Etiqa executive vice president and chief strategy officer Chris Eng Poh Yoon. Pic by Zahid Izzani/The Edge

KUALA LUMPUR (Oct 30): Demand for medical and health insurance remains resilient despite some concerns about co-payment structures, according to Etiqa, the insurance division of Malayan Banking Bhd (KL:MAYBANK).

The insurer reports strong interest particularly from Malaysia’s middle- and upper-income segments, with co-payment requirements not triggering significant policy cancellations.

Etiqa’s executive vice president and chief strategy officer, Chris Eng Poh Yoon, emphasized that the shift towards co-payment features has had a minimal impact.

“The recent introduction of co-payment features has had a limited impact, as insurers and takaful operators in Malaysia have predominantly implemented co-payments at modest levels, either set at the minimum of RM500 annually or 5% of yearly costs,” he told The Edge.

According to Eng, the demographic profile of policyholders has played a significant role in sustaining demand.

“Medical insurance here is primarily purchased by middle- and high-income individuals, which is why we haven’t seen a major reduction in demand,” he explained.

The broader uptake in insured patients is also notable.

“About a decade ago, only 30% of patients in medical facilities were insured, while 70% were self-paying. Now, it’s the reverse — 70% are insured and only 30% self-paying,” Eng added.

While Eng acknowledged that co-payment requirements could create challenges for lower-income policyholders — possibly leading some to cancel policies — Etiqa, he said, remains focused to raising awareness and providing affordable options for this segment.

Eng also welcomed the government’s co-payment initiative as a response to rising medical inflation. Key cost drivers include delayed treatments during the Covid-19 pandemic, heightened awareness of health issues, investments in new medical equipment and currency fluctuations.

By opting for co-payment, policyholders can manage premium costs, with a minimum of 5% or RM500 out-of-pocket, depending on which is higher.

Notably, recent announcements in Budget 2025 aim to further ease the financial burden of medical and health insurance. These include increasing the individual income tax relief on medical insurance premiums to RM4,000 and offering up to RM10,000 in relief for medical expenses. This relief will extend to the portion of payments under insurance and takaful products with co-payment features.

“Any increase in tax relief would be good to encourage more adoption of insurance,” said Eng.

He noted that additional tax measures, such as the service tax expansion and the new 2% tax on individual shareholders with dividends exceeding RM100,000, are unlikely to dent insurance demand significantly.

Calls for investment flexibility in the insurance sector

Beyond immediate tax and premium incentives, Eng highlighted the need for greater flexibility in investment regulations for Malaysian insurers. Allowing a higher proportion of investments abroad, he argued, would enable insurers to deliver better returns and diversify product offerings, including those in foreign currencies.

Currently, he said, local insurance companies are required to keep 90% of their investments within Malaysia.

“If we invest more of our assets overseas, we can offer insurance products in currencies other than the ringgit. These are investment-linked policies. We have observed that some high-net-worth individuals in Malaysia purchase insurance policies from other countries because they are denominated in different currencies,” Eng explained.

He believed that increasing the 10% allowance on foreign investments could allow Malaysian insurers to develop products, such as US dollar-denominated policies, reducing capital outflow from Malaysia.