In its Financial Stability Review for H2 2024, the central bank attributed the decline to weaker investment performance and higher underwriting losses, largely driven by surging medical claim payouts.

Medical payouts surged to RM6.2 billion in H2 2024, up from RM5.3 billion in both H1 2024 and H2 2023.

BNM attributed the increase in medical payouts to higher medical treatment costs and utilisation rates, particularly for chronic and acute conditions, “which led to premiums for medical and health insurance/takaful (MHIT) policies/certificates being adjusted upwards to ensure the sustainability of long-term coverage”.

To ease the burden on policyholders, the industry has introduced a staggered premium hike over at least three years from 2024 to next year.

However, BNM warned that the combination of rising medical costs, growing claims and the continued decline in participating life insurance policies could further strain net underwriting income.

“In this regard, structural reforms addressing the root causes of rising medical costs are crucial in ensuring the sustainability of the MHIT business,” BNM added.