Dr Mohamed Rafick Khan, a physician and former reinsurance CEO, has warned that Malaysia’s private health insurance market faces growing structural pressure as hospital charging practices, regulatory capital rules, and product sustainability concerns intersect. He said the relationship between insurers and private hospitals is essentially transactional, driven by commercial objectives on both sides. “In this relationship, both parties are doing business and claim that they are in it to serve the people. This is far from the truth. Both are in for the profits,” he said, as reported by CodeBlue. He added that efforts to keep medical premiums stable are unlikely to hold if hospital pricing trends and regulatory constraints on risk pooling are not addressed together.
Mohamed said premium adjustments in the Malaysian health segment are closely tied to how private hospitals set and revise their fees, in addition to underlying claims patterns. He described health assurance as a capital-intensive line, given medical inflation and regulatory requirements to hold sufficient capital to protect policyholders. At the same time, he noted that private hospitals have wide latitude in determining tariffs and are under internal pressure to deliver year-on-year revenue and profit growth.
Mohamed characterised the operating environment for insurers as one in which they are “surrounded by hospitals that behave like vultures, seeing it as an easy meal for them to hunt,” adding that hospital fees are “self-regulated” and “not answerable to anyone in determining their prices.” Policyholders, he said, often expect premiums to remain unchanged over the duration of coverage. He questioned whether that expectation is consistent with rising healthcare costs and the prudential framework applied to insurers.
From a balance sheet perspective, Mohamed highlighted that Malaysian prudential rules require health contribution funds to stand on their own. Insurers manage premiums within defined pools, and income depends on generating surplus in each pool after claims and expenses. He said Malaysian law, in line with practice in many other jurisdictions, does not allow surplus from one pool or product line to subsidise another. Cross-subsidisation, he said, is “simply not allowed” and is embedded in the financial prudence standards imposed on assurance companies.
Where a health fund records repeated deficits, Mohamed said, the insurer must consider repricing, redesigning benefits or reassessing whether it remains in that segment. “Until the bleeding point (hospitals’ uncontrolled charging) is cauterised, premium contribution cannot be stabilised,” Mohamed said. He also referred to expected measures from Bank Negara Malaysia (BNM) intended to respond to public concerns on health coverage and costs. While details are still emerging, he suggested that additional requirements could raise compliance and operating costs for health insurers.
In this context, Mohamed said insurers with persistently loss-making health portfolios “should consider exiting the health business.” If several carriers scale back or withdraw, he said, there could be a shift in public focus toward private hospital billing and the direct affordability of care. “Those who choose to stay need to change the way they do business, failing which, they will face the same fate,” Mohamed said. Should health products be withdrawn on a wider scale, he warned, policyholders may have to depend more heavily on personal savings and credit facilities to pay for treatment.
Mohamed added that insurers’ ability to influence hospital conduct is limited. Tools such as provider networks, pre-authorisation, and benefit design can shape utilisation, but do not fully control prices or clinical practice. “Assurers do not have a foolproof mechanism. Only policyholders can improve the situation,” he said, calling on consumers to question bills and avoid unnecessary use of benefits. If there is no change in hospital practices and policyholder behaviour, Mohamed said “assurers have no option but to stop selling health products.” He noted that consortium-based or jointly underwritten health offerings may be considered, but would only be viable if pricing adequately reflects cost and risk.
Mohamed’s remarks come amid wider discussion about the role of insurance processes in private clinical care in Malaysia. A survey by health news outlet CodeBlue of 855 private hospital specialists reported that almost all respondents had experienced situations where insurance processes influenced their clinical decisions, with only about 1% saying they had never faced such interference. Most respondents said insurer involvement in clinical decisions was frequent or occasional, with nearly half indicating it occurred “very often.” Specialists indicated that, in a typical month, multiple patients encountered issues such as delayed guarantee letters, denials of inpatient admission, and limits on diagnostic testing. Some respondents described cases in which insurers or third-party administrators declined coverage for certain tests, admissions, or treatments, leading to patients being referred to public facilities or paying out-of-pocket. In some instances, patients reportedly postponed or opted out of treatment following coverage denials.
The survey findings have fed into ongoing debate in Parliament about long-term oversight of private healthcare financing. During debate on the 2026 budget, Bayan Baru MP Sim Tze Tzin called for the creation of a permanent Private Healthcare Commission to supervise the sector, resolve disputes, and address systemic issues. Sim noted that an inter-ministerial committee on medical and healthcare costs is already in place but has a temporary mandate. “Currently, the government has set up an inter-ministerial committee on medical and healthcare costs. But this committee is temporary in nature, and attention is still needed to address core structural issues. This is where the commission can step in to assist,” Sim said, as reported by The Star.
Sim also proposed a national taskforce made up of the Health Ministry, BNM, and law enforcement agencies to investigate alleged instances of insurer interference in clinical decisions, pointing to protections for clinical independence under the Private Healthcare Facilities and Services Act. “Our patients are innocent; no one wants to fall ill or have accidents. But when they face giant insurance companies with legal teams, they are unable to defend themselves. Many stay silent, fearful, and give up,” Sim said.
For insurance professionals in Malaysia and across Asia, these developments highlight ongoing tensions between capital regulation, medical inflation, provider charging practices, and expectations around insurer involvement in care. Industry participants are awaiting further details on BNM’s upcoming measures and any move toward a dedicated commission as they assess product design, pricing strategies, and long-term participation in the private health segment.
