MEMORANDUM TO THE GOVERNOR OF THE CENTRAL Bank (BNM), FINANCE MINISTER & PRIME MINISTER OF MALAYSIA

Theme: Proposals to improve the Financial Services Act (FSA) and/ or to overcome various unfair practices / policy pitfalls caused by some insurance companies in Malaysia which prejudice the basic rights of our insurance consumers, especially during this pandemic period

From: Campaign to Protect the Rights of Insurance Consumers in Malaysia

1. Instruct all insurance companies in Malaysia to put on hold/ stay the latest excessive increment to a rate of more than 200% imposed on all their medical policies-related premium commencing since 2020, to reduce the financial burden of our consumers during this period of pandemic. Among the original reasons given by such insurance companies previously for such premium hikes included the increase of medical costs and increase of the ration of claims for such medical policies. But all these main reasons are no longer relevant now when the total claim ratio for medical policies in 2020 had dropped drastically by more than 8%/ RM400 million due to the serious impact of Covid-19, whereby many insurance consumers were not keen to be admitted into any hospital even for the treatment of any non-Covid illnesses during this high risk period. Moreover, as most of the insurance companies do not include Covid treatment in their policies, it is totally unfair and unreasonable to force our consumers to pay a higher premium for medical policies at this point of time.

2. For the few insurance companies which do not exclude protection from the Covid/ pandemic in their policies: Instruct them to strictly adhere to its policy terms and provide cash-less payment facility to its consumers just as for other illnesses. This is because many consumers are not able to afford to even pay in advance such a substantial sum for the treatment costs of Covid ranging from RM20,000 to RM400,000 imposed by various private hospitals.

3. For most insurance companies which have excluded the protection of Covid/ pandemic in its policies: Encourage them to allocate more funds to assist their customers infected by Covid on an ex-gratia/ social responsibility basis.

4. Investigate the trend for the unusual hike in premiums for our medical policies in the long term as imposed by our insurance companies. According to feedback from some consumers, the premium for their medical card could increase to a rate of 300% within 15 years, which is obviously and relatively higher than our common inflation rates.

5. Make it compulsory for all local insurance agents to buy a Professional Indemnity Insurance as one of the criteria to renew their membership. This is important to secure the interests of our consumers because many of the insurance dispute cases attended to by us are caused by the misconduct/ misrepresentation of their attending agents including misappropriation of their premium payment, failure to explain in details all the related health status disclosure terms as stated in their proposal form, hiding the actual health status of their customers.

6. Prohibit any insurance company to offer to their consumers any unlimited medical benefit/ to the extent of “no limit” in terms of medical costs coverage in their policy. Such benefit is obviously misleading, impractical, unnecessary and eventually causes an unhealthy trend in the hike of our medical costs. This is because so far, there are no illnesses whatsoever which involve unlimited medical costs in our country. Secondly, based on our experience, a lot of insurance companies would find other excuses to null and void the policy after their customers claimed a substantial sum in medical costs from them. As such, no insurance companies would give an opportunity to their customers to claim for unlimited medical costs smoothly despite such a commitment having been stated clearly in their own policy.

7. To review and reform the current consumer’s appeal system including BNMTELILINK and the Financial Ombudsman Scheme which are less transparent, biased in facour of the insurance companies and not friendly to consumers. A special Insurance Consumers Tribunal should be established under the FSA to be operated similar to the model of an open court system in the Civil Court/ Consumer Tribunal/ Housing Tribunal.

8. When an agent from Insurance Company B has successfully induced a consumer to switch his/ her medical policy from Insurance Company A with original full (100%) illnesses’ protection in the first place, subsequently Company B is not allowed to exclude the said policy with certain illnesses or null and void the said policy with the excuse of non-disclosure of health status by the said consumer. This is because we have received complaints from some consumers that after they surrendered their original Policy A with full protection’s entitlement, Company B failed to honour their promise to provide the same extent of full protection to them on a back-to-back basis. These negative records of the consumer in Company B would also affect their qualification to buy similar medical policies with protection against full illnesses from other insurance companies in the future.

9. Recently we received a lot of complaints against certain insurance companies in Malaysia abusing/ manipulating their duty to disclose “Material Facts” imposed by the FSA to the consumers. For example when a consumer submits a claim to them on the basis of critical illness of “cancer”, they decline/ repudiate/ void the claim/ policy by alleging that the consumer had failed to disclose other unrelated non-critical illnesses such as “examination of back-pain” as stated in their proposal form’s questionnaire. Such illnesses have not even been diagnosed by any medical practitioner but merely at the stage of investigation. Some consumers even been required to self-disclose their medical history since 20 years ago, during childhood or even before they born (family history). 

As such, we urge BNM to intervene and control such unreasonable questionnaires formulated by the insurance companies in its proposal form, including asserting unreasonable demands unto its customers to confirm his/ her medical history for more than 200 type of illnesses. Meanwhile, the scope is also too wide, not only limited to the diagnosis of such illneesses, but including their investigations/ consultations/ examinations. As such, 200 types of illnesses are too complicated, academic and technical to be understood by laymen consumers or even their own insurance agents. All insurance companies should be required to refer their customers to a panel of doctors for examination before acceptance of their proposals.

9.1 Investigate suspected illegal/ unethical practices by some insurance companies to obtain/ check the medical history of their customers/ customers’ family members from various hospitals/ medical practitioners only at the stage when processing/ assessing their insurances claims, which might have violated the Personal Data Protection Act / Professional Code of Conducts.

9.2 To prohibit such insurance companies against using various pitfalls in their proposal form to reject their customers’ claims based on irrelevant/ non-critical technical faults/ errors. Some consumers have indeed in utmost good faith, disclosed their medical history in the proposal form via the attending agent. However, eventually some insurance companies rejected their claims by alleging that they ticked wrongly on the required questionnaire item.

9.3 To prohibit certain insurance companies' unethical act which only declined their life assured's medical benefits based on the above non-disclosure clauses after have issued letter of guarantee for their admission to hospital or even in the midst of emergency treatment in ICU. Recently there was a life assured from Penang who had indeed caught by surprise by sudden decline of his medical card by an insurance company after approved RM1million for his medical treatment costs previously, until causing heavy pressure to give up his cancer treatment & eventually passed away as worrying unable to settle the substantial balance sum of few hundred thousand ringgit malaysia of hospitalisation expenses incurred by the private hospital on his spouse. 

10. To investigate and control various policies related to investment-link or saving plans promoted by some insurance companies. Some have exposed our insurance consumers to very high investment risk, although their initial intention to buy such insurance products was only for basic risk protection or non-investment purposes.

Recently many consumers suffered serious losses in such policies due to investment in high risk funds whereby information was withheld from them but arranged by the insurance agent.

The management of some insurance companies has been given discretionary powers which are too wide whereby they may unilaterally decide on the repayment rate of maturity benefits for their consumers. They can simply reduce such rates without any limit causing serious prejudice to their customers.

We sincerely and humbly propose the above to your good office in order to improve the development of the entire insurance industry in Malaysia. We always believe that the interest of our insurance consumers should be given utmost priority in line with the inherent spirit of insurance protection.

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