Understanding the Insurer’s Defensive Logic

 Beyond the Headlines: 

The recent outcry against health insurers in Malaysia for "Deny, Delay, Revoke" tactics has stirred justifiable public anger. The stories are compelling, but to truly fix the system, we must move past simple blame and analyze the issue from a macro-financial perspective, understanding the insurer’s primary duty: protecting the sustainability of the policyholder fund.

The True Scale of the System

The perceived "underbelly" is frustratingly visible in moments of crisis, but it represents a tiny fracture in an otherwise massive system that is working for millions of Malaysians.

In 2023 alone, total medical claims payout by life insurers increased to RM7.7 billion. This figure, provided by the Life Insurance Association of Malaysia (LIAM), highlights the sheer volume of healthcare financing provided by insurers. Furthermore, Medical and Health Insurance/Takaful (MHIT) claims have surged by 73% between 2021 and 2023, far outpacing premium growth. This explosion in claims proves that the vast majority of requests are being paid out, forming a significant portion of the private hospital industry’s revenue—which reached approximately RM27.7 billion in 2023.

The challenge is therefore not that the system never pays; it’s that the failure points are catastrophic. A tiny percentage of GL rejections—often concerning smaller, initially uncertain cases—causes maximum distress precisely because they deny cashless access during an emergency. The issue isn't claim denial; it's access denial.

Understanding the Insurer’s Defensive Logic

From an insurer’s standpoint, every GL rejection is a risk mitigation decision, safeguarding the collective pool against the rampant rise in medical inflation and unsustainable utilisation rates.

The most common reasons for a GL to be denied or revoked are rooted in two key principles:

Material Non-Disclosure and Anti-Selection: The insurer must enforce contractual fidelity. When a patient is admitted for one issue but tests reveal a long-undiagnosed, high-risk condition like diabetes or hypertension, the insurer flags this as a potential pre-existing, undisclosed condition. While clinically unrelated to the immediate illness, the financial logic is that the policy was underpriced for this client's actual risk profile, and failure to reject would encourage anti-selection across the entire pool, leading to higher premiums for everyone.

Validation of Medical Necessity: Insurers are battling abuse where a non-critical condition that should be treated as an outpatient case is elevated to a high-cost inpatient stay. The decision to reject a GL based on "normal" lab results, even if the patient feels ill, is often an administrative check against unnecessary hospitalisation. It is an attempt to enforce policy terms that strictly cover treatments requiring inpatient care. The delay in GL approval, though frustrating, often allows a medical officer (not an administrator) to review the case to distinguish between true emergency and a misuse of high-cost facilities.

Creative Solutions: Bridging the Access Gap

The fundamental flaw is the lack of a financial bridge when the GL fails. The patient should never have to choose between financial ruin and life-saving care. We need new models that provide liquidity while the full claim is being processed.

1. The "Pay Later" Function with Hospital Liability

Instead of denying the GL outright, the insurer could issue a Provisional GL guaranteeing a base amount (e.g., up to RM5,000 for immediate stabilisation), while simultaneously initiating a "Pay Later" function. The hospital would run a quick credit check or hold a temporary charge on the patient's credit card or debit card, which is only executed if the final claim is rejected (not just the GL). The hospital, in turn, is incentivized to assist with the final claim submission. This transforms the patient from a debtor to a fully-treated client whose account is under review.

2. Government-Backed Emergency Healthcare Bonds/Lines of Credit

For acute emergencies or high-cost cases like the stroke patient mentioned in the article, the government or Bank Negara Malaysia (BNM) could mandate a mechanism: A Guaranteed Emergency Healthcare Line of Credit. This would be a small, low-interest loan available immediately upon GL rejection for life-threatening conditions. The loan would automatically be repaid by the insurer if the final claim is approved, or by the policyholder via a structured, manageable repayment plan if the final claim is rejected. This facility ensures that clinical urgency is never dictated by administrative bureaucracy.

3. The "Micro-Guarantee" GL for Observation

For common, smaller-cost admissions that are currently rejected (e.g., dehydration, low-grade pneumonia requiring observation), insurers should implement a Micro-Guarantee Letter covering just the initial 24-48 hours of observation and diagnostics. This addresses the critical need for monitoring without guaranteeing the full bill, allowing the doctor to proceed ethically while providing the insurer time to conduct a non-urgent full-policy review.

The ultimate solution for Malaysia lies in an Independent Review Body—as proposed by the specialists—which uses clear, transparent, data-driven rules to audit both claims and premium setting. Only by introducing this objective layer of oversight can we ensure the RM7.7 billion in claims is not just efficiently disbursed, but ethically managed to secure the health and financial future of every Malaysian policyholder.