MEDICAL CLAIMS INFLATION REMAINS HIGH AT 12.28% IN 2025, DRIVEN MAINLY BY HIGHER HEALTHCARE UTILISATION - Findings align with World Bank report highlighting utilisation as a key driver of rising medical claims costs

KUALA LUMPUR, 26 August – Medical claims inflation in Malaysia remained high in 2025, rising by 12.28%, with the increase mainly driven by more insured individuals seeking treatment, particularly at private hospitals.

The scale of claims paid by the insurance and takaful industry also highlights the growing demand for healthcare services.  In 2025, the industry paid a total of RM13.5 billion in claims, compared with RM12.2 billion in 2024, representing an increase of approximately 10.7%.

The Malaysia Medical Claims Inflation Report 2025 found that of the 12.28% increase, 11.22 percentage points came from the increase in the number of claims, while the remainder was attributable to higher costs of care.

The report noted that the overall increase in the cost of care was partly moderated by public hospital claims, which accounted for 9% of all claims and recorded a14% decrease in claims costs from the previous year.   In contrast, the cost of care in private hospitals rose 5.89%, and while claims costs in private day-care settings rose 2.3%. 

The findings show that rising medical claims costs are not driven by higher medical prices alone. Healthcare utilisation and changes in the way healthcare is consumed are also important contributors to overall claims growth.  Healthcare utilisation refers to factors such as the number of people seeking treatment, the frequency of treatment, the types of procedures and the intensity of care.

“Medical claims inflation remained high at 12.28% in 2025. Importantly, 11.22 percentage points came from the increase in the number of claims.  This shows that utilisation, and not just medical prices, is a major driver of rising claims costs,” said Mark O’Dell, Chief Executive Officer of Life Insurance Association of Malaysia (LIAM).

“The findings are consistent with the World Bank’s analysis of Malaysia’s Medical and Health Insurance/Takaful (MHIT) sector, which identified healthcare utilisation and service intensity as key contributors to rising medical claims costs.  It reinforces the need to address the issue holistically. No single stakeholder can solve the medical cost challenge alone. Continued collaboration among policymakers, healthcare providers, insurers, takaful operators and consumers are essential to ensure sustainable and affordable medical protection for Malaysians,” Mark added.

Multiple factors drive medical claims inflation

Medical claims inflation is influenced by a combination of factors, including:

• Inflation – rising costs of medical services, supplies and medicines;
• Utilisation – increased use of healthcare services, influenced by an ageing population and rising non-communicable diseases (NCDs);
• Treatment mix – changes in the type and complexity of treatment, including the increasing use of daycare procedures and advanced medical technology; and
• Other pressures – including imported medical costs, healthcare workforce shortages and wider healthcare system pressures.

While the increase in the cost of care has moderated, higher utilisation remains the main driver of claims growth.

Healthcare utilisation patterns are changing

The 2025 data also show a shift in how healthcare services are being utilised. For the first time, inpatient claims declined slightly, from approximately 808,200 in 2024 to 803,400 in 2025, while daycare claims increased from 314,500 to 354,100.

The leading inpatient diagnoses included heart disease, disc disorders, infectious gastroenteritis and colitis, pneumonia and bronchitis. For daycare claims, the leading diagnoses were cataract, breast cancer, gastritis, lung cancer and other eye disorders.

Why rising claims costs matter to medical insurance and takaful sustainability

Medical insurance premiums/takaful contributions are derived from several components, including claims, expenses, distribution costs and profit. Claims represent by far the largest component, typically accounting for approximately 75% to 80% of medical insurance premiums/takaful contributions.

Consequently, when claims costs increase, this inevitably puts pressure on the adequacy of premiums. This is particularly the case when the combined costs of claims, expenses and distribution approach or exceed 100% of the premiums/contributions collected.

Periodic review of premium and takaful contributions are therefore necessary to ensure that medical insurance and takaful funds remain adequate to meet claims obligations and sustainable over the long term.

The industry emphasised that the objective is not simply to manage premium/contributions increases, but to address the underlying drivers of rising healthcare costs so that medical protection can remain accessible and sustainable for Malaysians.

A broader healthcare challenge requiring collective action

The insurance and takaful industry continues to face challenges including rising healthcare utilisation, an ageing population, increasing NCDs, changing treatment patterns, advances in medical technology, healthcare workforce pressures and rising costs of specialised medical supplies and treatments.

Greater healthcare cost transparency can also help consumers make more informed decisions, while stronger use of the Centralised Claims Database and data analytics can support efforts to identify and address fraud, waste and abuse.

The industry supports ongoing measures such as deductibles and co-insurance/co-takaful, as well as the Government’s RESET initiative, MediAsas and Diagnosis Related Group (DRG)-based billing, which are expected to contribute towards greater affordability, transparency and cost management.

“As medical claims continue to rise, our focus must remain on ensuring that Malaysians can continue to access meaningful and affordable medical protection. For the Takaful industry, this means addressing the underlying drivers of claims while safeguarding the sustainability of Takaful funds, so that participants can continue to benefit from protection that remains relevant and affordable over the long term,” said Encik Mohd Radzuan Mohamed, Chief Executive Officer of the Malaysian Takaful Association (MTA). 

He added, “The data show that this is not a short-term challenge. Average annual medical claims inflation stood at 13.63% between 2023 and 2025, compared with approximately 8% during 2013 to 2018. At the same time, medical claims typically account for around 75% to 80% of premiums and Takaful contributions. For the Takaful industry, sustained claims growth at this level has implications for the adequacy of contributions and the long-term sustainability of Takaful funds. Ultimately, maintaining this balance is critical to ensuring that participants continue to receive meaningful medical protection and long-term value from their Takaful coverage.”

“Managing claims growth isn't a challenge any single sector can solve in isolation, especially as higher utilisation continues to drive rising costs despite moderated care pricing. The findings of the World Bank Group report underscore the need for a unified front. By aligning healthcare providers, regulators, and insurers around transparent practices and efficient care delivery, we can address utilisation trends and keep medical coverage sustainable,” noted Chua Kim Soon, Chief Executive Officer of Persatuan Insurans Am Malaysia (PIAM).
 

Double-digit claims growth expected to continue

While the level of medical claims inflation for 2026 cannot be predicted precisely, double-digit claims growth is expected to continue in the near term.

The continued adoption of cost-containment measures, stronger action against fraud, waste and abuse, greater cost transparency, DRG-based billing and the MediAsas plan are expected to help moderate claims growth over time.