5.6 Medical Renewal, Underwriting and Claims

Study Focus

Guaranteed renewal does not necessarily guarantee an unchanged portfolio premium. Current MHIT co-payment rules contain specific treatment exceptions.

4. Policy Renewability Terms

Because MHI policies are typically structured as one-year contracts, the contractual terms governing renewal are of vital legal importance to consumers.

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|                   MHI RENEWABILITY CLASSIFICATIONS                      |
|                                                                         |
|   1. GUARANTEED RENEWABLE (Standard for Quality Malaysian MHI)          |
|      * Insurer CANNOT cancel or decline renewal on individual grounds   |
|      * Insurer CANNOT load or exclude an individual due to claims       |
|      * Insurer RETAINS right to adjust PORTFOLIO premium rates          |
|                                                                         |
|   2. CONDITIONALLY RENEWABLE                                            |
|      * Insurer reserves right to decline renewal for individual policies|
|      * Insurer may impose individual loadings or exclusions on renewal  |
|                                                                         |
|   3. NON-RENEWABLE (Short-Term)                                         |
|      * Policy terminates automatically at end of specified term         |
|      * No contractual right to renew (e.g., travel medical insurance)   |
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1. Guaranteed Renewable

In a Guaranteed Renewable contract:

• The insurer guarantees to renew the policy on each annual policy anniversary up to the maximum contractual age limit (e.g., age 70, 80, 85, or 100), provided premiums are paid within the contractual grace period.
• The insurer cannot unilaterally cancel the policy, refuse renewal, or impose individual loading surcharges or new exclusions on an individual policyholder because that individual suffered a severe illness or submitted high claims during the preceding year.
• Right to Revise Portfolio Rates: Guaranteed renewability does not mean guaranteed level premiums. The insurer expressly retains the contractual right to adjust the premium rate schedule applicable to the entire portfolio or risk class on a renewal anniversary. Portfolio-wide revisions require advance notice to policyholders and must follow BNM's requirements for MHIT repricing, justified by medical inflation and claims experience.

Regulatory Developments: Co-Payment, Repricing and MediAsas

Rising medical costs led Bank Negara Malaysia (BNM) to tighten its rules on MHIT products:

• Co-payment option (from 1 September 2024): Under BNM's Policy Document on Medical and Health Insurance/Takaful Business, insurers and takaful operators must offer consumers the option of an MHIT product with a co-payment feature. Existing policyholders without co-payment may keep their plans at renewal. Co-payment must not apply to emergency treatment (including accidents), to outpatient follow-up treatment for critical illnesses such as cancer or kidney dialysis, or to treatment at government healthcare facilities, and insurers may waive it in cases of financial hardship.
• Interim repricing measures (December 2024): Premium increases caused by medical claims inflation and made from 2024 to 2026 must be spread over at least three years, so that at least 80% of affected policyholders face yearly increases of less than 10%. This measure remains in place until the end of 2026.
• Base MHIT plan "MediAsas": Under the national RESET strategy, BNM, the Ministry of Finance and the Ministry of Health published a White Paper in January 2026 on a standardised, voluntary basic MHIT plan named MediAsas, planned for nationwide rollout from January 2027.

2. Conditionally Renewable

In a Conditionally Renewable contract, the insurer reserves the contractual right to decline renewal, cancel individual policies, or impose new exclusions and premium loadings on an individual basis on any renewal date, provided predefined contractual conditions are satisfied (e.g., if the insured reaches a specific age or ceases to be a member of an association).

3. Non-Renewable (Short-Term)

A Non-Renewable contract is issued for a temporary, specified duration (such as a 30-day travel medical insurance policy or a temporary foreign student health policy). Coverage ceases automatically upon expiration of the term, with no expectation or right of renewal.

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5. Standard MHI Policy Exclusions

Every Malaysian MHI policy contains a standard list of general exclusions. These represent risks that are uninsurable due to extreme catastrophe potential, intentional self-selection, elective non-medical choices, or violation of public policy:

1. Congenital Anomalies: Hereditary deformities, chromosomal disorders, birth defects, or physical anomalies present from birth (e.g., congenital heart septal defects, spina bifida).
2. Elective Cosmetic Surgery: Plastic or cosmetic surgery, aesthetic treatments, liposuction, hair transplants, or circumcision (unless reconstructive surgery is necessitated by an accidental bodily injury sustained while insured).
3. Routine Dental and Optical Care: Routine dental examinations, fillings, root canals, dentures, tooth extractions, eye examinations, spectacles, contact lenses, and corrective eye laser surgery (unless required as emergency treatment for accidental injury).
4. Pregnancy and Childbirth: Pregnancy, antenatal care, normal delivery, caesarean sections, miscarriages, abortions, infertility investigations, assisted reproductive treatments (IVF), and contraception.
5. Self-Inflicted Injury and Substance Abuse: Intentional self-inflicted bodily injury, attempted suicide (whether sane or insane), alcoholism, drug abuse, or intoxication.
6. Hazardous Sports and Criminal Acts: Participation in professional sports, motor racing, diving outside the depth or certification limits specified by the policy, skydiving, aviation (other than as a fare-paying passenger on a commercial airline), or active commission of a crime.
7. HIV and AIDS: Human Immunodeficiency Virus (HIV) and Acquired Immune Deficiency Syndrome (AIDS) and related complex conditions.
   • Policy-specific exceptions: Some policies provide exceptions covering occupational infection for registered healthcare workers (e.g., accidental needle-stick injury) and infection contracted through medically necessary blood transfusions in Malaysia.
8. War, Terrorism, and Nuclear Contamination: Active participation in war, civil commotion, revolution, and ionizing radiation or contamination from nuclear fuel.

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6. The Medical Underwriting Process

Medical underwriting evaluates the health status and lifestyle risk of a prospective applicant to determine whether coverage can be offered, and if so, at what price and under what contractual conditions.

Primary Underwriting Factors

• Age: Morbidity risk escalates significantly with advancing chronological age.
• Sex / Gender: Morbidity patterns vary across genders (e.g., higher claims for females during reproductive years; higher cardiovascular incidence for males in middle age).
• Build and Body Mass Index (BMI): Calculated as $\text{BMI} = \frac{\text{Weight in kg}}{(\text{Height in m})^2}$. BMI is one screening measure; insurers apply their own assessment guidelines and may consider ethnicity, medical history and other clinical evidence. A BMI value does not automatically determine acceptance or a loading. Severe obesity is closely correlated with hypertension, sleep apnoea, diabetes, and joint degeneration, frequently attracting premium loadings.
• Personal and Family Medical History: Prior surgical records, chronic conditions, and family history of hereditary diseases (e.g., diabetes, early cardiovascular death, cancer).
• Occupation Class: Evaluated based on physical hazards (Class 1 clerical/indoor to Class 4 heavy industrial/hazardous machinery).
• Avocations and Habits: Cigarette smoking, vaping, alcohol consumption, and dangerous hobbies (e.g., rock climbing, paragliding).

Underwriting Decisions

Based on medical assessments (proposal disclosures, attending physician reports, and medical examination tests like blood profiles, urine tests, ECG, or chest X-rays), underwriters make one of five determinations:

1. Standard Acceptance: The applicant's risk profile aligns with standard mortality and morbidity tables; accepted at ordinary catalogue rates.
2. Premium Loading: The applicant represents a higher-than-average risk (e.g., controlled mild hypertension or moderate obesity). The policy is accepted with a percentage loading (e.g., +25%, +50%, or +100% of standard premium).
3. Exclusion Clause / Endorsement: The applicant is accepted at standard rates, but a specific anatomical organ, chronic condition, or disease is permanently or temporarily excluded from coverage (e.g., "Excluding all medical and surgical treatment for the right knee joint and its complications").
4. Deferment / Postponement: The risk cannot be accurately assessed currently because the applicant is undergoing active medical investigation or recuperating from recent surgery. The deferral period depends on the medical evidence and the insurer's underwriting guidelines.
5. Rejection / Decline: The risk is uninsurable due to active malignant disease, severe multiple chronic ailments, or adverse moral hazard.

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7. Claims Administration and Dispute Resolution

Cashless Admission Procedure: The Guarantee Letter (GL) Workflow

For an insured seeking inpatient treatment at a private panel hospital, the cashless claim process proceeds as follows:

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|                    CASHLESS ADMISSION WORKFLOW                          |
|                                                                         |
|   1. PATIENT ARRIVAL                                                    |
|      * Presents Medical Card and NRIC at Hospital Admission Desk        |
|                                                                         |
|   2. INITIAL GUARANTEE LETTER (INITIAL GL) REQUEST                      |
|      * Hospital transmits attending doctor's admission report to        |
|        Insurer / TPA                                                    |
|      * Insurer verifies policy in-force, waiting periods, & room limit  |
|      * Insurer issues INITIAL GL confirming eligible room and waiver    |
|        of standard admission deposit                                    |
|                                                                         |
|   3. INPATIENT MEDICAL TREATMENT                                        |
|      * Patient receives medically necessary surgery / medical care      |
|                                                                         |
|   4. DISCHARGE & FINAL GUARANTEE LETTER (FINAL GL)                      |
|      * Hospital compiles final itemized billing & doctor's discharge    |
|        summary and transmits to Insurer / TPA                           |
|      * Insurer adjudicates eligible charges, deductibles, & co-insurance|
|      * Insurer issues FINAL GL specifying exact amount paid to hospital |
|                                                                         |
|   5. PATIENT DISCHARGE COUNTER SETTLEMENT                               |
|      * Patient pays non-covered personal items, deductibles, and        |
|        co-insurance directly to hospital cashier                        |
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Reimbursement Claim Procedure

When admitted to a non-panel hospital or receiving emergency treatment overseas, the patient must settle the entire bill upfront and submit a reimbursement claim within the claim-notification and submission periods stated in the policy with the following required documents:

• Completed original Claim Form signed by the policyholder and attending doctor.
• Original detailed itemized hospital billing statements.
• Original official payment receipts.
• Comprehensive Medical Report / Attending Physician's Statement.
• Certified copies of diagnostic test results, lab analyses, and surgical operation notes.

The Medical Necessity Doctrine

Every claim payment is legally conditioned upon Medical Necessity. Under the standard policy definition, a treatment is medically necessary only if it is:

1. Consistent with the diagnosis and accepted medical practice for the condition in Malaysia.
2. Appropriate with regard to standards of good medical practice.
3. Not primarily for the personal convenience of the patient, family, or attending physician.
4. Conducted in the most cost-effective clinical setting suitable for the condition.

• Treatments primarily for diagnostic rest, cosmetic pampering, unproven experimental therapies, or general health screening are not medically necessary and are lawfully repudiated.

Dispute Resolution: The Financial Markets Ombudsman Service (FMOS)

If an insurer repudiates a claim or disputes the settlement amount, the consumer has structured redress avenues:

1. Internal Complaint: The policyholder first lodges a complaint with the insurer's complaints unit and receives a written final decision.
2. Financial Markets Ombudsman Service (FMOS):
   • FMOS replaced the Ombudsman for Financial Services (OFS) on 1 January 2025 and is approved by BNM and the Securities Commission as an independent, free dispute resolution scheme.
   • The complainant may refer the dispute within six months of the insurer's final decision, or if the insurer does not respond within 60 days.
   • Jurisdiction: FMOS hears insurance and takaful claims, including medical claims, involving direct financial losses of up to RM 250,000.
   • Binding Nature: The Ombudsman's Decision binds the insurer; a complainant who rejects it remains free to pursue other avenues, including the courts.