More than 340,000 medical insurance and takaful (MHIT) policies were cancelled or surrendered between January 2024 and June 2025.
In simple terms, hundreds of thousands of Malaysians have dropped their private medical insurance because it has become too expensive to maintain.
These findings were revealed in the White Paper on the MHIT Basic Plan presented by the government last week.
Why are people cancelling their insurance?
The White Paper explained that insurance companies and takaful operators raised premiums to cope with the rising cost of medical claims in private hospitals.
Before new interim measures were introduced in 2025, premium revisions resulted in increases of up to 40% for most policyholders.
These hikes were meant to match the real cost of treatments, which had been rising for years. However, this also meant many policyholders could no longer afford to keep paying their insurance.
How big were the premium hikes?
Here’s a breakdown from the White Paper:
- 40% of revised policies increased by 11 to 20%
- 30% increased by 21 to 40%
- 5% increased by 41 to 60%
- 4% increased by more than 60%
According to NST, the report noted that the 340,000 cancelled policies made up 5.2% of all revised policies, even after counting policies that were later reinstated.
The paper also explained that premium reviews had been postponed during the COVID-19 pandemic, and once reviews resumed, insurers implemented large adjustments at once to catch up with actual claim costs.
What happens when people drop their insurance?
When individuals can no longer afford private medical insurance, they usually stop private coverage or rely fully on public hospitals and clinics.
This creates a cycle of pressure as private healthcare becomes increasingly expensive and public health clinics become more crowded, with the White Paper warning that this strains both systems in the long run.
How Malaysians currently pay for healthcare
The report showed that in 2024:
- 39% of total health spending came from households’ own money
- Private insurance contributed less than 8%
This means most Malaysians were either paying medical bills out of their own pockets or depending on government healthcare.
It must also be noted that private insurance still covers only a small portion of national healthcare financing.
MHIT Basic Plan
To tackle affordability issues, the government introduced the MHIT Basic Plan under the RESET Strategy.
The plan targets:
- People who do not yet have medical insurance
- People who already have insurance but need a cheaper alternative due to rising premiums
Currently, only about 22% of Malaysians have individual MHIT policies, excluding employer-provided coverage.
According to the White Paper, this is what the Basic Plan covers:
- RM100,000 annual coverage
- Expected to cover 99% of treatment cases in private hospitals
For individuals over 60yo:
- Coverage automatically increases to RM150,000
Standard-Plus Option:
- RM300,000 coverage
- Deductibles of RM10,000 to RM15,000
This option is designed for those who can pay smaller medical bills themselves but want protection against major medical expenses.
How will premium prices be controlled?
To avoid the same problem happening again, premiums will be calculated using actuarial risk principles and shared across all participating insurers and takaful operators.
This risk-sharing system aims to prevent extreme premium jumps and keep prices stable long term.
The White Paper positions the MHIT Basic Plan as a structural fix to Malaysia’s private healthcare affordability crisis one driven by rising medical costs, delayed premium reviews, and growing financial pressure on households.
Whether it succeeds will determine if more Malaysians can stay insured without overburdening public hospitals.
