Copyright in the material

contained in this document

belongs to third parties. It

has been published by kind

permission of the owner(s)

and provided for review

only. This document may

not be reproduced,

amended or redistributed

without prior written without prior written

permission of the copyright

owner(s).

Role of Private Medical InsuranceRole of Private Medical Insurance

Anusha Thavarajah

Deputy CEO / CFO

ING Insurance Malaysia, July 2011

Presentation Outline

• Malaysia’s Changing Healthcare Landscape

• Private Medical Insurance Gaining Prominence

• The Role of Private Medical Insurance

• Final Thought

• Q&A

2

• Q&A

Malaysia’s Changing Healthcare Landscape

3ING 3

Current Conditions in Malaysia’s Healthcare SystemCurrent issues in healthcare system i. Rising healthcare

expenditure – 5%of GDP

4

Current issues in healthcare system

Countries Indicators 2000 2001 2002 2003 2004

Malaysia

Total

expenditure

on health

(in RM

millions)

11,330.93 12,287.152 13,339.608 19,478.917 21,200.439

2005 2006 2007 2008 2009

21,574.5 24,778.67 28,021.895 31,140.871 32,648.524

Current Conditions in Malaysia’s Healthcare SystemCurrent issues in healthcare system ii. Highly subsidized services &

overdependence on government health facilities

iii. Gaps in present healthcare delivery system

– i.e. equity, efficiency, accessibility

iv. Inadequate integration

5

Current issues in healthcare system

iv. Inadequate integration between public & private sectors

v. Increasing trend of private health expenditure – 41%Out-of pocket (OOP) spending

vi. Globalization & liberalisation

Increased deficit in Malaysia’s budget if these

remained unsolved

What’s Driving the Change?

Healthcare has grown to become a much bigger part of the

Malaysian economy owing to four major drivers

Longevity

Medical advances and improvements in living

standards are contributing to growing life expectancies

Wealth

When people can afford it, they will spend almost any

amount on health

6

Lifestyles

Rising affluence is altering lifestyle patterns and diets,

thus leading to higher prevalence of chronic diseases

which are costly to treat

growing life expectancies

Technology

New therapies, products, medical procedures are driving

up patients’ expectations; pulling up demand

Demographic trends – Higher Population Growth Rates & People are Living Longer

Population Pyramids for Malaysia (1980, 2000, Projected 2025)

6 0

6 5

7 0

7 5

8 0

8 51

98

0

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

Malaysia Life Expectancy by Gender: 1980-2025

7

Source: International Database, US Census Bureau, Population Division (http://www.census.gov/ipc/www/idb/)

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

M a le F e m a le

i. Aging Population

• Extended longevity

• The % of ageing people (60 years+) is projected to increase to 3.4 million in 2020 (9.9% of total population).

ii. Population Growth

• Increased 17% from 2000-2010

• Projected to increase to 34.3 millions in 2020. 24.3% growth rate from year 2010.

Affluence Effect – Standards of Living Are Higher

8

Source: World Bank, WHO

Lifestyle Diseases – From Communicable to Non-Communicable

Changing Disease Patterns

• Cardiovascular diseases (such as coronary heart disease)

• Hypertension• Stroke• Diabetes

9

• Diabetes• Cancer• Mental health conditions (mostly dementia and depression)

Private Medical Insurance Gaining Prominence

10ING 10

• It is estimated that 40% of the country’s population or 10.8 million Malaysian are medically insured. 16.2 million people are without health insurance. 60% out of the 40% healthcare spending is supported by the Government

• Demographic Changes

• Increases in medical bills are outpacing the

What’s Triggering the Need for Private Medical Insurance?

11

• Increases in medical bills are outpacing the general inflation rate each year

� Average inflation rate for the past 10 years = 2.2% each year

�Medical inflation is escalating at between 13% -15% annually due to rise of investments in research and adoption of new technologies to deal with new illnesses

• Increasing demand for Private Healthcare

How can we as a nation address these needs?

12

1Care 1Malaysia NKEA LabsEPPs

Government’s Proposal on Healthcare Reforms

Healthcare is 1 of 12 NKEAsSectors with potential to generate high income

Vision 2020High income and high productivity nation

ETP

Vision

13

1Care 1Malaysia• Restructured integrated

health system

NKEA Labs• Seniors Living Coverage

EPPs• Foreign workers insurance

• Health tourism

Highest historical growth rate of 8.8% between 2000 & 2009 among all sectors.

Powerful engine of economic growth. Potentially grow to

RM35.1b to GNI by 2020.

Creating more than 180,000 jobs.

Healthcare Sector

ETP

Private Sector to spur Growth in Healthcare Service Industry

What role can private sector play in health system reforms?

Health expenditure:The most predominant expense factor in government’s spending – 5% of GDP

• Need for private medical insurance -

•Access to private health care

•Help alleviate government’s burden

•To reduce OOP and therefore reduce

Increasing role of the private sector

1414

Source: OECD health data (2008), Munich RE

•To reduce OOP and therefore reduce financial indebtedness

NB: OOP in developed nations is only 14%.

•Vast growth opportunities in private health insurance –

•Only 14% penetration

•Private insurance spending is only 8%,where high income nations recorded 20%.Total health expenditure

growth

Increasing pressure on public health expenditures

Health system reforms

• 10.9% of GDP in 2009

Healthcare system in Canada: Role of Private Health Insurance

Characteristics of the Healthcare System

Total Healthcare Expenditure

• Many choose to rely on the Public Health System (1st tier)

• Primary health coverage given to all citizens (irrespective of medical history & personal income)

• Publicly funded (taxation from personal & corporate income taxes)

• Type of healthcare services provided (Preventive care / primary care, access to hospitals, dental surgery, some additional medical services)

• Public healthcare being administered on a provincial basis (2nd tier)

• Additional services provided at provincial level

• Physiotherapy, dental & prescriptive medicine

• Funded by sales tax & cash contribution (health premiums for individuals)

• Private health insurance(3rd tier)

1515

some additional medical services)

Role of Private Health Insurance (PHI)

• Supplementary role in the healthcare system• To cover what is not covered in the public / provincial health insurance

• Corrective lenses, medication, home care• Not so much to gain access to quality care• Usually offered as part of employee benefits packages

Total PHI Expenditure • 11.4% of total healthcare expenditure

Population covered by PHI • 65%

Healthcare system in France: Role of Private Health Insurance

Total Healthcare Expenditure • 11.7% of GDP in 2009

• Dominated by Public Health InsuranceSystem

• All citizens are covered• Funding – employee and employer contributions and personal taxes

• Covers outpatient, hospital care, prescription drugs, home nursing care, certain alternative therapies.

• No gate-keepers regulating access to specialists & hospitals

• Complementary health insurance covers other benefits not covered under the National Health Insurance. Covers those

• Whose health expenditures have been exceeded

• With chronic illnesses• Whose incomes are low• Finances 12.5% of total

Private health insuranceCharacteristics of the

Healthcare System

1616

specialists & hospitals• Finances 70-75% of total personal care expenditure

• Finances 12.5% of total personal care expenditure

Role of Private Health Insurance (PHI)

• Supplementary role.• To reduce out-of-pocket expenses which could be quite substantial• Not so much to gain access to quality care.

Total PHI Expenditure • 12.7% of total healthcare expenditure

Population covered by PHI • > 90% of population covered by complementary & supplementary insurance

The Role of Private Medical Insurance

17ING 17

Private Insurers: Vital Link in Healthcare System

Regulator

Insurers

Providers (Clinics/

1818

Regulator

3rd Party Administrators

(Clinics/ Hospitals)

What’s the Role of Private Medical Insurance?

Healthcare Financing

Part of health financing scheme to ease the government’s burden by alleviating the increasing healthcare cost

1919

Financing

Working with 3rd Party

Administrators

(TPA)

Product Design

Offer expertise to public health financing scheme

New product innovation under Healthcare NKEA

• Foreign workers insurance• Seniors living

• Portable health insurance

Role in Healthcare Financing

Healthcare Financing

Health Funds

• Discipline & consistent savings towards healthcare / medical needs.

• Reduce OOP spending.

Social Health Insurance

• Mandatory medical savings scheme regulated by the government – i.e. healthcare financing in Singapore.

• Design & provide affordable medical

2020

• Reduce OOP spending.

• Increased affordability for better health services.

• Design & provide affordable medical insurance plans tie-in with the EPF account (auto-deductible mechanism).

• Encourage the nation to contribute certain amount of premiums to purchase a health insurance plan.

Where are Insurers in the Current Malaysian Healthcare System?

Tertiary

• Specialist consultation

Hospitalisation

Secondary

• Specialist

Primary

• General Practice

2121

• Hospitalisation & Surgical

In the future?In the future?

Health Product Evolution in Malaysia

Without credible claims data

Identify Claims abuse

Periodic review of claims experience

Start to gain market share

First Non-cashless Plan sold through

First Non-cashless Plan

Replace with Cashless Plan (Medical Card)

Offer choice of Cashless & Non-cashless

22ING 22

1995………......….1997……..……….…….2001………..………..2003……………………2004

Inner Limits• Inner Limits• Slight change in benefit design

Premium Increase

Premium increase• Premium increase• Annual limit increase

through Employee Benefits

Plan Individually

(Medical Card) cashless Plan

More Regulations/ Guidelines on More Regulations/ Guidelines on Hospital & Surgical Business

Health Product Evolution in Malaysia

• Introduce deductible

• Disclosure & Transparency

• Revised Health Regulation leads to change in product design

Risk Management Reporting for better claims and pricing

23ING 23

2004…………….....................….2006………………………… 2007..................................

•Premium increase•Premium increase•Annual limit increase

Annual limit increase

Transparency• Breakdown of attained age group <21

product design• Male/Female Premium Rate

claims and pricing controls

Health Product Evolution in Malaysia

• Extended entry age & expiry age

• Higher annual limit and lifetime limit

• No Claim Bonus• 2nd Medical Card

Extended Longevity & Rising Medical Cost

24ING 24

2007……………..............2008……………………..2009..........................2010……….

•Premium increase

NOW

limit• Major medical plan

• 2nd Medical Card

Moving Forward…Continuously Enhance & Innovate Health Insurance to Complement Government Proposed Initiatives

New product innovation

Foreign Workers Insurance

• Only 75% of 1.8m foreign workers are covered by workmen’s compensation schemes

• 2005-2009, RM64m of unpaid healthcare bills

• Mandatory insurance on –

• Workmen’s compensation

• Medical insurance

Product enhancement

Extended coverage

• Extending maturity age or age of entry in view of the improved longevity among Malaysians

• Increase annual and lifetime limit to meet the increasing medical cost

• Juvenile medical plan with “Coverage before birth” features

2525

Seniors Living

• Malaysia is likely to reach ageing nation status by 2035 –# of elderly people reaching 15% of the population

• LTC insurance – provide coverage for seniors living support

* Source: International Medical Travel Journal

Healthcare Tourism

• Grew at 25.3% every year since 1998*

• Malaysia attracted > 1m foreign patients with total medical receipts of RM800m

• Possibility of influencing product design among Asian affiliates in providing portability feature of medical insurance?

Multiple-layers coverage

• Provide coverage at different stages of illnesses to ensure the wellness of policyholders by obtaining early treatment

Preventive healthcare / health management

• Provide regular medical check-up to policyholders � help the policyholders keep track of their health status

Final Thought

26ING 26

In conclusion…

The future is all about achieving greater synergies among all parties for the benefit of the public

27

Q&A

28ING 28

THANK YOU

2929

Disclaimer: Any views or opinions expressed in this presentation are those of the presenter and do not necessarily reflect the official stand, policy or position of ING Insurance Berhad. Examples, illustrations shared are based on the presenter’s views which may include information sourced from publicly available information. They should not be taken as professional advice.