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Takaful Repricing: The Why And How It Affects Us

Takaful Plan Repricing: The Why And How It Affects Us
What Is Takaful Repricing?

What Is Takaful Repricing?

Perhaps you would have received a message like this:

“Good afternoon, sir. Kindly be informed that your contribution for your takaful plan has increased this year. Please make your payment to avoid the lapse of your coverage.”

As illustrated in the above, Takaful repricing refers to a rise in contribution on a Takaful plan. The thought of our escalating contributions can be worrying and even makes you wonder if you should surrender your takaful plan. But hold that thought! Many certificate holders do not know that takaful contributions, especially medical takaful, may increase through time, if necessary. The Edge Malaysia reported that medical insurance premiums have been increasing in the recent years, and at an annual rate of 6% to 8% over the past few years. As the basis of takaful revolves around risk-sharing, higher repricing is to ensure sustainability of takaful portfolios, in securing the takaful operator has enough to shoulder hospital bills from claimants.

Let’s dig into the why of takaful repricing and what it could mean for us.

Why Is There Takaful Repricing?

Why Is There Takaful Repricing?

For example, in early-2022, Zaid had to undergo an emergency surgery for a gall bladder removal for RM15,000. Not long after, he met a friend whose relative had undergone a similar surgery for RM7,000 back in 2010. Naturally, he questioned the price difference.

The rise of treatment costs would mean a rise in contributions, and this is caused by medical inflation. To add on, the annual rate of medical cost increments are predicted to go up to 2-digit numbers! Did you know? In an article published by New Straits Times, Malaysia is in the top ASEAN countries with the highest medical inflation!

Medical takaful is often times affected by repricing, but so are non-medical takaful plans. Repricing for non-medical plans, though rare, may happen too.

The pandemic did not help either – the world’s economy was severely impacted, and we are going through tough times. Now that the economy has opened up, Malaysians have been hit with news of the rising cost of basic goods and fuel, resulting in a rise in prices at eateries, medical services and other industries. This impacted some Takaful plans as well. 

What Causes The Rise Of Costs?

What Causes The Rise Of Costs?

These rising costs are also attributed to longer life spans, mainly due to the advent and advancement in medicine. Older people are also learning to care for themselves, aspiring to keep youthful and healthy. With longer life spans, however, come treatments of medical conditions for a longer term. The irony of the longer life spans is that though there are people looking out for their health, many also have adopted unhealthy, inactive lifestyles as a whole. These could result in illnesses, physical and mental, if not mindful. As medical institutions take on the newest equipment and technology, big investments need to be made for implementation; not forgetting having to hire qualified staff to operate such equipment and training those who are less experienced. The Great Resignation has narrowed the talent pool in many industries, causing the higher cost in hiring talent.

Specific to non-medical takaful, there are rare occurrences when repricing will take place. An instance would be if the claims experience for a particular product is poor. When claims experience is found to be bad, whereby there are more claims than expected, takaful operators would need to reprice to ensure the sufficiency of the Tabarru’ fund for future claims, on the basis of helping each other in times of need. 

How Does It Affect Us And What Can We Do?

How Does It Affect Us And What Can We Do?

While takaful contributions are bound to rise, meaning having to pay a little extra and potentially affect your finances, takaful coverage is still a must-have. As consumers, we should be informed and wise!

First, be sure to revisit your existing takaful coverage and make adjustments where necessary. It helps to have a customisable plan so that you can cater to what we and our family really need. This would help you to get just enough coverage, without over-protecting yourself.

Furthermore, it helps to compare the expected costs between hospitals and treatments, though make sure they are of reputable quality! If you are discharged from a hospital, make a request for an itemised bill to verify and inspect for any possible unreasonable charges. This aids in advocating for transparency from medical institutions to customers.

Looking Ahead

Looking Ahead

Takaful contributions will increase in the years to come, but you can have peace of mind that you and your family will be cared for.

Bank Negara is reviewing existing regulations to allow more flexibility to Takaful Operators in light of claims experience. Great Eastern Takaful Berhad on the other hand, strives to care for customers’ needs.

With the availability of information on the Internet, consumers these days are also growing just as if not more informed, and are bold to speak out on injustices. As mentioned previously, practice reviewing your existing Takaful plan(s). So play your role, and rest assured, we got you!

Check out our various plans and choose one (or maybe two) that best suit you. 

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