Malaysian insurers face margin pressure from prolonged haze

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Malaysian insurance faces haze pressure

Highlights

MBSB Research cut its earnings forecasts and target prices for Allianz Malaysia Bhd by RM4.04 to RM22.73 and for Takaful Malaysia by RM1.07 to RM3.44.
Malaysian insurers face margin pressure from rising haze-related medical claims and higher treatment costs, compounded by constraints on premium increases due to regulatory intervention.
Bank Negara Malaysia has capped medical insurance premium increases at 10% until next year, potentially allowing larger increases thereafter, though the risk of policy cancellations remains high.

This article was translated from the original. Read the original version by our correspondent here.

Medical claims risk and forecast revisions

As reported by The Edge Malaysia, citing MBSB Research in a sector report, more people seeking treatment for haze-related respiratory illnesses could raise medical claims, while insurers also face higher drug and medical equipment costs due to logistics disruptions.

The research firm said rising living costs make it difficult for companies to impose higher charges on policyholders, as customers risk dropping their coverage, while also triggering further regulatory pressure. As a result, insurers may have to accept smaller premium increases and thinner profit margins.

MBSB Research said insurance policies with recurring medical premiums are more vulnerable to regulatory intervention, while employer-provided medical coverage is less affected because its pricing can be renegotiated annually. In its coverage, the firm identified Allianz Malaysia Bhd as the most exposed due to its greater reliance on medical insurance products with recurring premiums, while Syarikat Takaful Malaysia Keluarga Bhd is expected to be less affected because its family takaful business is more focused on financing-related products and much of its medical coverage comes from employee benefits.

MBSB Research cut its earnings forecasts for both companies and reduced Allianz's target price by RM4.04 to RM22.73, and Takaful Malaysia's by RM1.07 to RM3.44.

Haze impact and regulatory constraints

The pressure on the sector comes as haze caused by severe forest and peatland fires in Indonesia continues to blanket the skies over several Malaysian cities. At 10am on Tuesday, Johor Bahru, Kuching and Kuala Lumpur each recorded unhealthy air quality readings.

Bank Negara Malaysia, which regulates the insurance sector, has capped medical insurance premium increases at 10% following public outcry, with the cap scheduled to expire next year. MBSB Research said insurers may be able to raise premiums more substantially thereafter to recover costs, but any sharp increase risks prompting customers to cancel policies and inviting further regulatory intervention as households continue to struggle with high living costs.

Nevertheless, the research firm maintained its buy recommendation on both stocks, as the persistent haze has yet to affect the sector's attractive valuations, dividend payouts and near-term growth prospects. It said the sector still has the potential to post robust record revenue, albeit with more moderate net profit growth.

In our earlier coverage of the 2027 Budget debate and healthcare reforms, we highlighted criticism that the modest increase in the Ministry of Health's allocation has yet to address workforce shortages, public hospital investment and gaps in preventive care. The article also discussed the MediAsas 2027 plan, including concerns over the use of EPF Akaun Sejahtera savings to pay premiums and the affordability of coverage once initial subsidies end.

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