Page 65 - MEDICAL AND HEALTH INSURANCE

MEDICAL AND HEALTH INSURANCE

It can be seen that the maximum discount allowed is a total of 35% by the

4th year of renewal, provided no claims were made. This pricing structure

will directly encourage policyholders to be cautious and responsible for

their health to avoid claims and enjoy low premiums. On the other hand,
insurers with this type of pricing structure must be able to ensure that the

discounts offered during the term can be balanced by the expected low

claims.

NCD pricing structure is only applicable to individual PMI products and not
to group products. This product will not be attractive to those who have

frequent claims as the renewal loading will be high, to offset the discount

given to the healthy or those who did not claim. Similarly, if the Insured

has enjoyed the discount and in the subsequent year made a claim, the

NCD would be forfeited and may be subject to a loading factor, which
overall, may offset his initial discount.

With medical inflation occurring every year due to advancement of

medical technology, together with new outbreaks of illnesses and disease,

this NCD cost containment scheme is not widely used by insurers in
Malaysia.

3.2.2 LOYALTY DISCOUNTS

A loyalty discount is not a 'no claim bonus' but tagged to the policyholders
as an incentive to continue insuring with the existing insurer. This will

improve the company's renewal rate and increase the pool of the risk

premium to sustain any claim loss. However, this is neither popular nor

used in a PMI environment as the insurer would not want to encourage

the aging group and adverse health condition policyholders to remain in
their pool. Generally, the insurer would want to attract new customers in

their target market.

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