Payouts Increase, Takaful Contribution Increase
This one is pretty logical – Takaful operators work on a risk pool management system, balancing out probabilities of claims and their costs with Takaful contributions. Naturally, as payouts increase and the pool of Takaful contributions are depleted more quickly over time, higher Takaful contributions are charged to offset the outflow. Serious fraudulent cases aside, many claimants tend to overstate the amount of losses or even misrepresent certain facts to ensure they receive payments.
Some may argue that economic factors such as medical inflation, mortality rates, private hospital fees and the new GST system play a much larger part in the increase of Takaful contributions. However, according to former Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim, there has been an estimated RM760mil lost by insurers and takaful operators in 2013.
Actuaries would most certainly take this into account, along with probabilities of such incidence rates in the future, and offset their potential losses with higher premiums.
Red Tape and Delays
Another considerable setback that dubious claims create for insurers and Takaful operators, is the measures that have to be put in place to prevent them. This affects other policyholders and Takaful participants in two ways:
- With the implementation of such procedures, more manpower is required, increasing the operating costs of the companies, which are ultimately passed down to the consumer in the form of higher Takaful contributions.
- More procedures are required to verify the authenticity of a claim, along with investigations into suspicious claims. These translate into more red tape and, subsequently, longer delays for genuine claimants to receive their due payments.
A Cooperative Effort
Increasing Takaful contributions due to excessive and dubious claims is not a problem isolated to Malaysia; some countries report insurance fraud as high as 30% to 40% of total claims! Be that as it may, consumers, health providers and businesses alike need to collectively work towards better market conditions.
For participants such as yourself, dismiss the mindset that they would lose out to wealthy Takaful Operators if you do not abuse the system. In fact, according to the industry’s statistics from Malaysian Takaful Association (MTA) and Persatuan Insurans Am Malaysia (PIAM), the claim ratio for motor Takaful and insurance in 2015 stood at 67.0% and 71.3% respectively.
This means that the Takaful industry paid out 67 sen in claims for every RM1 contribution collected while the Insurance industry paid out 71.3 sen in claims for every RM1 premium received. This does not include operating costs which include management and commission expenses!
Having said that, you should know your rights as a participant, and how to take full advantage of your coverage – legally, of course! And by the way, if you're in the market for a car, motorcycle or travel insurance, be sure to head on over to our product pages to get an instant quotation!