Medical Insurance? No thanks… I’ve got it

Considering self insurance

By Ming-Foo Looi


You know, sometimes we come across the question, likely to be asked by someone selling insurance, “Are you insured?”

The response you’d usually get is, “Sure, I am insured” and respondent would be absolutely right when he or she said this.  You see, we are all insured, the question should really be “BY WHOM are we insured?”.11 To give a simple illustration of this, let’s say we own a house worth RM500,000.  If a fire occurred and the house got partially burned down, we would need to get it repaired or reinstated before we can continue to live in itas usual.  Now if the cost of repair is RM100,000, we’d have to fork this sum of money out to get the repairs done, right?  Now the only thing we’d need to figure out is WHO is going to come up with the RM100,000 to repair the house?  The answer is simple; the one who has insured it.

If we had bought a fire insurance policy (with adequate sum insured) on the house, the insurance company will pay the RM100,000.  If we did not buy a fire insurance policy, then we are out-of-pocket on this – in other words, we’d need to come up with the RM100,000 ourselves.  In the insurance industry, this is known as being “self-insured”.  Makes sense?

Therefore, in life, everyone is insured – the only difference is: WHO IS THE INSURER?

As far as our property goes, we know that if we did not properly insure it and if it were to get stolen or damaged, we’d lose money, money that we have paid for, or invested in, the property.  In another sense, we were the insurer for the risks and therefore had to pay for the loss as a result.

For certain types of risk, however, the law makes it mandatory for us to be insured by an insurer.  One of these is the liability risk that we may incur should we kill or injure others or damage property belonging to other’s whilst driving our vehicles.  The requirement to have Third Party Insurance by all motor vehicle users is stipulated under the Road Transport Act 1987, Section 90.untitled 2

Note however that the requirement is only to have Third Party Insurance – insurance to compensate people when we through our negligence injure them and/or damage their property.  There is no requirement, however, that we also need to insure our own vehicle against damage or loss.  That decision is entirely ours.  In other words where it concerns our own property, we can choose to be our own insurer if we like.

Now, the reason the Government makes it mandatory for motor vehicle users to have Third Party Insurance is to ensure that when an accident happens, there will be adequate financial resources to meet the cost of the damages caused.  It will be useless, and extremely unfair to the victim, if a motor vehicle user, being self-insured, were to be declared a bankrupt and cannot compensate for the loss he has caused.

Essentially therefore, before one can self-insure, one must have the financial resources to do so, and in this aspect the reality is most people are not in the position to do so.

Now, this understanding and appreciation of the need for insurance starts to blur when it comes to some other forms of insurance besides property or motor insurance, for example, medical insurance.

On the subject of medical insurance, to be fair, most people realize that having medical insurance is important because medical treatment can be costly if one were to seek treatment at private hospitals. In Malaysia, we are still very fortunate because we can still relatively easily seek treatment at government or public hospitals which are heavily subsidized – unlike people in developed countries such as in the U.S., U.K., Europe, Australia, Japan, etc.  In developed countries (which we as a country aim to attain by year 2020), whilst public funded medical facilities are available, they are not so prevalent and thus are less easily accessible for those living in areas where there are none.  Most people in these countries will therefore have to rely on getting treatment at private medical facilities, but because of the high costs involved most will have no access to treatment unless they are covered by some form of medical insurance.

Luckily for us in Malaysia, we are still able to have access to treatment at very low cost at government medical facilities.  The downside however is having to contend with the huge crowds seeking treatment at Government hospitals and the consequently long waiting time.  This is unavoidable simply because government facilities are affordable, and therefore most people, rich and poor alike, will want to seek treatment there – the rich if they didn’t mind the wait, the poor because they had no choice.

To give an example of this at our government hospitals, a few years back, there was a case of a 76 year old man who had a fall and fractured his pelvis and thigh bone (femur). Being a government pensioner, he enjoyed (almost) free medical treatment at government hospitals.  (Note that even for non-civil servants the costs of medical treatment are just nominal and still very affordable to most.)  Naturally, the man was admitted into a government hospital, a well known one with excellent facilities.  The doctor who examined him ordered surgery to repair the fractures.  In the meantime traction was administered for his fractured leg in order to prevent further injury.  An appointment for surgery was set for about two weeks or so depending on availability.  This was unavoidable simply because with the limited facilitiesavailable doctors had to ensure that those with more critical or life threatening injuries were given preference for surgery.  Now having to lie on a hospital bed (thankfully this hospital was air-conditioned) with one leg immobilized by traction and with as little movement as possible permitted for two whole weeks can be awfully agonizing!  Needless to say, if one can’t afford to seek treatment and surgery elsewhere, there will be no choice but to continue in that state and wait the two weeks or so out.


Fortunately for the man, his family could afford the additional costs of about RM20,000 to seek treatment at a private medical facility, and off he was transferred to one close by.  Surgery was carried out the day after and just about a week later, he was discharged from the private hospital.

This is but an example of a relatively minor problem which involved about RM20,000 in treatment costs.  What if it were something more serious and the costs had been higher?  Say, RM50,000 or RM100,000 or even RM200,000?  With the double-digit rate of inflation in costs of medical treatment, it would not be surprising at all if a procedure which today costs RM50,000 may very well cost RM209,000 in 15 years’ time (just using an inflation rate of 10% – statistics for Malaysia from the World Health Organization website show the rate to be higher). See the table on current costs of certain medical procedures – note however, these costs do not take into consideration costs of hospitalization, ICU, etc. yet. untitled

If it costs RM200,000 for a treatment that we need, do we have the financial resources to pay for it?  If not, what are our alternatives?

Fortunately, for those who are in employment generally would enjoy some form of coverage from their employers.  However prudence dictates that we ought to find out what and how much are we covered for exactly.  In fact, not too long ago, a very senior executive of a very large public listed conglomerate discovered to his own dismay that his medical coverage entitlement had a limit of just RM30,000 per annum – after he had undergone a heart bypass operation which had cost RM65,000.  The poor chap had to pay the balance (of RM35,000) from his own pockets – what a way to learn.

To add salt to the wound, the man was retiring the following year.  Double jeopardy for him in that he now had RM35,000 less in retirement funds as he had used part of his retirement funds for the surgery, and secondly, the prospect of him qualifying for medical insurance upon his retirement has now become pretty slim.  Even if he did qualify, the premiums would have been substantially higher because of his age and health condition, and besides that it would have been very likely that his coverage would have a permanent exclusion on treatment for heart related diseases which is now a pre-existing condition.

Suffice it to say therefore that people who are currently covered under their employer’s Group Hospitalisation and Surgical Policy will still need to consider the following: