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CI cover provides specific financial rewards. It is like buying a lottery. You will be paid if you strike the right number (i.e. the right disease). By Dr Mohamed Rafick Khan bin Abdul Rahman
I refer to the article that appears in The Star on Friday May 25, 2007 under the heading “ EPF’s insurance option to allow purchase of policies for critical illness”. VK Chin followed and gave a write-up on Tuesday August 7, 2007 under the heading “ EPF money for critical illness insurance”. Subsequently a report appears in the Business Times where Rexit CEO made a statement that “Life insurers may gain RM3b from EPF move” which gave an insight on how much money is involved in this scheme. This led to comments made by MTUC in the NST on June 11 under the heading “MTUC 'shocked' that EPF ignored insurance objections” where apparently MTUC has express their objection to the scheme. I would like to share my views on the matter as both being a Medical doctor and Reinsurance Consultant who is familiar with the business of insurance and the environment Is critical illness product really critical? Critical Illness (CI) has been in the global market for a long time. Under the policy, the insurance company pays off the assured if the assured suffers from any of the 36 or 40 listed illnesses in the policy. If one would study the list of disease, about 1/3rd of the disease is quite common but the rest are not so common. Certain diseases in the list are very rare like Apallic syndrome. Sufficient to say that not all the disease listed is critical to Malaysians. If one were to read trough the list of diseases being covered, it certainly looks interesting. However, in reality, the name of the diseases does not reflect what is covered. Each condition that is defined in the CI is define by Insurance companies and may not reflect the actual definition of such condition in the medical environment or as understood by the public. E.g. No 1: Under the list of CI, there is an item under the heading of Bacterial Meningitis. It is an establish fact that majority of Meningitis are cause by viruses and a very small percentage of cases are cause by bacteria. For the layperson, a bacteria and a virus is a germ or “kuman” or “bacteria” There is no difference between the two. As such, most people with viral meningitis will not be able to claim. E.g. No 2: Coronary Artery Disease (CAD) benefit is paid if the patient suffers from certain level and number of vessels having CAD. If this is not met, no matter how serious the CAD, the person will not be covered. This will certainly cause confusion among the public. What I have illustrated is just one of the many illnesses definitions that can cause confusion. There are many more if one were to study the details of the list of diseases. Without doubt when there is a claim, many will not be able to claim and eventually it will be a public nightmare for EPF. Do Malaysians need it Without any doubt, it is quite clear that chronic disease is on the rise in this country. Problem related to Heart Disease, Cancer and Disability is fast becoming a major liability for the nation. It is taking a toll on the country healthcare delivery system and the financial impact on the patient and his family. Having being involved at the nucleus stage of this product concept 8 years ago, the aim was to cover those people with small amount of saving in the EPF. The aim is to give those people with small amount of savings a chance to cover the cost of healthcare in case they suffers from “critical illnesses”. As such, there is a need to have an insurance scheme that will cover the cost of any medical calamity. Hospital Surgical Product and its hybrid product are one such example. CI cover provides specific financial rewards. It is like buying a lottery. You will be paid if you strike the right number (i.e. the right disease). If you strike a CAD but do not meet predefine CAD definition, then you will not be paid. It does not matter if the No 1 cardiologist in the country says that it is actually CAD). That is why I said that it is like buying a lottery. If you have to hit the exact “number”, if you hit one wrong “digit” than, then the person will not be paid. We must ask ourselves what we are buying and whether we are looking for protection or looking to buy a lottery. What actually Malaysian need? First, I believe Malaysian need not buy any lottery. If they want to buy lottery, they can go to B-Toto. Malaysians need to buy insurance protection. In the medical environment, the best protection would be the Hospital Surgical Product (H&S). This product will cover the cost of treatment of any diseases that is serious enough that requires hospitalization. The product would be cheaper if it is based on a group basis rather then individual basis. If in the EPF database there is sizeable number of members with small amount of deposits then maybe H&S would be the better thing to buy because it covers the cost of treatment of all serious illnesses that requires admission. If someone has about RM10 000 in their medical account, they probably would get about 15 -20 years of H&S cover if the product is priced about RM500 to RM750 a year. Going by the current medical cost, typical Malaysians need about RM 30,000 – RM50,000 in annual coverage to cover any major medical expenses at private hospitals. MTUC Objection I am not privy to the reasons on MTUC rejections but I believe it is related to the statement made by Rexit CEO, which claims that Insurance Company is expected to rake in RM3 bill from this venture. RM3 bill is a lot of money. Considering that, most insurance companies in Malaysia make an annual profit of about RM200 – RM300 millions, then every single insurance company in Malaysia wants to be in the scheme. Could it be that MTUC felt the scheme does not benefit its members? What can be done with RM 3 bill? With RM3 billions changing hands, the impact on the economy is great. It goes without saying Rexit will makes good amount of money as the system provider to the scheme. I belief this is not the reason why EPF is embarking on this scheme. If it does then, it would go against the charter of EPF where protecting the interest of the member is the priority. As I had explained above, it is obvious that the CI Scheme is not beneficial to its members. H&S scheme would be more beneficial. Furthermore, EPF account 2 has a provision for the payment of medical cost and the amount allocated here may not be sufficient. As I had illustrated above, the better scheme would be running an H&S Scheme and not CI, as this would take care the medical interest of its members. Assuming that EPF still wants to go ahead with the program, then what would be the factors that EPF need to consider: To insure or to self Insured? The core issue is to provide benefit to its members and at the same time to make sure that it is done at the minimal cost. EPF under this scheme, proposed that members withdraw part of their money and buy the product. Maybe EPF should consider self insured like how it is done with SOCSO and many other mutual trust organization. In this manner, EPF do not have to pay RM 3 bill but has only to pay the claims. Assuming that the claim ratio and administrative expenses is 30%, then the payout is about RM 1 bill. It is still cheaper than spending RM 3 bill. If self-insured program is used, then the EPF has the option to reinsure itself against any risk of over exposure to excessive claims. Should the current CI terms be used or it should be modified? The current CI terms are indeed not “CRITICAL ILLNESS”. It is because it does not cover illness that is critical to Malaysians. I would consider the various terminology used in the product definition is rather confusing and may raise problem for EPF. Having been in this industry for sometime and has been on both side of the fence (medical and insurance), I anticipate that there will be a massive PR problem with EPF. Conclusion In conclusion, EPF board need to ask itself. Is the EPF CI program is beneficial to its members? Would not it better to pay for H&S rather than CI? It must also ask itself whether it is ready to receive dissension from members when the claims starts pouring in when many members realized that they have bought a no so good product, which is endorsed by EPF. I do hope EPF revisit its decision after taking into account the interest of the members.
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