Bank Negara Malaysia (BNM) has clarified that insurers and takaful operators must not unduly delay the settlement of medical claims or rely on exclusions and conditions that are not clearly set out in policy documents.
In a written response to CodeBlue, BNM said medical claims must be handled on a fair and timely basis. “ITOs must observe fair and prompt settlement of claims and cannot unreasonably delay or deny claims without valid justification,” the central bank said, referring to insurers and takaful operators. BNM also said companies may not apply terms that were never disclosed to the policyholder. “In addition, ITOs cannot enforce conditions or exclusions that are not made known to the policyholder in the policy terms and conditions and related disclosure material. Where such cases arise, BNM can take actions to investigate and enforce its requirements,” it said.
The clarification followed coverage of a Stage 4 tongue cancer patient whose insurer, Allianz Life Insurance Malaysia Berhad, reportedly put all cancer-related claims on hold pending an investigation into an earlier hypertension episode that was not the subject of any claim, and requested medical records going back several years.
While BNM stated that claims cannot be unreasonably delayed, it did not introduce fixed timelines for claims assessment or guarantee letter approvals, and it did not define “prompt” settlement. The central bank also did not say whether prolonged deferrals – where an insurer asks for additional documentation but does not formally approve or reject a claim – would fall under the category of “unreasonable delay” in its framework.
BNM also addressed questions on whether medical examinations are required before issuing medical and health insurance or takaful policies. The regulator confirmed that there is no blanket requirement for pre-issuance medical screening; instead, each institution determines its own underwriting process. “ITOs decide whether a medical check-up is needed before issuing a policy based on their own underwriting rules,” the regulator said.
At the same time, BNM said insurers and takaful operators must ensure their proposal forms are structured so that customers can understand what information they need to provide. “Nevertheless, all ITOs have a duty to ensure proposal forms ask clear, specific, and relevant questions for the purpose of underwriting so that consumers understand their disclosure obligations,” it said. Policyholders are expected to give accurate and complete information when responding to these questions. “Consumers have a pre-contractual duty of disclosure, which means they should provide truthful, accurate, and complete information when responding to questions from ITOs at the point of underwriting,” BNM said.
According to the central bank, information obtained at the underwriting stage allows insurers to assess health risks, set policy terms and conditions, and price premiums according to individual risk profiles. BNM said this is intended to support “the sustainability of the risk pool for all policyholders” and to ensure coverage that is “both fair and equitable.” BNM did not outline additional requirements for cases where insurers choose not to conduct medical screening at the point of sale but later carry out detailed reviews of an insured’s medical history when significant claims arise. In Malaysia and other Asian markets, products promoted as requiring “no medical check-up” remain common, with some non-disclosure disputes only surfacing when large claims are made and the insured is already seriously ill.
On dispute resolution, BNM said customers who remain dissatisfied after completing an insurer’s internal complaints process may bring their case to the Financial Markets Ombudsman Service (FMOS), where the matter falls within FMOS’s remit. BNM added that “in certain circumstances, FMOS may also review cases outside its jurisdiction if both the consumer and the institution agree to refer the matter.”
For cases outside FMOS’s scope, BNM said policyholders may seek assistance from BNMLINK, its consumer complaints, and advisory channel. The central bank also referred to the Grievance Mechanism Committee (GMC) as part of broader efforts to improve medical claims management. The GMC includes the Life Insurance Association of Malaysia, the General Insurance Association of Malaysia, the Malaysian Takaful Association, the Malaysian Medical Association, and the Association of Private Hospitals of Malaysia.
According to BNM, the GMC is “working to improve communications between hospitals, doctors and ITOs in medical claims management,” including establishing “clear claims protocols to address common claims pain points and ensure more consistent practices across payers and providers.” BNM added: “This will be adopted for all MHIT (medical and health insurance/takaful) claims and will serve to provide more transparency and certainty in the claims process to all parties going forward.” The central bank did not provide a timeframe for when the protocols would be adopted, and it did not state whether compliance would be mandatory or how they would be enforced.
BNM’s clarification comes as Parliament considers wider reforms to the regulation of private healthcare insurance. During debate on the 2026 budget, Bayan Baru MP Sim Tze Tzin called for an independent commission to oversee private healthcare insurance, citing concerns over claim delays, denials, and administrative processes in private hospitals. “Currently, the government has set up an inter-ministerial committee on medical and healthcare costs. But this committee is temporary in nature, and attention is still needed to address core structural issues. This is where the commission can step in to assist,” he said, as reported by The Star.
Sim cited a CodeBlue survey of 855 private hospital specialists, which found that almost all respondents had encountered insurance processes affecting their clinical decision-making. Only about 1% reported never experiencing such influence. Most respondents said at least one to five patients per month faced insurance-related complications, while nearly a quarter reported six to 10 affected patients monthly. Specialists reported delays in guarantee letter approvals, denials of inpatient admission, limits on diagnostic investigations, and instances in which patients were referred to public facilities or paid out-of-pocket. Some respondents said patients postponed or did not proceed with treatment after coverage disputes or denials.
In response to these findings, Sim urged the government to create a national taskforce including the Ministry of Health, BNM, and law enforcement agencies to examine cases of alleged interference by insurers or third-party administrators in clinical decisions. He referred to the Private Healthcare Facilities and Services Act, which provides for clinical independence in private medical practice. “Our patients are innocent; no one wants to fall ill or have accidents. But when they face giant insurance companies with legal teams, they are unable to defend themselves. Many stay silent, fearful, and give up,” Sim said, as reported by malaymail.
