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Medical Cost Inflation and Loss Ratio Pose Challenges for Health Insurance Products

03 Feb 2024
Medical Cost Inflation and Loss Ratio Pose Challenges for Health Insurance Products

Jakarta — The increase or inflation of medical costs in Indonesia is considered a challenge for health insurance product services. Moreover, this increase is in line with the loss ratio of this business line over the past five years.

This was revealed during the Relaxed Tugu Discussion organized by PT Tugu Reasuransi Indonesia (Tugure) on Friday, February 2, 2024.

During the event, Group Head Life at Tugure, Dr. Kiki Oditya, detailed data gathered from the Indonesian Life Insurance Association (AAJI) showing a continuous increase in the loss ratio of health insurance products over the past 5 years.

In 2019 and 2020, the loss ratio for health insurance products in the country ranged from 45% to 46%. However, this ratio increased to 66% in 2021 and even reached 94% in 2022.

Kiki added that the loss ratio for health insurance products continued to rise last year, reaching 107% as of August 2023.

"This is a concern for all of us in the industry. These are AAJI's data, and we're looking at a 5-year trend. The performance of health insurance is evident," he explained during the Relaxed Tugu Discussion.

He further noted that the increase in the loss ratio is in line with the rising inflation of medical costs, reaching 13% in 2023.

Medical cost inflation is significantly higher than the general inflation of goods and services in Indonesia, which is around 3%. Consequently, insurance premiums for health continue to rise.

"In general, inflation is about 3%, but medical cost inflation is in double digits. This is noteworthy because inflation factors are always included in premium calculations," he clarified.

Therefore, Kiki mentioned that there are several aspects that need improvement by insurance and reinsurance companies in managing the health business in such conditions.

"There are several things we need to improve, such as business sources, enhancing core systems in both reinsurance and insurance, existing third-party administration (TPA), claim monitoring, and individual product initiatives developed by Tugu Re and other insurance companies."

In this regard, he emphasized that Tugure is ready to support insurance companies in developing initiatives for product enhancement.

"We proactively engage with insurance companies. Whatever our colleagues need, we come and prepare," he concluded.

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