PETALING JAYA: Employer groups warn that the looming rise in insurance premiums may compel businesses to scale back on employee benefits, including health insurance and related perks.
They said this could adversely affect employee retention, workforce morale, productivity and overall competitiveness.
Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman said employee health is important to employers.
“The projected increase in insurance premiums will be unaffordable for most micro, small and medium-sized enterprises (MSMEs).
“Without adequate intervention, the steep rise could force many employers to reevaluate the existing medical benefits offered. Some may potentially drop out due to cost constraints.
“This could result in reduced insurance coverage, leading to less comprehensive health benefits for employees,” he said.
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He added that such reductions could challenge the retention of skilled employees and negatively impact workforce morale, productivity and competitiveness.
Syed Hussain noted that any cost increase could significantly strain working capital, leading to tighter cash flows which might hinder investments in crucial areas such as digitalisation, new technologies and operational expansions.
“A steep hike in insurance premium will pose various challenges, especially to MSMEs that typically operate on tight budgets,” he said.
SME Association of Malaysia president Chin Chee Seong said SMEs are concerned about the potential financial strain on businesses due to significant increases in insurance premiums.
“We are already facing a lot of costs. Medical insurance is one of the fringe benefits we provide through group packages that cover each employee,” he said.
If premiums rise, Chin said SMEs may have to adjust coverage to manage costs, which could lead to staff receiving less coverage.
“Employees won’t be happy with reduced coverage.
“Such increases, alongside other rising costs, are bad for business. Employers will have to bear more costs.”
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The government, he said, should not allow such significant hikes, especially when insurance companies reported increasing profits yearly.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) president Datuk Ng Yih Pyng said any increase in insurance premiums has to be reasonable and affordable without burdening the payers, including employers.
He highlighted that businesses are already grappling with a “triple whammy” of financial pressures – a higher minimum wage, a multi-tiered levy and the mandatory EPF contribution for non-Malaysian workers as outlined in Budget 2025.
“The proposed hikes of between 40% to 70% in insurance premiums would place a substantial financial burden on these businesses, especially higher operating costs,” he said.
ACCCIM treasurer-general Datuk Koong Lin Loong said many businesses, including SMEs, buy group insurance as part of benefit-in-kind, or for the benefit of employees.
“When premiums increase, they cannot simply stop buying but have to fork out extra to maintain the benefit,” he said.
There are broader implications such as talent retention and escalating operational costs due to various factors, including geopolitical economic concerns and raw material costs, he added.
“Bank Negara should handle the situation with extra care, as this is an internal issue that can be controlled,” he said.
