This article first appeared in The Edge Malaysia Weekly on April 1, 2019 - April 7, 2019

WITH medical cost inflation increasing at an alarming rate, healthcare could become unaffordable to vast segments of the population in the near future. Thus, groups outside the insurance industry are looking for novel solutions, including peer-to-peer (P2P) models.

Ravinder Singh, general manager of the life and health division for South and Southeast Asia at Hannover RE, is a proponent of such solutions as he believes they are viable.

“Today, in Malaysia, medical cost inflation is increasing at between 12% and 15% [a year], which means that every five or six years, the bill doubles. So, if cancer treatments cost RM200,000 today, the cost will be huge in 10 years’ time. It could become unaffordable,” he tells The Edge in an interview.

Although medical insurance may cover those who are ill and those in need of hospitalisation, it has also undoubtedly added to the escalating cost of healthcare.

“As a good reinsurer, we need to think like a consumer … We always study the pain points for consumers. When somebody is sick and needs to be admitted, the first thing he or she is asked is, ‘Do you have medical insurance?’

“If the answer is ‘yes’, the cost would go up by 30% … Medical insurance is the problem. The problem cannot be the solution. When the bill is escalated like that, while the patient would receive help, the cost could be passed on to the next generation,” Ravinder asserts.

He believes a better solution lies in Life Engineering, which brings “crowd sharing” into play.

The mobile app for healthcare and medical expenses provides individuals with the opportunity to join as participating “sharers” in a scheme where medical costs are shared among a pool of members.

Not an insurance scheme

Life Engineering is not an insurance scheme but a crowd-sharing arrangement where medical costs are capped at a maximum of RM50 a month per member in the event of a claim. Members continue to pay in the subsequent months until a claim is fully paid.

“Life Engineering is not an insurance provider because we are purely focusing on sharing medical costs. There is no conflict of interest between us and our consumers,” Gideon Leong, founder of Crowd Care Sdn Bhd — the administrator of the programme — tells The Edge.

At the moment, the programme is only open to healthy individuals from 8 to 40 years of age, but the age limit will be expanded when the community grows larger.

There is an annual participation fee of RM100, and a member can enjoy the benefits as long as he or she continues to be an active sharer.

Loh Gim Chuan, who is also a co-founder of Crowd Care, says the company does not plan to profit from the sharing programme but to generate revenue via other means, one of which would be via an annual participation fee.

Another would be through the cross-selling of other products within the community, once it grows larger. “We plan to partner other insurance companies and be a corporate agent for them. A typical medical insurance will cost you about RM150 a month, assuming it is for a young individual, but this (Life Engineering) is only a maximum of RM50 a month. We can free up part of the money spent on medical cost, which can be put into other investments or other types of insurance products. We don’t replace the insurance companies. We provide an alternative,” says Loh.

As the community expands, the company hopes to earn advertisement revenue by leveraging its platform as well as through merchant tie-ups for member rebates.

Crowd Care expects to turn profitable in another 18 to 24 months, says Loh. “Thirty per cent of the net profit will be given back to the community. We are not making any money now as part of the initial annual participating fee was waived when we started.”

Datuk Syed Moheeb Syed Kamarulzaman, CEO of Malaysian Insurance Institute, is optimistic that the P2P model has the potential to be successful, although it may be “out of the box”.

“I think this model is something that has a lot of opportunities. These are big social issues as a large number of people in the country are not covered [by insurance]. If there is transparency — such as that in Life Engineering — I think the potential would be tremendous,” says Moheeb, who views the programme as a “benevolent scheme” since it provides the public with an alternative, which complements insurance companies rather than compete against them.

“Insurance companies should look at this scheme as a way to help them stabilise medical costs … It will have an impact on how medical providers do the billings,” says Moheeb.

In terms of how Life Engineering helps to lower hospitalisation costs, Ravinder and Moheeb say it is more than just medical coverage as it is also about awareness creation.

Ravinder and Moheeb are independent advisers of Life Engineering.

“Life Engineering makes it easier to share while building a community spirit … A lot of changes and positive behaviour are created. That’s what excites me. We want to encourage patients to ask doctors, ‘Do I need this treatment? Is there an alternative?” says Ravinder, who fully supports the programme. He adds that hospitals would not charge an excessive rate when they know the funds are coming from a community rather than an insurance company.

“There is no conflict of interest as it is purely a form of medical cost sharing. For insurance companies, there is an element of shareholders’ profit and hospitals [also] want a cut.”

Lack of monitoring by health ministry

To Ravinder, this is a critical issue for the insurance industry as excessive costs and unnecessary treatments would eventually lead to skyrocketing insurance premiums as well.

“Ideally, the Ministry of Health should keep a close eye [on the issue] but there was not much monitoring by the previous government. We don’t know about the new government as it is still new but we need to put this agenda on top.”

Ravinder describes Crowd Care’s solution as a global first for the crowd sharing of medical costs. “There are some examples around the world but not for medical insurers. This is the first in the world.”

Loh and Leong say Crowd Care would like to participate in Bank Negara Malaysia’s “regulatory sandbox” — introduced to enable fintech innovation to be deployed and tested in a live environment, within specified parameters and timeframes.

But because P2P operators in the country are not licensed, it is difficult for them to participate.

Bank Negara had previously put Crowd Care on its alert list, and had advised that only licensed entities could engage in the insurance or takaful business. But the company was subsequently removed from the list after its business model was made clear to the central bank.

Touching on the sustainability of the medical cost sharing model, Loh says the company has its own initial screening procedure, and that three independent actuaries have looked at the model and are comfortable with the proposition.

“We have a set of underwriting questions [that need to be answered during the] initial screening. We also have a deferred period as we want to only help people who are genuine.

“To ensure the sustainability of the programme, we are also working with other insurance companies to arrange temporary loss coverage in the event that the sharing [claims] exceed RM50 per person in a month. We are raising funds to ensure that there are sufficient funds to [act as a] buffer,” Loh adds.

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