How an insurer makes money even when it pays out

An insurer makes money when it pays out because your claim was in the price before you ever made it, and your premium spent the waiting time earning something. Refusing claims is the explanation people reach for first. I think that's lazy, though I'll come back to where it isn't.

Where a ringgit of premium went at one general insurer

That comes from Allianz Malaysia's 2025 results briefing, which also says its ratio beats the market average, so it's a flattering example.¹ Across all motor insurers, Bank Negara Malaysia (BNM) put net claims at 68% of earned premiums in the second half of 2025.²

Either way, the big slice is the one that goes back out. A paid claim isn't a bad day for an insurer. It's the plan.

The part that isn't on your policy

The premium comes in first and the claim, if there is one, goes out later. In between, the money has to sit in something.

Allianz's general arm held about RM7.6 billion of investments at the end of 2025, more than twice that year's insurance revenue.¹ Some of that must be shareholders' money rather than premiums, and the briefing doesn't separate them.

It's a dull pile. Bonds make up about 63%, and it reports a yield of 3.7%.¹ I find that reassuring, since it's meant to be there when your car isn't.

Dull still adds up. The same arm made about RM513 million from insurance in 2025, and about RM208 million more from investments, after a charge for how long claims take to settle.¹ So close to three ringgit in ten came from the waiting, by my sum.

Life insurers are stranger

Now look at life insurers and family takaful together. BNM says they ran net underwriting losses of RM3.6 billion in the second half of 2025, and still ended with RM4.6 billion of excess income over outgo.²

Lose billions on the main activity and come out ahead? My reading is that investments fill the gap, and FMT's report of the review points the same way, with unrealised gains from a recovering share market.³ Unrealised means on paper, so I'd hold that one loosely.

I'd add two warnings before anyone gets excited:

• Part of the loss is seasonal. Group policies tend to renew in the first half of the year, when the loss was only RM0.9 billion.³
• Excess income over outgo isn't the same as shareholders' profit, as far as I can tell. Some of it stays in funds that policyholders have a claim on, and I couldn't find a published split.

So what about refused claims?

In July 2026 the deputy finance minister told Parliament that industry data for 2025 showed an average claims payout above 90%.⁵ That's the industry's own number, and the report doesn't say whether it's by count or by value.

Nobody outside seems able to check it. "We don't have a national registry for rejected claims," the Malaysian Medical Association's president told The Star.⁴ He called that a problem, and I'd agree.

So here's a sum on weak ground. Borrow that split for a made-up insurer, and say it paid every refused claim, each the same size as an average paid one. Claims go from 62 sen to about 69 sen, which eats more than half of the 12 sen left over.¹

That's why I said lazy and not wrong. Refusals clearly aren't nothing, and many of them may be perfectly proper, which my sum ignores. But the made-up insurer still makes money after paying everything, before it has invested a sen.

Where the sums stop working

The split only holds if the price was right, and the price gets set before the bills arrive. Medical is where that's being tested.

Payouts on medical cover hit RM6.5 billion in that half, up from RM5.7 billion in the one before, with BNM pointing to more hospital admissions.² It also says premium income was held back by interim measures on price rises.²

I can see why a policyholder hates a repricing, and why an insurer can't skip one forever. I don't think the fight is really between those two. It's about the hospital bill.

There's a cushion, and it isn't optional. BNM's capital ratio for the industry stood at 225%, against a minimum of 130%.² That's money which has to sit there doing not much, so the waiting isn't free either.

One thing for anyone running a business

Any business paid before it does the work is holding a small version of this. A gym knows the feeling, and so does anyone taking deposits.

If it were me, I'd treat that cash the way an insurer has to treat a premium. It has arrived, but it isn't mine yet.