Almost all (93%) of Indonesia’s insurance industry players are optimistic about their companies’ future growth in the next five years, according to the results of a survey conducted by the Financial Services Authority (OJK) in 2023.
Similarly, 87% of the insurance industry has a positive outlook on the growth of the industry.
However, 33% of insurance industry players believe that the growth of the insurance industry in Indonesia is not as favourable as the growth observed abroad.
According to the “Roadmap for the Development and Strengthening of the Indonesian Insurance Industry 2023-2027 – Restoring Confidence through Industrial Reform” released by the OJK earlier this month, there are two main challenges to the growth of the insurance industry, namely public literacy and limited support from domestic reinsurance.
Industry growth
The insurance industry as a whole is currently experiencing growth. However, growth in the conventional insurance sector has been relatively modest over the past five years, averaging only 1.89% per year. Specifically, conventional insurance premiums have grown by only 0.9%, while Shariah insurance premiums have grown by 15.7% over the same period. Despite this growth, the market share of takaful contributions remains relatively small compared to conventional insurance premiums (excluding social and mandatory insurance), accounting for only 15.51% in 2022.
The insurance industry in Indonesia consisted of 136 conventional insurance companies, including 52 life insurance companies, 72 general insurance companies, 7 reinsurance companies and 5 social and mandatory insurance companies (excluding insurance support institutions, actuaries and insurance agents).
Life insurance accounted for 38.98% of total premiums or contributions in the insurance industry, while general insurance and reinsurance accounted for 16.03% and social and compulsory insurance for 45%.
Insurance joint ventures had a dominant market share of 69.1% in the life insurance sector, while in the general insurance sector insurance joint ventures had a market share of 34.4%. Therefore, it is important to enhance the implementation of international standards while taking into account the unique characteristics of the Indonesian market, according to the OJK.
According to the OJK, a significant number of insurance companies in both the general and life insurance sectors are relatively small in size.
In contrast, a few insurance companies account for more than 80% of the total premiums of the insurance industry.
In summary, 69.2% of the total number of life insurance companies (36) and 62.5% of the total number of general insurance companies (45) contribute less than 20% of the total premiums/contributions to the industry. Therefore, it is crucial to increase the capacity of companies and consolidate the industry, according to the OJK.
