Overshadowed By Recession, The Indonesian Insurance Industry Is Still Promising And Continues To Grow

Illustration of the Rupiah (Photo: Doc. Antara)

JAKARTA - Indonesia's insurance industry is predicted to have promising prospects. In addition, it will continue to grow in 2023.

However, the penetration of the insurance sector is still relatively small in Indonesia, with a rate of only 3.13 percent at the end of 2021.

"Imagine the economic recession will still be a challenge because the insurance industry has a high dependence on the stability of global and national economic growth," said Senior Research Associate IFG Progress Ibrahim Kholilul Rohman quoting Antara.

Ibrahim explained that one of the main drivers of the growth of the domestic insurance industry is the improvement in terms of regulations with the presence of the Job Creation Law, especially P2SK for the financial sector.

The law gives priority to the development of the insurance industry and pension funds through various innovations, strengthens supervision, and supports insurance and pension funds as a promising alternative source of financing for development.

On the other hand, according to him, the use of digitalization in marketing insurance products to the public will encourage increased insurance penetration in the community.

With digitization, it is easier for people to understand and acquire various insurance products offered. One sector that is quite promising is the growth of a digital-based economy through the presence of a marketplace, which encourages digital transactions.

In the future, he said, the need for insurance to be present guarantees that the transaction will increase along with the risks that grow in line with the increasing level of public confidence in shopping online.

On the other hand, according to Ibrahim, the insurance market from the MSME segment is also still wide open. The government is currently continuing to provide support for MSMEs through the distribution of KUR and PEN, which from year to year continues to increase.

The distribution of government support requires guarantees through insurance companies, in addition to individual awareness of MSME players to buy other insurance products to ensure business risks.

"With stable economic conditions until the first quarter of this year and no significant negative sentiment so far this year, the growth of the domestic insurance industry is expected to continue to increase," he said.

The reason is, reflecting on the prospect of growth in premium income, increasing investment income due to the recovery of Indonesia's capital market conditions and the increasingly moderated level of claims in general due to the stable national economic situation, and even tending to grow positively.

Ibrahim added that the main challenge for the domestic insurance industry this year is the shadow of a global economic recession, which has an impact on the domestic economy.

A number of business sectors that depend on their business growth in export-import activities will be disrupted due to declining foreign market demand.

However, the domestic market, which is also supported by household spending and MSMEs which are relatively more agile, will continue to encourage national economic growth to be better than other countries.

Responding to these findings, IFG Corporate Secretary Oktarina Dwidya Sistha on the same occasion explained various IFG transformation efforts in bringing changes to the healthier and more sustainable insurance industry to continue to increase public trust.

"The recovery of the insurance industry continues with the handling of a number of cases that reduce the level of public confidence in the industry, such as in supervising and supporting the restructuring process of former PT Asuransi Jiwasraya (Persero) customer policies to IFG Life in accordance with applicable requirements and conditions," he said.

In addition, IFG also supervises and ensures that there is a transformation that has a positive impact on the fundamental performance of its subsidiaries, as has happened at PT Asuransi Jasa Indonesia (Jasindo) which can achieve risk based capital (RBC) in accordance with regulatory provisions in a relatively fast time.

He added that in addition to the role in recovering the insurance industry, IFG also has a mission to continue to increase public confidence in the insurance industry through strengthening holding governance and its subsidiaries, as well as an active role in financial literacy and education for the community through various contributions made by the company.