AAUI Chair: Many Private Sectors Are Not Aware Of The Benefits Of Insurance

Photo: Doc. Antara

JAKARTA - Chairman of the Indonesian General Insurance Association (AUI) Budi Herawan said that many private sectors in Indonesia are not aware of the benefits of insurance, thus hampering market penetration.

Indonesia's private sector is characterized by many small companies, but economic dominance is only owned by a few large companies. Indonesia's private sector is home to 66 million businesses, only 9 million are officially registered (following the insurance program)," he said at the 28th Indonesia Rendezvous Conference event in Bali, quoted from Antara, Friday, October 11.

Some of the challenges related to the barrier to insurance penetration in the private sector are the issue of distrust about the reliability of insurance companies which creates the uncertainty of the discretion of government regulatory enforcers.

Therefore, increasing regulatory consistency and encouraging access to international markets is the key to releasing the potential of the Indonesian private sector, as well as encouraging sustainable economic growth which will provide benefits to the insurance industry.

We understand, appreciate, and support the government's initiative to promote the development of the insurance industry. This includes implementing regulations to increase customer transparency and protection, as well as providing incentives for insurance companies to expand our reach," he said.

A number of important government initiatives appreciated by AAUI include financial health for insurance and reinsurance companies (conventional and sharia), governance for mutual insurance companies, separation of sharia units, guidance on credit and guarantee insurance, customer protection, then licensing for insurance and reinsurance companies.

Then also product management guidelines as a form of simplifying the filing and returning to the basic process in managing assumptions that can actually support price policies for insurance products.

The last is the implementation of IFRS (standard financial accounting from the International Financial Reporting System (IFRS) Board) 17 for insurance companies as a new global standard designed to provide a more comprehensive and transparent view of the position and financial performance of insurance companies. On the other hand, the application of IFRS can be complicated and expensive, requiring significant investment in technology, data, human resources, as well as a strategy for determining product prices and risk management.

The effect of this initiative is an increase in the volatility of insurance companies' profits, which are particularly relevant to long-term general insurance products. In addition, there has been a change in capital requirements. Some insurance companies may need to increase their capital base to comply with the new rules, "said Budi.