Insurance Industry Pressured By COVID-19, Jiwasraya, And AJB Bumiputera

Illustration. (Photo: Unsplash)

JAKARTA - The national insurance industry is currently experiencing a crisis. Not only because it was hit by the economic slowdown due to the COVID-19 pandemic, but also because of the decline in consumer confidence due to the failure to pay for Jiwasraya Insurance and Joint Life Insurance (AJB) Bumiputera.

Chairman of the Infobank Institute, Eko B. Supriyanto, said that prior to the COVID-19 pandemic, the national life insurance industry had actually experienced tough times in the last two years.

According to Eko, currently some insurance companies are focused on marketing products wrapped in investment, such as unit-linked. However, because they are too filled with guaranteed investment-based products, life insurance companies have quickly entered into stocks and mutual funds.

Furthermore, Eko said, as a result, if the stock market crashed, many insurance companies would end up having problems. In addition, there are other problems, namely there are many violations of good corporate governance (GCG).

Based on data from the Financial Services Authority (OJK), in 2019 the gross premiums for the life insurance industry, which are inhabited by 61 companies, grew negatively by 0.38 percent or to Rp. 185.33 trillion.

"This growth continues the downward trend that occurred in the previous year. In 2018 the life insurance industry premium grew 1.20 percent, a very deep drop from the previous year's achievement which recorded a growth of 16.23 percent," he said, in a virtual discussion, Thursday, July 30. .

Meanwhile, said Eko, the profit as per May 2020 was quite improved, up 128.26 percent to IDR 1.21 trillion from a total of 54 life insurance companies. However, this was accompanied by a decline in other financial indicators.

"As of May 2020, gross premium income experienced minus 12.54 percent to IDR 64.01 trillion. Investments were minus 8.12 percent to IDR 426.24 trillion, and assets minus 5.52 percent became IDR 531.14 trillion," he said.

Digitalization Is An Opportunity To Develop Business

Deputy Commissioner for Supervision of IKNB II of the Financial Services Authority (OJK) Moch Ihsanudin said the national insurance industry is expected to take advantage of the opportunity for digitization in the midst of the COVID-19 pandemic. This is because more and more people are technology literate.

Ihsanudin explained that most of the 270 million Indonesians have been actively using cellular phones. In fact, cellular phone users in Indonesia have reached 338 million active numbers.

According to Ihsanudin, the insurance industry could make this phenomenon an opportunity to further develop business towards digital or insurance technology (insurtech).

"In our opinion, the opportunity is quite big where we can use digital identity and penetration. So when we are being affected by COVID (currently) we are lying down but while reorganizing, once the economy improves, it is hoped that (the insurance industry) will rebound," he said.