T

he general insurance industry reported a lackluster performance in the first quarter of the year, triggered by the economic slowdown.

According to the latest data released by the General Insurance Association of Indonesia (AAUI), the general insurers posted 9.8 percent growth year-on-year in terms of gross premiums to reach Rp 13.97 trillion (US$1.05 billion) in the January to March period.

It was a steep drop compared to the first quarter of 2014, when the companies managed to book 19.6 percent annual growth.

AAUI executive director Julian Noor said ongoing economic contraction '€” with 4.7 percent gross domestic product (GDP) growth recorded in the first quarter '€” had played a part in the result.

'€œOur business is highly connected to economic activities. When they are slowing like today, our business is lagging as well,'€ he said in a press conference on Monday.

One of the insurance segments that was most affected by the slowdown was property, as shown by the data. In the first three months of 2015, property premiums climbed only 6.9 percent to reach Rp 4.1 trillion, whereas a year ago, they rose by more than 50 percent.

Marine cargo and marine haul segments posted slower growth rates as well, while the credit insurance segment booked a decline, as business was down 11.6 percent year-on-year from the previous period.

'€œThey somewhat reflected the slower pace of loan disbursement and the low number of government projects on progress,'€ Julian said.

Despite the slower growth rate, property remained the biggest contributor to total gross premiums as it accounted for almost half of the figure.

Automotive, on the other hand, surged 17.6 percent on an annual basis to Rp 4.08 trillion, higher than the 8.1 percent rate recorded in the first quarter of 2014.

However, Julian said that the AAUI would probably not see the same positive development in the automotive segment in the second quarter, citing the sales target revision made by the Association of Indonesian Automotive Manufacturers (Gaikindo).

Gaikindo previously said that carmakers will presumably fail to reach their sales target of 1.2 million units this year due to a variety of reasons, such as the depreciation of the rupiah against the US dollar and people'€™s weakening purchasing power.

Instead, Gaikindo estimates that sales will only amount to around 1.1 million units by year-end.

In terms of claims, the AAUI announced that total claims skyrocketed 80.8 percent year-on-year to Rp 8.07 trillion in the first quarter. It attributed the rising figure to claim payments made in relation to last year'€™s AirAsia plane crash.

By the end of March, AAUI'€™s members comprised 79 general insurance firms and five reinsurance companies.

Meanwhile, according to Julian, the association is now on the lookout for further business declines.

'€œIf state spending, which is expected to be the main driver of the economy, remains stalled, this year'€™s [growth domestic product] GDP growth will probably be less than 5.2 percent. It will mean that the general insurance business will only rise by 10 to 15 percent, as opposed to 15 to 17 percent if the GDP exceeds 5.2 percent,'€ he said