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Indonesians cut back on insurance but industry remains upbeat over growth potential
Improved insurance literacy among consumers is one way to capitalize on potential growth in Indonesia's insurance industry, which still lags behind its Southeast Asian peers.
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Long reach: A customer service officer speaks to a customer via video call on June 25, 2020 in line with COVID-19 rules at BP Jamsostek Salemba in Jakarta. (JP/Seto Wardhana)
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onsumers have cut the amount they spend on insurance even as a relatively low penetration rate leaves ample room for growth in the country’s insurance industry, the Finance Minister has told a virtual conference held by Indonesian Financial Group (IFG), a state-owned holding company of insurance and underwriting firms.
In her keynote speech on Monday at the 2022 IFG International Conference, Sri Mulyani Indrawati explained that average insurance spending in Indonesia was US$75, or just 1.9 percent of annual consumer expenditures.
The decline in average insurance spending comes amid growth in insurance assets to account for 13 percent of the financial industry.
Data in March from the Financial Services Authority (OJK) show that insurance assets grew 12.87 percent year-on-year (yoy) to Rp 1.637 quadrillion (US$112 billion) while insurance investments grew 10 percent yoy to Rp 1.345 quadrillion.
"This data confirms the fact that insurance penetration and density in Indonesia are still very low," the minister told conference participants, citing data from insurer Swiss Re Institute’s Sigma 2020 report showing that Indonesia’s insurance premiums-to-GDP ratio was 1.9 percent, just 0.1 percentage points higher than the Philippines’ ratio.
Singapore leads in the region with a ratio of 9.5 percent, followed by Malaysia and Thailand with respectively 5.4 percent and 5.3 percent, and Vietnam slightly better than Indonesia with 2.3 percent.
OJK data show that insurance premiums decreased 0.56 percent yoy in March to Rp 133 trillion. Meanwhile, IFG’s March report states that the gap between premium growth and GDP growth had been closing from double digits in 2005 to a single digit in 2020.
