The Indonesian insurance market, which has grown significantly since its recovery from the 1998 economic crisis, has proved its resilience to the challenges recently posed by COVID-19. Despite a slight slowdown in growth, the sector still makes a steady contribution to GDP. Regulated by the Financial Services Authority (OJK), the market comprises 151 insurers, 78 of which specialize in non-life insurance, 60 in life insurance, and eight in reinsurance. However, the financial literacy rate of less than 50 percent prevents greater penetration of the various types of insurance. Moreover, there is still a need to build trust and inclusion, with significant untapped potential among Indonesia’s vast Generation Z and millennial population.
Indonesia’s insurance landscape
The insurance industry presents a dynamic landscape and strong potential for development, considering the low penetration rate stimulated by rising income levels and the growing middle class. Indeed, the country still has an insurance penetration rate of 2.72 percent, lower than that of neighboring ASEAN countries. The life insurance sector is dominated by international players such as Prudential Indonesia, with total assets of around 61 trillion Indonesian rupiah, closely followed by Manulife Indonesia. Written premiums in this sector reached 76 trillion Indonesian rupiah in June 2023, while premiums in the non-life insurance industry reached almost 49 trillion Indonesian rupiah. The highest premiums were recorded in motor, property, and credit insurance. Growth is expected to follow the country’s economic trajectory in 2023. However, public distrust remains a major challenge, requiring greater financial transparency and inclusion from insurance companies.
As of 2023, the implementation of the Financial Sector Omnibus Law (PPSK) is expected to drive the sector forward, addressing capital agreements, political guarantee programs, and digitalization. In fact, despite the progress made, low financial inclusion and persistent mistrust are hindering the industry’s development. Since 2019, Indonesians’ level of financial literacy on insurance has risen from 19.4 percent to 31.7 percent in 2022. However, this progress remains limited as it is not reflected in an increase in financial inclusion, which reached only 16.6 percent in 2022. Initiatives by OJK, including the implementation of PSAK 74 and the additional mandates given to the Deposit Insurance Corporation, are aimed at strengthening confidence and providing a safety net for policyholders.
Health insurance developments
Indonesia’s health insurance system plays a crucial role in meeting the population’s diverse healthcare needs. The national health insurance program (BPJS Kesehatan) is at the forefront of public initiatives to provide affordable coverage. In addition, private insurers are responding to the needs of a growing middle class seeking improved benefits and services. Nevertheless, despite the attraction of better services in private health facilities, private health insurance retains a relatively low ownership rate, at 33 percent.
The JKN-KIS (Indonesian health card) program has made significant progress in improving healthcare accessibility, particularly for vulnerable and low-income groups. Introduced in 2014, the program aims to cover the entire population, reaching around 249 million beneficiaries nationwide in 2022. Despite these positive developments, challenges remain, notably the obstacles faced by Indonesia’s rural and eastern populations due to insufficient infrastructure and healthcare providers.
