What are some of the promising prospects of the Insurance Industry? How is the market condition for the Insurance Industry in Indonesia? 

Insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. These insurance policies are used to hedge against the risk of financial losses that may result from damage to the insured from liability for damage or injury caused to a third party. 

The past years have been the oddest living periods considering the period of recovery from COVID-19 and the recession happening. Though globally, insurance industries had quite a downfall, there was a slight growth to approximately 1.2% in 2020. In addition, preliminary data suggests that growth and profits rebounded in 2021 especially in countries who have reinforced vaccine rollouts, which made activities possible again. 

With that being said, what are the opportunities of the Indonesian Insurance Industry? How will it perform in the future? How is the insurance penetration rate in Indonesia? Read more to find out!

Overview of the Indonesian Insurance Industry and its Market Dynamics 

According to a report by KPMG, the market fundamentals of the insurance industry in Indonesia have a low penetration, at around 2.3% of its Gross Domestic Product. It has strong returns, but has a relatively untapped market on Islamic insurance opportunities (considering Indonesia has the largest Muslim populations in the world). It also currently has an untapped microinsurance opportunity. 

Demographically, Indonesia has a good potential for this industry because it has a large population of almost 255 million people, which mostly consists of a young population (half of the population is under 30 years old). The Indonesian middle class is also growing which could also be a potential for this industry to expand its businesses to Indonesia. 

Indonesia itself has a liberal insurance foreign investment environment which has led to the entry of the largest insurance companies in the world like FWD, Prudential, Allianz, and more. In the future, this industry is expected to have positive growth from 2020, 13% CAGR projected to grow in Life Insurances which could amount to IDR 243 trillion. 

However, the challenges that could be present in the Indonesian insurance industry include an uncertain regulation, which could present foreign investors with operational risks, high vulnerability to natural disasters (considering Indonesia is a tropical country and an archipelago with many flora and fauna) and the slowdown in China which could weaken confidence in the Indonesian Rupiah which could depress economic growth. 

Strategies to Help Insurance Companies Bounce Back

Considering the performance during and before the pandemic, it is notable that there was not a good outlook for the insurance industry. However, there are several strategies that companies could implement to help bounce the industry back. Among them include:

1. Engage with Ecosystems and Insurtechs

The ongoing drive towards digitalization has put the insurance industry on the verge of a paradigm shift. Especially with the rapid development of technology, traditional industry borders will fall away and by adapting to high technological advancements, it could influence the future of insurers. According to research done by McKinsey, ecosystems could encompass USD 60 trillion in revenue by 2030 so adjusting to this could help insurers become more open to opportunities. 

2. Product Innovation and Coverage of New Risks

It is important for insurance industries to create financial resilience, but some companies have left some substantial risks uninsured. Especially with the fast changing world which is creating a lot of new and dangerous risks, it is crucial for insurance companies to adjust and create their products so that it could align with needs of the market. New risks also call for new products and a reallocation of priorities, which represent a window for product innovation. 

3. Enhance and Personalize Customer Engagement and Experience

Nowadays, customers are embracing digital channels and have become accustomed to experience in leading tech companies. Do note that insurance company customers expect the same when buying insurance both online and offline. Creating a good customer engagement gives the customers a better experience to the company thus increasing the customer retention. 

Popular Insurance Companies who have Penetrated the Indonesian Market

This category is divided into life, non-life, and brokering. Among them include:

1. Life: Prudential Indonesia, Allianz Indonesia, and AXA-Mandiri
2. Non-Life: Jasindo and Asuransi Astra and Asuransi Sinar Mas
3. Brokering: Marsh Indonesia and KBRU (local broker)

Future Prospects of the Indonesian Insurance Industry

In the future, the insurance industry in Indonesia is expecting an improving outlook in the upcoming years. The most promising subsector of this industry would be life insurers. This balanced optimism isn’t surprising given that insurers are expected to benefit from steady economic growth and rising household incomes combined with increasing market penetration. Product innovation and distribution strategies in the market are most likely to help the industry to capitalize on the growth potential. 

Enter Indonesia’s Insurance Industry with BRIGHT Indonesia

It would take a lot of in-depth research about the Indsurance industry in Indonesia. In order to enter the Indonesian market, you would need the right local partner to assist you. 

BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:

1. Provide assistance for you in expanding and developing your business by identification of potential partners.
2. Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arrange business meetings, and act as a liaison.
3. Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
4. Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.

For more information, email info@brightindonesia.net.