OJK Deems That Insurance Industry Plays Significant Roles in National Development

Nov 19 2015



Financial Services Authority, Jakarta, November 19, 2015: As we all know, insurance industry plays significant roles to support national development process by collecting a big amount of long-term funds, which then become the source of funds for development. Apart from that, insurance industry also has roles to support members of society in handling daily risks, especially in starting and running their businesses.

Insurance industry development increases each year in line with the increasing number of insurance-minded people in society. The trend indicates that Indonesian society has begun to understand that insurance is a part of risk management that gives guarantee and protection against property and life losses; therefore it affects insurance industry growth in general. 
Within the last four years from 2011 to 2014, assets of conventional insurance industry grew more than 16 percent in average. Similarly with the average of investment growth and premium, which consecutively grew 14.4 percent and 21 percent, said Chief Executive for Non-Bank Financial Industry Supervision Firdaus Djaelani at Insurance Outlook 2016 seminar in Jakarta.

As for this year, assets and investment of conventional insurance industry until end of September have reached the amount of Rp 765.6 trillion and Rp 608.6 trillion consecutively. Compared to the amount in end of 2014, industry assets grew by 1.36 percent, while investment declined by 0.24 percent due to fluctuation in some investment instruments recently. 
Meanwhile, premium growth in national insurance industry as of September 2015 increased by 17.1 percent compared to the figure in August 2015 and increased by 11.9 percent compared to September 2014. The biggest premium growth was contributed by life insurance, followed by social insurance and general insurance. 
Apart from that, as of September 2015, there have been more than 137 conventional insurance companies (comprising life insurance, general insurance, reinsurance, companies that provide obligatory insurance and social insurance), 52 Sharia insurance companies and business units, 168 insurance broker companies, 28 reinsurance broker companies, and 28 loss adjusters. 
We must admit that people`s interest in insurance remains low. As of end of September 2015, conventional insurance penetration level only reached 2.51 percent, with a density of Rp 1.1 million. As for Sharia insurance, penetration and density levels reached a mere 0.08 percent and Rp 40,000 consecutively. 
We should consider the low insurance penetration level as a wide open opportunity for practitioners in financial services industry. We have the biggest number of population in ASEAN region, high growth of middle-class society that certainly demands beyond banking services, especially insurance products to protect wealth. Indonesia also has a huge number of micro, small and medium enterprises (UMKM). The number continues to grow each year, consequently the UMKM sector needs insurance to protect business sustainability, said Firdaus.          

The dynamics of insurance business in 2016 must certainly be in the corridor that is regulated by Law Number 40 of 2014 on insurance and also in line with implementing regulations. In relation to this matter, OJK is now formulating several implementing regulations on insurance that suggest further ruling as to 41 provisions that will be formulated into 16 OJK regulations. The draft regulations have to be issued at the latest in two years and six months after insurance law takes into effect.    

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