Liga Asuransi – Friends of entrepreneurs, risk managers, underwriters, and loyal readers, welcome back to this blog! This time, we will discuss a very relevant and interesting topic: the condition and prospects of the insurance industry in 2025, a year full of hopes and challenges.
As one of the key sectors in the economy, the insurance industry plays a critical role in protecting assets, managing risk and supporting financial stability. With advances in technology, increased financial literacy, and changing societal needs, 2025 promises tremendous growth opportunities. However, like every opportunity, big challenges also await, ranging from global competition to changes in regulations and economic dynamics.
Through this article, we will dig deeper into global trends, domestic conditions, and strategies that industry players can take to face the future. We hope that this article not only provides insight, but also serves as a practical guide for those of you who are involved in the world of insurance.
If this article was useful to you, don’t hesitate to share it with your colleagues. The more people understand, the greater the positive impact we can create together. Happy reading and hopefully it’s useful!
As we all know, the insurance industry has an important role in maintaining economic stability and protecting against risks faced by society, business and government. By providing financial guarantees against unexpected losses, insurance becomes the foundation for business sustainability and economic development. In Indonesia, this industry has shown positive growth until 2024, although it still faces challenges such as low penetration and limited insurance literacy.
The performance of the insurance industry until 2024 recorded premium growth in the life and health insurance sectors, driven by increasing public awareness post-pandemic. However, other sectors such as property and vehicles experienced a slowdown due to fluctuating economic conditions.
In a global context, globalization and digitalization have changed the way industries operate. Climate change is also a major challenge with increasing claims due to natural disasters. This transformation encourages the insurance industry to adapt through technological innovation, strengthening sustainability (ESG), and product diversification.
This article aims to analyze the prospects for the Indonesian insurance industry in 2025, with a focus on growth opportunities, challenges and strategies that need to be implemented by industry players. By looking at global trends, such as digitalization, ESG (Environmental, Social, and Governance) adoption, and climate change, this article will explore how these trends are impacting Indonesia’s insurance landscape. In addition, this article also links the industry’s prospects to domestic economic and political conditions, including the impact of government policies and post-transition leadership stability. This analysis is expected to provide strategic insights for insurance companies, regulators and other stakeholders to optimize the industry’s potential in the future.
Performance in 2024
In 2024, the Indonesian insurance industry will show positive growth. Total insurance industry assets reached IDR 1,142.5 trillion as of September 2024, an increase of 2.46% compared to the same period the previous year.
Premium income also increased. Until September 2024, total premium income reached IDR 245.42 trillion, growing 5.77% annually.
The life insurance segment remains dominant, with premiums growing 2.73% year-on-year. Health insurance also showed significant improvement, with premium growth reaching 32.11% in the first quarter of 2024.
Meanwhile, property insurance recorded premium growth of 37.49% in the same period.
However, this industry still faces challenges, such as a decline in people’s purchasing power and low insurance penetration levels. Despite this increase, insurance penetration in Indonesia is still below 4% of Gross Domestic Product (GDP), indicating that the majority of the population is not yet covered by insurance products. Factors such as low financial literacy and lack of awareness of the importance of insurance contribute to this challenge.
Supporting and Inhibiting Factors
The Indonesian insurance industry receives significant support from the government, especially through Financial Services Authority (OJK) regulations. The latest POJK, such as POJK 69/2016 concerning Good Corporate Governance in Insurance Companies, is continuously updated to ensure transparency, efficiency and consumer protection. In addition, the government’s push for digitalization has encouraged insurance companies to adopt technology such as digital platforms for distribution of products and services, so that they can reach more segments of society, including in remote areas.
However, major challenges remain. Low insurance literacy is a major obstacle, with many people still not understanding the importance of insurance as risk protection. The penetration rate which is still below 4% shows the need for more massive education. Product distribution is also not optimal, especially in the micro and rural segments, due to limited access and infrastructure.
Competition and Innovation
Technological innovation is a key element in this competition. InsurTech adoption enables efficient data analytics-based underwriting, claims and premium adjustment processes. Technologies such as AI, blockchain, and big data have been implemented to provide a more personalized and seamless customer experience. Companies that can integrate technological innovation with product offerings based on consumer needs are projected to dominate the insurance market in the future.
Global Trends in the Insurance Industry
Digitalization and InsurTech
Digitalization continues to be a key driver of transformation in the global insurance industry. Technologies such as Artificial Intelligence (AI), blockchain, and big data are now widely used in claims and underwriting processes. AI enables quick and accurate analysis of customer data, identifying risks and detecting potential fraudulent claims. Blockchain, on the other hand, provides transparency in policy and claims management with a secure and decentralized ledger system. Big data technology is used to understand customer behavior patterns, enable product personalization, and speed up the premium setting process.
Digital platforms also play an important role in the distribution of insurance products. Through applications and websites, companies can reach more customers directly without going through traditional agents. This platform makes it easy for customers to compare products, buy policies, and submit claims in real-time. This trend is increasingly relevant, especially for the younger generation who tend to look for fast and technology-based solutions.
Climate Change and ESG
Climate change has had a significant impact on insurance claims, especially in the property and agricultural sectors. Disasters such as floods, storms and forest fires are becoming more frequent, increasing the frequency and size of claims. This encourages insurance companies to increase premiums to cover higher risks.
Apart from that, regulations related to sustainability or ESG (Environmental, Social, and Governance) are starting to be implemented in various countries. Insurance companies are now required to adapt, both by offering products that support sustainability, such as renewable energy insurance, and by investing in assets that meet ESG criteria. Companies that do not integrate ESG into their operations risk losing the trust of investors and customers.
Global Economic Crisis
After the COVID-19 pandemic, economic recovery has been slow, plus geopolitical conflicts have worsened the situation. This crisis affects people’s purchasing power, so many are reducing their spending on insurance. However, the health and life insurance sector is actually receiving more attention because people are increasingly aware of the importance of health protection.
High global interest rates are also affecting the insurance industry. On the one hand, insurance companies benefit from higher investment returns, but on the other hand, claims pending due to difficult economic conditions increase. This challenges companies to maintain a balance between risk management and investment returns.
Shifting Demographics
Demographic changes also change the need for insurance products. Millennials and Gen Z, who now dominate the market, have different preferences compared to previous generations. They tend to look for products that are flexible, technology-based and suited to modern lifestyles, such as usage-based insurance and policies that can be accessed via mobile applications.
In addition, the younger generation cares more about sustainability. They tend to choose products that align with ESG values. Insurance companies must adapt by providing products that are innovative, transparent and relevant to the needs of this group to remain competitive in the market.
By integrating digitalization, sustainability and demographic understanding, insurance companies have a great opportunity to stay relevant and grow in a dynamic global landscape.
Indonesian Economic and Political Conditions
Indonesia is projected to experience stable economic growth in 2025, with the growth rate estimated to be in the range of 5.1%-5.4%. This optimism is supported by several key sectors, including infrastructure, technology and MSMEs. Ongoing infrastructure development programs, such as toll road, port and power plant projects, have a significant impact on economic growth. On the other hand, the adoption of digital technology and innovation in various sectors, including finance and health, is increasingly strengthening the domestic economy.
MSMEs remain the backbone of the Indonesian economy, contributing around 60% to GDP. Digitalization helps MSMEs expand their market reach through e-commerce and online platforms, although they still need wider access to financing and insurance protection to support growth.
However, economic challenges remain. Inflation triggered by global energy and food prices can reduce people’s purchasing power. This has an impact on reducing domestic consumption, which is the main driver of economic growth. On the other hand, the banking sector faces the risk of increasing non-performing loans due to economic uncertainty, even though banking liquidity is relatively well maintained.
2025 is an important period for Indonesia’s political stability, post-government transition which will take place in 2024. New leadership brings opportunities as well as challenges, especially in ensuring the continuity of economic and development policies.
Political stability is a key element in maintaining the confidence of domestic and foreign investors. Consistent policies to support the investment climate, including in the insurance sector, are very important. One of the government’s focuses is to encourage financial literacy and inclusion, including insurance, to increase public protection against risk.
The government is also expected to continue regulatory initiatives that support the digitalization of the insurance industry. This is in line with OJK’s strategy to increase efficiency, transparency and innovation through InsurTech development. In addition, appropriate fiscal and monetary policies are needed to maintain macroeconomic stability, which will have a direct impact on insurance premium growth.
However, political risks remain, including the possibility of regional instability or policy conflicts between the center and regions. In this context, the insurance industry needs to prepare for various political risk scenarios that can affect their operations and growth.
With relatively stable economic and political conditions, the insurance industry has a great opportunity to grow in 2025, although it still needs to anticipate existing challenges. Collaboration between government, regulators and industry players is the key to maximizing this potential.
Opportunities for Growth in the Indonesian Insurance Industry in 2025
Insurance Segment Projected to Grow
Health, micro and sharia insurance are projected to be the main drivers of growth for the Indonesian insurance industry in 2025. Increasing public awareness of the importance of post-pandemic health protection is driving the growth of health insurance, especially among the middle class. Microinsurance also has big prospects, supported by expanding reach to low-income segments of society through affordable products and digital access. On the other hand, sharia insurance is increasingly in demand, with a large Muslim population and increasing demand for products that comply with sharia principles.
Digitalization as a Game Changer
Digitalization is the main driver of insurance market penetration. By utilizing technology such as InsurTech, insurance companies can expand access to remote areas, reduce operational costs and increase service efficiency. Mobile applications and digital platforms allow customers to buy policies, compare products, and submit claims easily. This initiative not only attracts the tech-savvy younger generation, but also increases financial inclusion.
The Potential of ESG-Based Insurance
ESG (Environmental, Social, and Governance) based insurance offers great opportunities, especially to attract global investors. Insurance products that support sustainability, such as renewable energy insurance or disaster protection due to climate change, are increasingly relevant. The focus on ESG also strengthens insurance companies’ reputation in international markets, opening up opportunities for collaboration with multinational companies and green finance.
Challenges and Mitigation of the Indonesian Insurance Industry in 2025
Global Competition and Tight Regulations
The Indonesian insurance industry faces the challenges of increasingly global competition, with multinational companies bringing technological innovation and extensive market experience. In addition, domestic regulations such as POJK demand higher standards of governance and transparency. Insurance companies need to ensure compliance while remaining competitive in the market, with a focus on operational efficiency and relevant product innovation.
Insurance Literacy Education Strategy
The low level of insurance literacy in Indonesia is one of the main obstacles to market penetration. Many people do not understand the importance of insurance as risk protection. Insurance companies can overcome this through integrated education campaigns, both online and offline. Collaboration with local communities, media and regulators can increase public awareness. Apart from that, simplifying insurance products to make it easier to understand is also important.
Collaboration with Fintech
Collaboration between insurance companies and fintech offers solutions to reach a wider market. Fintech platforms can be used for distribution of micro-insurance products, automatic premium payments, and faster claims services. By integrating technology and data analytics, companies can create better customer experiences, increase trust, and reduce acquisition costs. This collaboration also accelerates product innovation to meet the needs of the tech-savvy younger generation.
Product Innovation and Distribution Model
To win the market, industry players need to develop insurance products that are relevant to the needs of modern society, such as usage-based insurance and index-based insurance for agriculture. On the distribution side, a digital-first model should be adopted, allowing customers to purchase policies online, get real-time quotes, and process claims via mobile applications. Partnerships with e-commerce and other digital platforms can also expand market reach.
Increasing Consumer Trust through Transparency
Trust is the key to the success of the insurance industry. Industry players must ensure transparency in the claims process, premium calculations and policies implemented. Using simple language in policies and providing customers with easy access to monitor their policy status can increase consumer confidence. Customer testimonials and quick claim resolution can also strengthen a company’s reputation.
Strengthening Technology and Data Analytics
Technology is the backbone of insurance innovation. Industry players must integrate data analytics to understand customer needs, detect risks, and offer personalized products. Additionally, technologies such as blockchain can ensure the security of customer data and speed up the underwriting process. Investments in artificial intelligence (AI) for automation and risk management will increase operational efficiency as well as competitiveness in the market.
Prospect Summary
The Indonesian insurance industry has bright prospects in 2025 with significant growth opportunities, especially in the health, micro and sharia segments. Digital transformation and technology adoption are the keys to increasing market penetration and operational efficiency. Although challenges such as low insurance literacy and strict regulations still exist, product innovation strategies, more inclusive distribution, and collaboration with fintech can be effective solutions. Regulatory support and integration with technology also play an important role in pushing industrial development in a more advanced direction.
Policy Recommendations
The government needs to provide incentives to encourage digitalization, such as tax reductions for companies that invest in technology. In addition, regulations that support the growth of sharia insurance, such as simplifying procedures and consumer protection, can accelerate the growth of this segment. To increase financial inclusion, policies that facilitate access to insurance for low-income people also need to be implemented.
Industry players are expected to expand the market to unserved segments, such as MSMEs and rural communities, with relevant products and affordable prices. Insurance literacy must also be improved through massive education, both directly and via digital platforms.
Collaboration between the government, industry players and the community is a crucial step to encourage insurance penetration. The government as regulator, insurance companies as providers, and society as beneficiaries need to work together to create an inclusive and sustainable ecosystem. With the right strategy and cross-sector synergy, the Indonesian insurance industry can develop rapidly and have a significant impact on national economic stability.
This article is brought to you by L&G Insurance Brokers
For all your insurance needs, Contact L&G Insurance Brokers Today!
—
DON’T WASTE YOUR TIME AND SECURE YOUR BUSINESS WITH THE RIGHT INSURANCE.
HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)
website: lngrisk.co.id
Email: customer.support@lngrisk.co.id
—
