Liga Asuransi – Dear loyal readers, how are you? Hopefully your business continues to grow and achieve success this year. Soon we will enter 2025, the right time to plan new steps. This time, we will discuss the opportunities and challenges of sharia insurance in Indonesia in 2025, an interesting topic for those of you who care about sharia-based financial protection. Don’t forget, share this article with your colleagues who might need it!
Sharia insurance will become increasingly important in 2025 due to growing public awareness of finance based on Islamic principles. As the Muslim population in Indonesia increases—which constitutes the majority of the population—the need for halal financial products continues to grow. Sharia insurance products are not only attractive to Muslims, but also to non-Muslims who prioritize transparency, fairness and sustainability.
Sharia insurance is a sharia-based financial protection system designed to provide guarantees to its participants through the principles of mutual assistance (ta’awun) and risk sharing (takaful). In sharia insurance, participants collectively collect funds through contributions called tabarru’ to help each other in facing unexpected risks or losses. This system is different from conventional insurance because it avoids elements that are prohibited in Islam, such as usury, gharar and maysir.
The main principles of sharia insurance include:
- Please help (laughter)
Insurance participants help and support each other collectively to overcome losses experienced by one member. This emphasizes the importance of solidarity and concern for others.
- Sharing risks (takaful)
The risk is not borne by the insurance company alone, but is shared among all participants. The funds collected are used to cover claims submitted by participants who experience disaster.
- Free from usury
All forms of interest or interest-based profits are avoided in sharia insurance transactions.
- Avoid gharar
Gharar refers to uncertainty or vagueness in a contract. In sharia insurance, contracts are designed clearly, including the rights and obligations of participants and managers.
- Stay away from maysir
Maysir means gambling or speculation which is prohibited in Islam. Sharia insurance ensures that every transaction is carried out transparently and based on real needs.
By adhering to this principle, sharia insurance is not only a financial protection solution, but also a means of strengthening Islamic values in social life.
Globally, Islamic finance shows rapid growth. Indonesia, as one of the world’s sharia economic centers, has great potential to become a leader in this industry. Government support through regulation and promotion of sharia economics, including in the insurance sector, further strengthens this relevance. Digitalization and insurtech trends also open up great opportunities for the sharia insurance industry to reach a wider community and provide efficient services.
Statistics and Growth Data
The sharia insurance industry in Indonesia shows significant development in the 2020–2024 period. Data from the Financial Services Authority (OJK) records that sharia insurance asset growth reached an average of 12% per year. By the end of 2024, total sharia insurance assets are projected to reach IDR 50 trillion, an increase from IDR 35 trillion in 2020. Gross contributions (premiums) are also experiencing growth, with an average annual increase of 15%, reaching more than IDR 20 trillion in 2024.
Despite recording positive growth, the sharia insurance market share is still relatively small compared to conventional insurance, namely around 5% of the total national insurance industry. This represents a huge opportunity to expand market coverage.
When compared to conventional insurance, sharia insurance offers value-based advantages of justice and transparency. However, challenges such as public literacy and lack of product differentiation are obstacles to competing in the wider market.
Regulation and Government Support
The Indonesian government, through the OJK, has issued various regulations to support the development of sharia insurance. One of the milestones is POJK Number 69/POJK.05/2016 concerning the Implementation of Sharia Insurance and Reinsurance Company Business. This regulation regulates governance, transparency and financial reporting for sharia insurance companies, ensuring that their operations comply with sharia principles.
In addition, the government is encouraging the spin-off of sharia units from conventional insurance companies, as mandated in Law Number 40 of 2014 concerning Insurance. This step aims to strengthen the structure of the sharia insurance industry, encourage independence and increase its competitiveness.
The government also provides fiscal incentives in the form of tax breaks for sharia insurance companies, including in the case of sukuk-based investments. In addition, support from national programs such as the Indonesian Sharia Economic Masterplan (MEKSI) 2024 plays a role in encouraging sharia insurance as part of the wider sharia economic ecosystem.
However, regulatory challenges remain, especially in synchronizing sharia rules with global financial practices. Harmonization between domestic and international regulations is homework to expand the attractiveness of the Indonesian sharia insurance market at the global level.
Current Challenges
Low Sharia Financial Literacy
Even though the growth of sharia insurance is quite good, public literacy regarding sharia financial concepts is still low. The 2022 OJK survey shows that sharia financial literacy is only 9.1%, far below general financial literacy of 49.68%. As a result, people tend to choose conventional financial products because they do not understand the advantages and benefits of sharia insurance.
Dependence on Niche Markets
Most sharia insurance users come from the Muslim market segment which prioritizes halal principles. This creates a dependency on a specific market, making it difficult to reach a wider audience, including potential non-Muslim segments.
Competition with Conventional Insurance
Conventional insurance has strong market dominance, with more established infrastructure, technology and marketing. Takaful insurance companies often face constraints in terms of capital, product innovation and distribution, making it difficult for them to compete in a highly competitive market.
Even though there are challenges, the prospects for sharia insurance remain promising if this industry is able to overcome these obstacles through innovation, collaboration and continuous public education.
Economic Growth and Muslim Population
Indonesia is projected to continue experiencing economic growth in 2025. According to a World Bank report, Indonesia’s economic growth could reach 5-6% per year, driven by post-pandemic recovery, increased investment and infrastructure development. This condition creates a conducive environment for the financial industry, including sharia insurance, to develop.
Apart from that, Indonesia is a country with the largest Muslim population in the world, reaching more than 230 million people. This population growth not only creates a need for products based on sharia principles but also increases the market potential for sharia insurance. With the increasing purchasing power and awareness of the Muslim community regarding the importance of financial protection, demand for sharia insurance is expected to increase significantly.
Public Awareness of Sharia Finance
Increasing Sharia Financial Literacy
Sharia financial literacy continues to increase, thanks to the joint efforts of the government, financial institutions and society. OJK’s educational programs, such as Islamic Financial Literacy Month, as well as collaboration with communities and educational institutions have helped increase public understanding of sharia finance.
The results of the latest OJK survey show that sharia financial literacy has increased from 8.93% in 2016 to 9.1% in 2022. Although still low, this trend shows positive progress. Better literacy enables the public to understand the advantages of sharia insurance, including transparency, fairness and the principle of mutual assistance, thereby increasing public confidence in this product.
Changes in Consumer Preferences Who Prefer Halal Products
Changes in people’s lifestyles, especially among millennials and Gen Z, show an increase in preference for halal products, including in the financial sector. Consumers are increasingly concerned about aspects of sustainability and sharia compliance in choosing products and services.
This is supported by the growth of the halal industry as a whole, such as food, clothing and tourism, which creates a mutually supportive halal ecosystem. The sharia insurance industry can take advantage of this trend by offering products that are integrated with halal lifestyle needs, such as sharia travel insurance for Umrah and Hajj, as well as sharia-based property insurance for Muslim households.
Technology Support
Digitalization of Sharia Insurance (Insurtech)
The era of digitalization provides great opportunities for sharia insurance to expand market reach. By utilizing insurtech technology, companies can provide services that are faster, easier and more affordable. The digital platform allows potential participants to understand, register and manage their policies online, without geographical restrictions.
Technologies such as mobile apps, AI-based chatbots, and data analytics can be used to better understand consumer needs, offer tailored products, and improve user experience. Digitalization also opens up opportunities for sharia microinsurance products, which can reach low-income communities with affordable premiums.
Potential Use of Blockchain for Transparency and Efficiency
Blockchain is a technology that has great potential in increasing transparency and efficiency in the Takaful insurance sector. In this system, all transactions are recorded in a decentralized manner, thereby minimizing the risk of data manipulation.
In the context of sharia insurance, blockchain can be used to ensure that participant contributions are managed according to sharia principles, speed up the claims process, and reduce operational costs. In addition, the use of smart contracts allows automatic implementation of policies based on agreed conditions. This technology can be a competitive advantage for sharia insurance in the digital era.
Globalization of Sharia Finance
Indonesia’s Role as a Global Sharia Economic Center
Indonesia has a great opportunity to become the center of the world’s sharia economy, supported by the largest Muslim population, government commitment, and strategic position in the global economy. The Indonesian Sharia Economic Masterplan (MEKSI) 2024 places the sharia financial sector, including insurance, as an important pillar in this strategy.
Through active promotion at the international level, Indonesia can attract foreign investors to contribute to the development of the sharia insurance industry. Superior sharia-based products that suit global market needs, such as maritime insurance and ESG-based project insurance, can be a special attraction.
Collaboration Opportunities with International Investors
Globalization opens up opportunities for collaboration with investors from the Middle East, Malaysia and countries with advanced sharia financial industries. This investment can help strengthen the capital of sharia insurance companies in Indonesia and encourage product innovation.
Collaboration also enables the transfer of technology and knowledge, which can improve the quality of services and competitiveness of sharia insurance in the international market. By building strategic partnerships, Indonesia can strengthen its position as a major player in the global sharia insurance industry.
With a combination of economic growth, a large Muslim population, increasing public awareness, technological support, and globalization, sharia insurance in Indonesia has bright prospects in 2025. The right strategy is needed to take advantage of these opportunities and overcome existing challenges.
Competition with Conventional Insurance
Sharia insurance faces tough competition with conventional insurance which has a larger market share and more established infrastructure. One of the main challenges is product differentiation, because many sharia insurance products are similar to conventional products, making them less attractive to consumers. The sharia insurance industry needs to develop product innovations based on sharia values that are relevant to market needs, such as community-based insurance or products that are integrated with the halal ecosystem.
Apart from that, the lack of market education means that many people do not understand the advantages of sharia insurance. More aggressive financial literacy programs and digital-based education campaigns are needed to expand public understanding and trust in this product.
Complex Regulations
Harmonization between sharia regulations and conventional finance is another challenge. Even though the OJK has issued various regulations to support the sharia insurance industry, there is still a gap between the needs of the sharia market and the applicable regulations. Regulations that are too complex often slow down product and service development. Collaboration between regulators, industry players and the National Sharia Council is needed to create regulations that are flexible but still comply with sharia principles.
Capital Capacity and Human Resources (HR)
The Takaful insurance industry often faces capital constraints, which hinders product development and technology investment. Apart from that, the lack of human resources who understand sharia principles and modern insurance techniques is a big challenge. The solution is to increase training, certification and collaboration with educational institutions to produce competent sharia insurance experts.
Resilience Against Economic Crisis
The global economic crisis and macroeconomic risks, such as inflation and currency fluctuations, can affect the growth of the sharia insurance industry. To increase resilience, sharia insurance companies need to diversify investment portfolios, utilize technology for operational efficiency, and develop adaptive risk strategies.
Facing these challenges with the right strategy can pave the way for stronger and more sustainable sharia insurance growth in the future.
Sharia Insurance Development Strategy Towards 2025
Product and Service Innovation
Sharia insurance needs to innovate by developing products that are relevant to market needs. One strategic step is to expand microinsurance coverage, which offers low premiums for low-income people, so as to reach segments that have not been served by traditional insurance. Apart from that, community-based insurance can be a solution to encourage collaboration between community members in sharing risks, such as sharia cooperatives or professional associations.
Increasing Sharia Financial Literacy
Increasing sharia financial literacy is the main key to developing sharia insurance in Indonesia. Digital-based educational campaigns can be an effective tool for reaching a wider audience, especially the millennial generation and Gen Z. Educational content can be disseminated via social media platforms, blogs, webinars and short videos on YouTube or TikTok. Campaign materials must be simple, attractive and relevant, such as infographics explaining the benefits of sharia insurance and how it works.
Providing an interactive mobile application, with premium calculator features, claims simulations, and sharia product guides, can also help the public better understand this service. An omnichannel approach, which integrates digital and traditional marketing, needs to be implemented to reach wider segments.
Collaboration with Educational and Community Institutions
Collaboration with educational institutions is also an important step. Education about Islamic finance can be included in school and university curricula, especially in economics, business and Islamic law departments. In addition, sharia insurance companies can collaborate with local communities, mosques and Islamic organizations to hold training or educational seminars.
Collaboration with the community can increase public trust in sharia insurance, because the information is conveyed by parties who are trusted and who are close to the community. This partnership can also encourage the creation of local sharia insurance agents who can provide direct education.
Collaboration with Technology and Startups
Leveraging technologies such as AI, big data and insurtech is critical to improving operational efficiency and customer experience. This technology allows companies to analyze customer needs in depth, provide personalized offers, and speed up the claims process.
Insurtech startups can become strategic partners in developing sharia-based digital platforms that are easy to access and transparent. This collaboration also opens up opportunities to create innovative new products, such as blockchain-based insurance to ensure trust and accountability.
Market Expansion
To achieve sustainable growth, sharia insurance needs to reach the non-Muslim segment. A focus on universal values such as transparency, justice and sustainability can attract non-Muslim people’s interest in these products.
Collaboration with zakat and waqf institutions can also expand market reach. Waqf funds, for example, can be used to finance microinsurance programs or sharia-based social projects. This approach not only increases financial inclusion, but also strengthens the image of sharia insurance as a tool for improving people’s welfare holistically.
With this strategy, sharia insurance can grow faster and become the public’s main choice, as well as supporting sharia economic growth in Indonesia.
The Important Role of Insurance Brokers in the Development of Sharia Insurance in Indonesia
Insurance brokers have a strategic role in encouraging the development of sharia insurance in Indonesia. As a liaison between customers and insurance companies, insurance brokers not only offer appropriate protection solutions, but also function as independent consultants who help customers understand the benefits and advantages of sharia insurance products.
First, insurance brokers play a role in education and increasing sharia financial literacy. Many people do not understand the concepts and principles of sharia insurance, such as mutual assistance (ta’awun) and risk sharing (takaful). Brokers can provide simple, relevant and comprehensive explanations, thereby increasing public awareness and trust in this product.
Second, brokers help create product innovations that suit market needs. With a deep understanding of customer needs, brokers can work with insurance companies to develop relevant sharia products, such as sharia microinsurance or travel insurance for Umrah and Hajj.
Third, insurance brokers can expand access to sharia insurance through digitalization and technology. By utilizing digital platforms, brokers can reach wider market segments, including people in remote areas, while providing a faster and more transparent service experience.
The independent, educational and innovative role of brokers makes them an important catalyst in the growth of the sharia insurance industry, which is in line with Indonesia’s vision as the center of the world sharia economy.
L&G: Leading Insurance Broker to Support Sharia Insurance Growth in Indonesia
As one of the leading insurance brokers in Indonesia, L&G Insurance Broker is fully committed to supporting the development of sharia insurance in the country. With more than 18 years of experience, L&G has become a trusted partner for various industry sectors, providing innovative, inclusive and value-based insurance solutions.
L&G understands the importance of sharia insurance as part of the sharia economic ecosystem in Indonesia. We combine in-depth knowledge of sharia principles with technical expertise in the insurance industry, ensuring every solution we offer not only meets customer needs, but also complies with sharia rules.
L&G has expertise in helping clients choose suitable sharia insurance products, from microinsurance to corporate protection. We also actively collaborate with insurance companies to develop relevant new products, such as sharia travel insurance, sharia property, and community-based insurance.
Technology and Digitalization Support
As a modern broker that adopts technology, L&G utilizes digital systems such as LIGASYS to provide fast, transparent and efficient services. With this platform, we are able to reach a wider community and help sharia insurance companies increase their market penetration.
Strong Global and Local Network
L&G has an extensive network, both at national and international levels. We are ready to support collaboration with global sharia investors, zakat institutions and local communities to strengthen the position of sharia insurance in Indonesia.
With dedication to service quality and commitment to sharia values, L&G Insurance Broker is a trusted partner in supporting the sustainable growth of sharia insurance. Together with us, create financial protection that is fair and in accordance with Islamic principles for the Indonesian people.
Conclusions and Recommendations
Sharia insurance has bright prospects in Indonesia, supported by the growth of the Muslim population, increasing sharia financial literacy, digitalization and regulatory support. However, challenges such as low public understanding, competition with conventional insurance, and limited capital and human resources still need to be overcome. With innovative strategies, continuous education and cross-sector collaboration, sharia insurance can grow faster and make a significant contribution to sharia financial inclusion.
Recommendation:
- Takaful insurance companies need to innovate in products and services, including microinsurance and community-based products.
- The government and regulators must continue to increase sharia financial literacy through digital campaigns and public education programs.
- Collaboration between industry players, educational institutions and insurtech must be strengthened to support industrial growth.
- Insurance brokers such as L&G can become strategic partners in expanding the reach of the sharia insurance market in Indonesia.
For all your insurance needs, Contact L&G Insurance Brokers Today!
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