Liga Asuransi – Hello risk takers, we are back to discussing developments and events in the world of insurance in Indonesia in the last week. Again, we would like to convey that in daily business matters, insurance objects are not only about vehicle, health, life and property insurance, but there is still a very wide range of objects that can be insured. Almost all business processes from A to Z can be protected by insurance. In this edition, as usual, we have again collected 7 selected news related to insurance that are good for you to know. Also included are things that are currently hot lately regarding Tapera.
As always, if you are interested in this article, please share it with your colleagues so they can understand it as well as you.
The Impact of the Weakening Rupiah on the Insurance and Reinsurance Industry in Indonesia
The President Director of PT Reinsurance Indonesia Utama (Indonesia Re), Benny Waworuntu, revealed the impact of the weakening of the rupiah exchange rate against the US dollar on the insurance and reinsurance industry. Quoting Bloomberg data, since April 2024 the rupiah exchange rate has touched IDR 16,000 per US dollar and continues to fluctuate. On Wednesday (24/7/2024), the rupiah exchange rate was at IDR 16,215 per US dollar. According to Benny, the weakening of the rupiah exchange rate can affect investment results in the insurance and reinsurance industry, which in turn has an impact on company income.
“This (exchange rate) increase could have an impact on investments held by insurance and reinsurance companies,” said Benny on the sidelines of the Indonesia Re International Conference 2024 in Jakarta, Wednesday (24/7/2024). Apart from that, the weakening of the rupiah also affects reinsurance companies, especially when buying protection from outside or retrocession.
However, Benny considers this impact to be seasonal. He is optimistic that the rupiah exchange rate still has the opportunity to strengthen in the second half of 2024. “We believe this is seasonal. So not yet and we will look at it in its entirety until the end of the year. So we hope that there will still be stability in the rupiah later which can have an impact positive to all stakeholders,” he said.
Based on a report by the Financial Services Authority (OJK), insurance industry assets in May 2024 reached IDR 1,120.57 trillion, up 1.30 percent on an annual basis (year on year/yoy) from IDR 1,106.23 trillion in the same period the previous year. For commercial insurance, total assets reached IDR 900.99 trillion, an increase of 2.10 percent yoy. The performance of commercial insurance shows that accumulated premium income reached IDR 137.40 trillion, an increase of 8.59 percent yoy. In detail, life insurance premiums grew 2.23 percent yoy with a value of IDR 73.51 trillion, and general insurance and reinsurance premiums grew 16.94 percent yoy with a value of IDR 63.89 trillion.
Despite facing challenges due to fluctuations in the rupiah exchange rate, the Indonesian insurance and reinsurance industry is showing positive growth which can provide hope for industry players.
Government Encourages Digital Transformation of Insurance Sector: Key to Sustainable Economic Growth
The government is increasingly focusing on the insurance sector which has become one of the main contributors to Gross Domestic Product (GDP) and has optimal potential. The Coordinating Minister for Economic Affairs, Airlangga Hartarto, stated that the performance of the insurance industry continues to increase along with the growth of the national economy.
“By mobilizing domestic savings, insurance makes it possible to reduce losses, increase financial stability, and encourage trade activities, so that insurance plays an important role in sustainable economic growth,” he said when giving a virtual Keynote Speech at the Indonesia Re International Conference (IIC) 2024, from Central Jakarta, Thursday (25/07/2024).
Airlangga highlighted that the development of digital technology is currently a challenge for the insurance sector. This encourages the insurance industry to develop its business towards digitizing business processes.
“Digital transformation in insurance, which is supported by artificial intelligence, machine learning, predictive analysis, mobile services, and live chat, allows insurance companies to develop their business sustainably,” he said.
Even though challenges such as infrastructure gaps and cyber security problems still exist, Coordinating Minister Airlangga is optimistic that the insurance industry in Indonesia is ready to face significant digital transformation.
“This transformation is expected to increase operational efficiency, expand market reach, increase customer satisfaction in the coming years, and also have the potential to increase the insurance industry’s contribution to Indonesia’s GDP,” he added.
The government is optimistic that it will be able to achieve an economic growth rate of 5.2% by the end of 2024 after economic growth reached 5.05% (YoY) in 2024. Through the National Long Term Development Plan (RPJPN) 2025-2045, the Government is committed to realizing the Vision of a Golden Indonesia Year 2045.
To achieve this vision, economic transformation is one of the essential steps that the Government needs to take to increase inclusive and sustainable economic growth. By taking advantage of the demographic bonus and international trust, the opportunity to achieve the vision of a Golden Indonesia in 2045 is increasing and needs to be optimized by the Government.
Improving regulations and procedures for ease of doing business is also a manifestation of the Government’s seriousness in carrying out structural reforms. Through these efforts, Indonesia’s competitiveness ranking in 2024 will experience a significant increase. In the Institute for Management Development (IMD) 2024 World Competitiveness Ranking (WCR), Indonesia rose to 27th place out of 67 countries, after previously being ranked 34th in 2023.
The insurance industry in Indonesia is at a critical juncture with digitalization the key to a brighter future. Government, industry and other stakeholders need to work together to ensure this transformation runs smoothly in order to achieve sustainable economic growth and the Golden Indonesia Vision 2045.
Property Insurance Booms! Premium Income Increases Rapidly Amidst Economic Challenges
A number of general insurance companies recorded positive performance in the property insurance business line amidst economic challenges. One of them is PT Asuransi Asei Indonesia.
Head of the Transformation and Strategic Initiatives Division of Asuransi Asei Indonesia, Wahyudin Rahman, revealed that the company succeeded in achieving premium income of IDR 19 billion in Semester I-2024. “This value increased by 179% compared to the same period last year,” he told Kontan, Monday (22/7).
Wahyudin explained that this high growth was caused by several asset insurance closures from BUMN. This year, Asei Insurance is targeting property insurance premium income of IDR 50 billion. To achieve this target, Asei will focus on implementing a number of strategies.
“We will continue to try to approach the home financing market from partner banks and assets from our various clients through cross selling. Apart from that, we also synergize with BUMN,” added Wahyudin.
PT Great Eastern General Insurance Indonesia (GEGI) also recorded positive performance regarding premium income from the property insurance business line. Marketing Director of Great Eastern General Insurance Indonesia, Linggawati Tok, said that property insurance premium income is the largest segment in the company’s portfolio. In Semester I-2024, property insurance premium income reached IDR 262.6 billion, an increase of 23% compared to the same period the previous year.
Linggawati explained that this increase was driven by increased demand for residential houses and apartments thanks to the VAT DTP incentives. Apart from that, premium growth from the commercial and industrial segments also supported this increase.
For 2024, Great Eastern is targeting total premium income from property insurance of IDR 439.2 billion. To achieve this target, Great Eastern will maximize its target to MSMEs, which are considered the most resilient amidst the sluggish economy.
Apart from that, Great Eastern will also focus on other property sectors, such as office buildings and shopping malls. Linggawati is optimistic that the property insurance business line will still be very promising in the future.
He hopes that the property sector and industrial development will continue to increase, accompanied by strengthening the value of the Rupiah and stability in interest rates. Thus, insurance income from the property sector will also continue to increase.
Property Insurance Performance Soars Drastically! Premium Income Skyrockets Up to 179%
In the midst of various economic challenges, several general insurance companies have managed to record extraordinary performance in the property insurance business line. PT Asuransi Asei Indonesia and PT Great Eastern General Insurance Indonesia (GEGI) are two of them that showed a significant increase in property insurance premium income in Semester I-2024.
Asuransi Asei Indonesia achieved premium income of IDR 19 billion, up 179% from the same period last year, thanks to the closure of asset insurance from BUMN. Meanwhile, Great Eastern recorded premium income of IDR 262.6 billion, up 23%, driven by increased demand for residential houses and apartments.
With a strategy to focus on the MSME market and other property sectors, both companies are optimistic that they will continue to experience positive growth in the future.
Life Insurance Investment Results Have Dropped Sharply, But Some Are Even Soaring!
Investment returns from life insurance companies in Indonesia have decreased significantly. Data from the Financial Services Authority (OJK) shows a decrease of 42.23% on an annual basis (YoY), to IDR 6.29 trillion in May 2024. This decrease was also recorded at 16.88% compared to investment results in the previous month which reached IDR 7.56 trillion in April 2024.
However, in the midst of this situation, PT Asuransi Jiwa IFG (IFG Life) reported investment results that actually grew by 15.6% YoY in June 2024, reaching IDR 844 billion compared to the same period last year which amounted to IDR 730 billion.
IFG Life Corporate Secretary, Gatot Haryadi, explained that the company focuses on placing investments in low to medium risk instruments, with the majority of investments placed in Government Securities (SBN). “We always maintain prudent investment management so that IFG Life can focus on innovation and expansion, so that it can grow sustainably and sustainably, and provide the best and long-term service for the country and all Indonesian people,” said Gatot to Kontan.co.id, Wednesday (24/7).
Gatot also added that IFG Life prioritizes placements in low to medium risk investments, so IFG Life’s main focus is placing placements in government bonds. “We apply the Liability Driven Investment concept, namely that the investment made must be in accordance with the company’s liability profile, so that the ability to make claim payments to policyholders can be maintained. We carry out investment placement prudently, strictly and in accordance with good governance practices,” he said.
On the other hand, PT BNI Life Insurance targets investment returns to reach IDR 1.087 trillion throughout 2024. In June 2024, the company’s investment results were recorded at IDR 461 billion. General Manager of Corporate Secretariat, Legal and Corporate Communication BNI Life, Arry Herwindo, expressed his confidence that this target can be achieved by the end of this year.
Arry explained that the majority of the company’s investment assets are placed in bonds, around 73%, with mutual funds around 20%, shares around 5%, and the rest in deposits. “It is placed in bonds because it best suits the needs of insurance products,” said Arry to Kontan.co.id on Wednesday (24/7).
He also added that currently the priority is still to place investment assets on bonds, considering the projected cut in the benchmark interest rate in semester II-2024. BNI Life sees an opportunity to take advantage of this to take profit.
With investment returns experiencing a decline in most life insurance companies, strategic steps such as those taken by IFG Life and BNI Life show that there are ways to survive and even grow amidst the existing economic challenges.
Source : https://keuangan.kontan.co.id/news/hasil-investasi-asuransi-jiwa-menurun-4223-pada-mei-2024
Jokowi opens his voice! The rules for mandatory motor vehicle insurance are a hot topic of discussion
President Joko Widodo (Jokowi) has finally spoken out regarding the excitement over the mandatory motorbike and car insurance regulations which are expected to come into effect next year. There is news circulating that third party liability (TPL) insurance will begin to be implemented in January 2025. However, Jokowi revealed that until now he has not held a meeting to discuss this matter.
“There has been no meeting regarding (mandatory TPL insurance),” Jokowi explained to journalists after the Indonesian Golden Visa ceremony at The Ritz-Carlton Hotel, Jakarta, Thursday (25/7/2024).
TPL insurance is an insurance product that provides compensation to third parties who are directly harmed by the insured motor vehicle, due to risks guaranteed in the policy.
Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervision, Ogi Prastomiyono, said that currently vehicle insurance is voluntary. However, the Financial Sector Development and Strengthening Law (UU PPSK) regulates that vehicle insurance can become mandatory for all car and motorbike owners.
The government is currently preparing derivative regulations from the PPSK Law. “It is hoped that government regulations regarding mandatory insurance will comply with the law no later than 2 years after PPSK, meaning that in January 2025 every vehicle will have a TPL,” said Ogi at the 2024 Insurance Forum, Tuesday (16/7/2024).
The practice of mandatory motor vehicle insurance has been implemented in various other countries, including in the ASEAN region. “If we look at world countries, including ASEAN, all of them have implemented mandatory vehicle insurance,” added Ogi.
Ogi also explained that mandatory motor vehicle insurance is mutual cooperation. In this way, when a traffic accident occurs involving many parties, losses can be reduced.
However, one homework that still needs to be completed is the mechanism for implementing mandatory insurance. We need a platform that can be used to find out the insurance used by each motor vehicle.
The mandate for the establishment of a mandatory insurance program is contained in Law Number 4 of 2023 concerning Development and Strengthening of the Financial Sector (UU PPSK), specifically in article 39A. The government can establish a mandatory insurance program according to needs and designate certain groups in society to pay premiums or participation contributions as a source of funding for the mandatory insurance program.
Further provisions regarding the implementation of the Mandatory Insurance Program will be regulated by Government Regulation after obtaining approval from the DPR. If a Government Regulation (PP) has been issued, it will be downgraded to the Financial Services Authority Regulation (POJK).
Currently, the Financial Services Authority (OJK) is still waiting for a draft government regulation (RPP) regarding the mandatory insurance regulations. Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervision (PPDP), Ogi Prastomiyono, said that the PP was a derivative of the PPSK Law.
The mandatory insurance program has been included in the 2023-2027 insurance roadmap. This mandatory insurance is intended to encourage expansion of insurance penetration and density.
“The government’s policy to require mandatory insurance for certain groups of people also requires support for the development of insurance products. Therefore, the insurance industry must innovate so that it can provide insurance products that suit people’s needs and support national development programs,” as quoted from the road map document insurance.
With all the dynamics that are occurring, the Indonesian insurance industry is at an important crossroads, ready to face the challenges and opportunities that exist in order to achieve national economic growth and stability.
Mega Insurance Optimistic about Achieving Target Even though the Automotive Market is Sluggish, Premium Income Increases Significantly!
PT Asuransi General Mega (Mega Insurance) recorded vehicle insurance premiums worth IDR 150 billion until May 2024. Compliance Director Mega Insurance, Diang Edelina, revealed that there has been no significant increase in gross written premium (GWP) in semester I/2024, especially for motor vehicle insurance. This is in line with the sluggish domestic automotive market.
“Currently Mega Insurance is focused on improving the risk mitigation or selection process for all business lines, so that there are several businesses that have an impact on its market share,” said Diang to Bisnis, Tuesday (23/7/2024).
However, Diang is optimistic that motor vehicle premiums will increase compared to the same period the previous year. The company’s strategy includes adding segmentation for motor vehicle insurance sales outside the CT Corp ecosystem. Currently, the company’s marketing staff is approaching several dealers and finance companies.
“We are very optimistic that the company’s target will be achieved by December 2024,” said Diang.
Mega Insurance currently uses a product bundling model with dealers, leasing and multi-finance companies. From Mega Insurance’s conventional monthly financial report in June 2024, the company recorded premium income of IDR 809 billion, an increase compared to IDR 679 billion in June 2023. Investment returns also increased to IDR 26.4 billion from the previous IDR 22.7 billion, and profit after taxes reached IDR 50 billion, up from IDR 40.8 billion. The company’s financial health level as seen from Risk Based Capital (RBC) reached 233.35%, up from 225.77% in June 2023.
Previously, the Financial Services Authority (OJK) recorded motor vehicle insurance premiums reaching IDR 9.39 trillion until May 2024, up 5.36% YoY even though domestic vehicle sales fell 13.29% in the same period.
Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervision (PPDP), Ogi Prastomiyono, emphasized that motor vehicle premiums do not only come from insurance for new vehicles, but also from insurance for existing vehicle ownership. To anticipate a sluggish automotive market, OJK encourages insurance companies to innovate and diversify their products, including promoting usage-based insurance, telematics, or other types of insurance products that meet changing consumer needs and behavior.
The motor vehicle business line is still the top three premium contributors to the general insurance industry. According to the Indonesian General Insurance Association (AAUI), in the first quarter of 2024, of the total IDR 32.71 trillion in premium income achieved by general insurance companies, the three main contributors were property, vehicle and credit insurance. Property insurance contributed IDR 9.59 trillion, an increase of 51% from IDR 6.35 trillion in the first quarter of 2023. Motor vehicle insurance worth IDR 5.9 trillion, an increase of 13.8% from the previous IDR 5.2 trillion in the first quarter of 2023. Meanwhile credit insurance reached IDR 4.9 trillion, an increase of 19.3% from the previous IDR 4.14 trillion in the first quarter of 2023.
With optimism and the right strategy, Mega Insurance and the Indonesian general insurance industry are ready to face challenges and continue to grow even amidst challenging market conditions.
Government Increases Insurance Establishment Capital to IDR 1 Trillion: This is the Impact on the Industry!
The Financial Services Authority (OJK) has just announced a new regulation that increases the minimum paid-up capital requirement for establishing an insurance company to IDR 1 trillion. This change is contained in OJK Regulation (POJK) Number 23 of 2023 concerning Business and Institutional Licensing of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies and Sharia Reinsurance Companies.
OJK Chief Executive of Insurance, Guarantee and Pension Fund Supervision, Ogi Prastomiyono, explained that this adjustment aims to strengthen the capacity of the insurance industry. This step is expected to provide legal certainty and increase efficiency and ease in the licensing process.
“For companies that will apply for establishment, paid-up capital is regulated as follows: insurance companies IDR 1 trillion, reinsurance companies IDR 2 trillion, sharia insurance companies IDR 500 billion, and sharia reinsurance companies IDR 1 trillion,” said Ogi at the Indonesia Re International Conference. 2024, Wednesday (24/7/2024).
Equity Capital Adjustment Stages
Ogi also explained that companies that have obtained a business license will undergo equity capital adjustments in two stages:
- First Level: The adjustment period is until 30 December 2026 with the following conditions:
- Insurance company: IDR 290 billion
- Reinsurance company: IDR 500 billion
- Sharia insurance company: IDR 100 billion
- Sharia reinsurance company: IDR 200 billion
- Second Level: Adjustment period until 30 December 2028, based on reinsurance company group (KPPE):
- KPPE 1:
- Insurance company: IDR 500 billion
- Reinsurance company: IDR 1 trillion
- Sharia insurance company: IDR 200 billion
- Sharia reinsurance company: IDR 400 billion
- KPPE 2:
- Insurance company: IDR 1 trillion
- Reinsurance company: IDR 2 trillion
- Sharia insurance company: IDR 500 billion
- Sharia reinsurance company: IDR 1 trillion
- KPPE 1:
Companies belonging to KPPE 1 is only allowed to carry out business activities and simple insurance products, meanwhile KPPE 2 can carry out all business activities and insurance products.
With these regulatory changes, OJK hopes that the insurance industry can develop stronger and be more competitive, while providing better protection for the public and ensuring compliance with higher standards.
This news is brought to you by L&G Insurance Brokers, insurance broker experienced in Indonesia.
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