Interview: Yasril Rasyid
Which sectors are likely to drive further expansion of general insurance?
YASRIL RASYID: The insurance sector plays a significant role in the economic development of every country. Looking back at Indonesia’s financial crisis in 2008, the insurance sector was tougher than other financial institutions during the financial turmoil. For the last five years insurance industry growth has been around 17%, which is far above national economic growth of 5%. In 2015 general insurance sector growth was 7.8% and was mostly dominated by the property and motor insurance lines. In 2016 I believe that the insurance industry will grow steadily, as in previous years. The growth prediction will be in line with the government’s major economic plan for that year. We expect growth in 2017 to remain the same. In addition to property and motor insurance, infrastructure and construction insurance, maritime insurance and low-scale insurance products, such as micro-insurance for low-income people, will also drive growth. Micro-insurance products are in line with the government’s development agenda, Nawa Cita, to help low-income people have more resilience.
What can the private sector and the government do to spread awareness about insurance?
RASYID: Private players and the government can collaborate in a so-called public-private partnership to improve insurance literacy in many layers of society. The insurance sector also exercised this partnership a long time ago. We have built insurance awareness in various institutions, such as universities, high schools, primary schools, banks and other financial institutions. When the awareness is formed, a society knows the importance of insurance products in their daily lives and, therefore, will buy such products voluntarily. This will consequently give a boost to insurance penetration.
How far will the government’s infrastructure investments impact general insurance demand?
RASYID: Unlike the life insurance sector, which provides cover for a person’s life and beneficiaries, the general insurance sector mostly covers the financial interests of assets or plants. As the government has planned to do more to develop physical infrastructure to support economic growth, this will create demand from the insurance side and also increase the buying power of society. Therefore, general insurance will grow from either society buying more insurance products or from the insurance company providing coverage for infrastructure development.
The insurance lines of businesses involved in infrastructure development include engineering insurance, surety bonds, cargo insurance and credit insurance. Infrastructure development is one of the main government programmes and has a multiplier effect for other lines, such as construction, maritime and manpower insurance.
What are the main challenges to increasing insurance penetration in Indonesia?
RASYID: Many insurance companies create insurance products that are affordable or cover the daily needs of society. Such products include micro-insurance products, agriculture products and maritime insurance products. All of these products can contribute more to insurance penetration. Therefore it is necessary to use IT to broaden the network and sale of insurance products. Penetration is still very low compared to the country’s demographics. Insurance penetration is lower than 2% of GDP and, compared to other neighbouring countries, penetration growth is very slow. We need to increase this in collaboration with the regulator. There should be more compulsory products, such as motor insurance or agricultural insurance.
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