General insurance industry in Indonesia to reach US$5.17bn in 2025, forecasts GlobalData

The general insurance market in Indonesia, in terms of gross written premium, is projected to grow from IDR63.87 trillion (US$4.50bn) in 2020 to IDR77.53 trillion (US$5.17bn) in 2025, according to GlobalData, a leading data and analytics company.

GlobalData has revised Indonesia’s insurance forecast in the aftermath of COVID-19 outbreak. As per the latest data, Indonesia’s general insurance industry is forecasted to register a decline  of 4.6% in 2020, primarily due to the economic impact of the pandemic. However, the market is expected to recover and grow by 2.9% in 2021.

Rakesh Raj, Insurance Analyst at GlobalData, comments: “Indonesian economy fell into recession in 2020 owing to the lockdown restrictions due to the COVID-19 pandemic. Restrictions on commercial activities and downturn in domestic consumption led to a steep decline in demand for general insurance.”

The impact of pandemic was most prominent in property insurance, which accounts for 33% of general insurance premium. Property insurance is estimated to have declined by 6.2% in 2020 due to restrictions placed on construction and other commercial activities. The industry, however, is poised to benefit from investments in infrastructure, proposed as part of government’s economic reforms.

Credit insurance accounted for 21% of the total general insurance premiums in 2019. It registered a CAGR of 72.1% between 2017 and 2019, owing to the increased awareness and implementation of 2016 National Financial Inclusion Strategy, which expanded funding for small and medium-sized enterprises (SME’s) and mirco SMEs. However, the economic volatility and heightened risk of bad debts could weigh in on credit insurance growth in 2021.

Personal accident and health insurance (PA&H), which accounts for 8% of general insurance premiums, is forecasted to grow in 2021 backed by increase in awareness for health insurance products. As policies providing COVID-19 hospitalization and telemedicine benefits gained prominence, the category is expected to grow at a CAGR of 7.03% during 2021-2025 and partially mitigate decline from other business lines.

The fiscal policies announced by the government have helped control economic decline. With many sectors opening up, incremental gains were reported across sectors in Q4 2020, indicating rebound in insurance industry as well.

Mr Raj concludes: “The long-term outlook for the Indonesian general insurance industry is positive. The proposed regulations permitting general insurance companies to issue PAYDI and unit-linked long-term general insurance products could usher in product innovations and help increase insurance penetration over the forecast period.”

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