The Indonesian general insurance market is expected to grow at a compound annual growth rate (CAGR) of 7.7% from IDR66.8 trillion (US$4.6bn) in 2020 to IDR96.6 trillion (US$6.3bn) in 2025, in terms of gross written premiums (GWP), finds GlobalData, a leading data and analytics company.

As per GlobalData, recovery in the economy and demand for financial lines insurance driven by economic reforms will support the general insurance market growth.

Swarup Kumar Sahoo, Senior Insurance Analyst at GlobalData, comments: “Indonesian economy is expected to grow by 5.3% in 2022 after contracting by 2.1% in 2020. The recovery, which is driven by government initiatives towards an inclusive economy for MSMEs, economic digitalization, and new infrastructure projects, will support general insurance growth which is expected to grow by 7.0% in 2022.”

Property insurance is the leading segment of the Indonesian general insurance market accounting for 33.9% of GWP in 2020. The segment grew by 4.1% in 2020 driven by demand for insurance against natural catastrophe events. The segment is expected to grow at a CAGR 5.8% during 2020-25 driven by high susceptibility to natural hazards, growing demand for commercial construction, and government push for new infrastructure projects under the public-private partnership (PPP) model.

Financial Lines is the second-largest segment in the Indonesian general insurance market accounting for 24.5% share of the GWP in 2020. It is dominated by credit insurance, that accounted for 86.5% of the Financial Lines GWP in 2020. The Financial Lines segment is expected to register fastest growth among all general insurance lines with a forecasted CAGR of 12.1% during 2020-25 supported by economic reforms towards MSMEs lending and easing credit guarantee rules.

Indonesia is currently home to around 62 million MSMEs out of which 99% are micro-enterprises. The government’s push towards accelerating the economic recovery by reviving bank lending to MSMEs will support the growth of credit insurance which is mandatory for most micro loans. Also, a government directive in 2018 mandated commercial banks to lend 20.0% of their total loans to SMEs, thereby supporting the growth of credit insurance. As a result, the share of financial line insurance within general insurance has increased significantly from 9.7% in 2016 to 24.5% share in 2020. It is further expected to grow to 30.0% by 2025.

Motor insurance is the third-largest segment accounting for 17.0% of the general insurance GWP in 2020. It declined by 15.5% in 2020 due to a decline in automobile sales. However, with revival in the economy and increasing vehicle sales, the segment is expected to grow at a CAGR of 3.9% during 2020-25.

Personal Accident and Health (PA&H), Liability, Marine, Aviation and Transit (MAT), and other miscellaneous insurance collectively account for the remaining 24.6% share in 2020.

Sahoo concludes: “The growth in the Indonesian general insurance market will be driven by gradual recovery in the economy and government reforms to support the financial sector. Increasing credit Insurance claims due to pandemic-led economic volatility and the country’s susceptibility to natural hazards could keep insurers’ profitability under pressure.”