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Indonesia Insurance Report Q1 2008
Business Monitor International, March 2008, Pages: 34
The Indonesia Insurance Report provides independent forecasts and competitive intelligence on Indonesias insurance industry.
This report differs from its predecessors in that it includes BMI’s Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI’s Country Risk Rating (CRR). It is now much easier to consider the business environment for the insurance sector in any one country relative to the business environment for other industries in that country that are surveyed by BMI, and the business environment for the insurance sector in other countries.
Indonesia’s IBER is 50.7. On this measure Indonesia is ranked 11th of the 15 countries in Asia surveyed by BMI. Relative to the more highly ranked countries in Asia, Indonesia lags especially in the areas of structure, regulatory framework and risk. The level of political volatility, the lack of reliability in the legal process and the opaque nature of the bureaucracy all drag on the overall rating.
Over the forecast period, we anticipate that non-life premiums will grow by 13% annually in local currency terms and by 15% in US dollar terms. Life premiums are expected to increase by 15% annually in local currency terms and by 17% in US dollar terms. The key drivers of growth in the non-life segment in 2007-2012 are the anticipated rise in nominal GDP from around US$422bn to US$592bn and an expected increase in non-life penetration from 0.60% of GDP to 0.85%. The key driver of growth in the life segment is the envisaged rise in life density from US$16.75 per capita in 2007 to US$35.00 per capita in 2012. Over the same period, Indonesia’s population will grow from 228mn to 241mn.
The competitive landscape, in both the non-life and the life segment, is fragmented. Both segments are open to participation by foreign groups. There are a number of local firms but none holds a dominating position in either the life or non-life sectors. By conventional standards most are small but they have proven resilient to survive through the various political and economic turmoil of the past. The market is comparatively open to new entrants and a number of the major multinational firms are represented in both sectors.
Indonesia’s non-life segment is dominated by motor vehicle insurance, which accounts for 45% of total premium income and property/fire, which accounts for another 20%. The overall market is small, but growing and it has significant long term potential. A number of the major international insurers appear to share the view that while not especially attractive at present the prospective market size makes it simply too big to ignore. Currently the life sector is both 35% larger than the non-life sector and it is growing more rapidly. Product density though is still very low.
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Indonesia insurance company claim payments by value in rupiahs from 1996 through 2000, with loss insurance and reinsurance claim payments and for "other" types of insurance
Number of insurance companies in Indonesia by type for 1996 to 1999
Indonesia insurance sector market size expressed as gross premiums in rupiahs by four insurance categories for 1995 to 1999
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