Page 18 - WTW Asia Insurance Market Report
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Indonesia	

  In line with global trends, the local insurance market     “The commodities-based Indonesian
  across many segments was soft in 2016, with general        economy has all but collapsed, with
  insurance business particularly afflicted. The imposition  GDP re-forecasted to be lower than
  of the statutory tariff on Property and Motor Insurance    previous estimates”
  by the Indonesia Financial Services Authority in 2014
  has had some unforeseen repercussions as insureds          2 .1 %Insurance
  sought ways to alleviate significant premium increases
  that the tariff brought. Many businesses have opted          penetration
  to not insure, or only partially insure their assets.        remains at
  Others knowingly under-insure and perhaps, even
  more significantly and of concern, is the number of                                 the lowest in South-East Asia
  companies that are opting out of Earthquake cover,
  which used to be automatically included in the past.       50% by 2019. The implication of the creation of IndoRe and
  Given Indonesia’s geological composition, this is not a    its impact on existing reinsurers is unknown at this stage,
  good idea.                                                 but it is clear from recent discussions that compulsory
                                                             cession to IndoRe will be mandated. This cession will vary
  Indonesia has seen its fiscal deficit rising due to        by line of business, but it is assumed that the primary lines
  the impact of low global demand for and weakening          of property and auto will see a requirement of 100% local
  of commodity prices. The mining and oil and gas            retention for all but the very largest of risks.
  industries have been impacted by the continued
  economic slowdown and many companies within                Digitization of the Insurance Industry
  these industries have shut down. In a bid to improve
  its budget position, the Indonesian government             Indonesia has one of the biggest online markets worldwide,
  has proposed a plan for a tax amnesty, aimed at            with access to mobile internet undergoing approximately
  encouraging wealthy Indonesians who have been              15% growth annually. Insurers are looking to invest in
  remiss in their tax affairs to disclose and optionally     technology to enable digital distribution and marketing,
  repatriate their undeclared assets by paying only a        as well as leveraging data and analytics to deliver
  modest clearance levy on the assets declared. As of        personalised insurance solutions to their clients. Though
  October 2016, only 14% of assets (135 trillion out of      the FinTech and mobile payment practices are reshaping
  937 trillion rupiah) declared were repatriated from        the way insurers think about payment, a path forward may
  overseas. The failure of the Indonesian government         not be visible at the moment in a country where only 11% of
  to follow through on its tax amnesty declaration has       the population has a bank account. Current restrictions on
  further impacted the Indonesian stock market and           telecom companies acting as a payment gateways are also
  the larger economy as reality sets in. Furthermore,        significantly hindering growth is this sector.
  the president and his party do not have majority of
  house and are struggling to push forward bills and         High Potential for Growth in the Health and
  reforms that might benefit the insurance industry and the  Benefits Sector
  economy as a whole.
                                                             Despite the quality of healthcare and distribution in
             Changes in the Reinsurance Industry             Indonesia being far behind other countries, the healthcare
                                                             sector is receiving vast amounts of local and foreign
In December 2015, the Indonesia’s Ministry of State          investment. Furthermore, the Universal Health Coverage
Owned Enterprises announced, as part of its commitment       system supported by the Indonesian government (BPJS)
to establish a strong reinsurance industry, that it would    aims to provide all citizens with access to basic medical
be merging three reinsurance companies to create             coverage by end 2018. Hence, there is a large potential for
Indonesia Re (IndoRe). This is being done because most       growth in the health and benefits sector in Indonesia.
of the country’s domestic needs have always been met by
insurers from abroad and the Ministry of Finance and the
OJK believe that this has negatively impacted Indonesia’s
balance of payments. Officials have said that their aim is
to inject capital into IndoRe and boost its market share to

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