The Future of Insurance in Indonesia

As we may be all aware insurance in developed nations plays a major role and function in the economy.

Obviously the biggest buildings in the city are owned by banks but the second largest buildings in any city is owned by the insurance company.

This shows that insurance is a big contributor in a developed economy. In the 2008 financial crisis in the US among the big banks that failed was an insurance company too. The government realized that these institutions were too big to fail and provided them a bailout package.

Developing nations however face different challenges because it is a product of the”West” and not indigenous to Asia. The problem of comprehending policy terms and conditions and aligning it with legal certainties is proving difficult. Western values which insurance is based on could be alien to local situations hence, the disconnect between what is being sold and what is needed. When trying to explain the product which applies to foreign countries in local terms the significance is sometimes lost in trying to explain the meaning of what the product is. It will need time and education and a common understanding of laws and risk management practices to eventually get the public to accept insurance and see and enjoy it’s value. The reason why most of the largest insurance companies in the world are in Indonesia is because the potential growth is so big that it cannot be ignored. It is only at a 3% penetration rate, whereas in places like US, Australia, UK and Europe the penetration rate is more than 80%. Have a nice day!