Low penetration rates challenge Indonesian insurance

Innovations and regulatory support to help drive growth in the insurance sector

Despite its robust growth, Indonesia's insurance industry faces significant challenges in market penetration, with rates currently standing at only 2.7%. Eric Nemitz, CEO of Sompo Insurance Indonesia, highlights both the progress and obstacles in expanding this sector.

"The Indonesian insurance market has developed very well, showing profound strength and resilience. However, penetration rates remain low compared to other ASEAN countries," Nemitz stated. He attributed the sluggish penetration to a combination of macroeconomic factors and individual financial awareness.

To tackle these challenges, Sompo Insurance is focusing on enhancing risk awareness and financial literacy across the population. "Increasing financial literacy goes hand in hand with offering affordable and attractive products for clients and customers," Nemitz explained. This approach is supported by regulatory efforts, including increased capital requirements and stronger governance among insurance firms, aiming to boost consumer trust in the industry.

Nemitz pointed out that traditional insurance products have not sufficiently met the diverse needs of consumers. "Product innovation is key to increasing penetration. We are moving away from traditional packaged products to more tailored solutions that cater to individual needs at reasonable prices," he said.

Nemitz identifies several trends reshaping the insurance landscape. Digitalization is at the forefront, with a shift towards mobile and online services that streamline interactions between insurers and customers. Artificial intelligence (AI) is another critical area, with its potential to speed up decision-making and customise insurance products more effectively.

"The traditional way of selling or buying insurance will likely vanish, replaced by digital-based interactions," Nemitz predicted. He also noted the emerging significance of electric vehicles (EVs) in Indonesia, which requires new insurance models to accommodate changes like car sharing and rental models.

The COVID-19 pandemic has also shifted consumer priorities, with heightened awareness of health risks fueling demand for individual health insurance solutions. "We have observed a substantial increase in health risk awareness, which will drive the need for more personalised health insurance products," he added.

Sompo Insurance is leveraging its global network to introduce advanced technologies and proven products to the Indonesian market, ensuring they remain at the cutting edge of the industry. "We are committed to satisfying customer needs and adjusting our offerings to meet evolving demands. Our focus is much more customer-centric than in the past," Nemitz concluded.