Indonesia's Insurance Penetration Weakens, Reaching its Lowest Point in 2023

According to data from the Indonesian General Insurance Association (AAUI), national insurance penetration has weakened in recent years.

Insurance penetration is the ratio between insurance industry funds and Gross Domestic Product (GDP).

In 2019, Indonesia's insurance industry funds reached Rp478.7 trillion, equivalent to 3.03% of GDP.

Then in 2020, the penetration ratio strengthened to 3.23%, along with the explosion of the Covid-19 pandemic.

However, since 2021, penetration has continued to decline, reaching 2.64% in 2023. This figure is the lowest achievement in the last five years.

National insurance penetration has the potential to strengthen next year, because the Financial Services Authority (OJK) is currently drafting regulations to make such insurance mandatory.

Ogi Prastomiyono, Executive Head of Insurance, Guarantee, and Pension Fund Supervision at the OJK, stated that vehicle insurance is currently voluntary.

However, with the enactment of the Law on the Development and Strengthening of the Financial Sector (UU PPSK), vehicle insurance can become mandatory for all car and motorcycle owners. The government is currently drafting the implementing regulations.

"It is hoped that the government regulation regarding mandatory insurance will be in accordance with the Law at the latest two years after the PPSK, meaning that by January 2025, every vehicle will have TPL [third-party liability insurance]," said Ogi, as broadcast by *CNBC Indonesia*, Tuesday (16/7/2024).