ASEAN KEY DESTINATIONS
Insurance eyes robust growth after slow year
The country’s general insurers expect to see the industry’s premium income increase by a double-digit margin this year, pinning their hopes on the government’s spending on infrastructure projects and other priority sectors.
The Association of General Insurance Companies (AAUI) has set an optimistic outlook this year as it aims to see the industry’s gross premium collection grow by 15 to 20 percent.
The target is around three times higher than the 6.7 percent increase in total gross premium collection booked by domestic general insurers last year.
AAUI chairman Yasril Y. Rasyid said the business group based its optimism on the government’s economic growth projection of around 5.3 to 5.4 percent this year, which is expected to be partly driven by infrastructure development.
In contrast to slow state spending in 2015, he said the government had started to make efforts to speed up its expenditure, including by carrying out procurements and auctions for its infrastructure projects as early as January.
“We are optimistic about our double-digit target should all macroeconomic assumptions and government projects go well,” Yasril said in a press conference on Tuesday.
Last year, the country’s general insurance firms collectively garnered Rp 58.9 trillion (US$4.41 billion) in gross premium, a slight increase from the Rp 55.2 trillion collected in 2014.
The growth was far lower than the 17.9 percent increase in gross premium made throughout 2014 and the average 17 percent annual increase over the previous five years.
Last year’s low growth, AAUI claimed, was mainly caused by weak property insurance and automotive insurance sales, which contributed the biggest portions to the industry’s total premium for years.
Meanwhile, total gross claims increased by 22.2 percent to Rp 28.7 trillion in 2015, from Rp 23.5 trillion a year earlier, mainly caused by skyrocketing claims in airplane insurance due to sharp rupiah
With the government’s infrastructure boost, Yasril said general insurance companies could benefit from construction-related businesses, such as engineering insurance, as well as from other government’s priority sectors, including maritime and agriculture.
He also said that the government-backed people’s business loan (KUR) program would also positively affect credit insurance as the nationwide target for KUR loan disbursement had been set at a minimum of Rp 100 trillion this year.
General insurance companies are also expected to seize the opportunity provided after the Financial Services Authority (OJK) recently granted them with permission to sell unit-linked insurance products, just as life insurance firms do.
AAUI executive director Julian Noor, meanwhile, said the industry’s ability to achieve its high target this year would depend highly on the overall success of the government’s development programs and global economic stability.
If many projects fail and demand stays flat, general insurance companies, he said, should probably be satisfied with single-digit premium growth at around 9 to 10 percent this year, AAUI communication and statistic head Dadang Sukresna said.
Dadang said weak nationwide automotive sales last year were predicted to improve slightly in 2016 as demand for vehicles would also be partly driven by government spending.
He said general insurers should also be aware of looming global risks, such as a drop in global oil prices and gloomy prospects in the mining sector due to weak export growth.
“We are still hoping that global oil prices and demand for commodities improve, but it is very difficult to predict whether they will rebound soon,” he said.
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