The Indonesian Life Insurance Association (AAJI) has said that there are four challenges faced by the sector which are predicted to persist into 2025.
AAJI executive director Togar Pasaribu said that the four challenges include rising medical claims due to medical inflation, changes in regulations related to the utmost good faith principle, weakening public purchasing power and low insurance penetration rates.
These challenges could be the main hurdles to the growth of the life insurance industry, according to local media reports quoting Mr Togar.
He said that increases in medical claims have forced insurance companies to adjust premiums to offset the high risk of claims.
Mr Togar said, "Indeed, this step is necessary so that the company can maintain operational sustainability while providing optimal services for policyholders."
He expressed the hope that premium hikes could be effected in such a way as to maintain a balance between the protection provided and the company's ability to continue to meet the needs of policyholders on an ongoing basis.
In 2024 to date, the life insurance industry in Indonesia faced significant challenges in the form of increasing medical claims, triggered by global medical inflation.
Commenting on the judicial review process in the Constitutional Court regarding the basic principle of utmost good faith, Mr Togar said that if the clause was removed from regulations, then the principle of maximum good faith that has so far regulated the relationship between insurance companies and customers would be disrupted. This would then have the potential to increase moral risk and misuse of information.
"This could lead to an increase in fraud cases and uncertainty in the insurance claims process," he said.
For this reason, Mr Togar said, insurance companies need to prepare mitigation steps to maintain the quality of service while ensuring the integrity of data obtained from customers.
The weakened purchasing power of consumers and low awareness of insurance are long-standing issues in the insurance industry.
On a positive note, he said that with careful adaptation and mitigation strategies, insurance companies can maintain stability, maintain public trust, and support sustainable industry growth.