LPS: The Public Has Not Yet Fully Prioritised Insurance
The Chairman of the Board of Commissioners of the Indonesia Deposit Insurance Corporation (LPS), Anggito Abimancu, stated that the public has not yet fully prioritised insurance as a fundamental form of protection.
His office recently conducted a survey on financial literacy and inclusion, specifically regarding the insurance industry. The results showed a literacy rate of 42.8 per cent and an inclusion rate of 29.55 per cent, indicating very low usage of insurance products among the Indonesian population. These levels are significantly lower than the literacy and inclusion rates found in the banking sector, suggesting that the public does not yet view insurance as a primary protection priority, Anggito noted during a working meeting with Commission XII of the House of Representatives (DPR RI) in Jakarta on Thursday.
Consequently, LPS is establishing the Policy Guarantee Programme (PPP) as an instrument to restore public confidence. The programme is a vital mandate for strengthening Indonesia’s financial sector, as stipulated in the Law on the Development and Strengthening of the Financial Sector (UU P2SK). The programme is expected to provide stronger protection for policyholders, increase trust in the insurance industry, and support the stability of the financial system.
During the second quarter of 2024, the insurance industry showed positive performance trends. Total general insurance assets grew by 5.1 per cent to Rp270.4 trillion, despite a 2.5 per cent decrease in gross premium income. Furthermore, Anggito noted that rising claim costs have led to an increase in insurance companies’ claim reserves.
The insurance industry also faces structural challenges, specifically low insurance penetration, which remains below 2 per cent of GDP. This penetration lags behind other ASEAN nations, most of which have already implemented policy guarantee programmes. Literacy and inclusion levels are similarly lagging.
Since receiving the mandate to organise the PPP, LPS has been preparing a roadmap for the 2023-2026 period. The policy guarantee is intended to protect policyholders, support the stabilisation of the insurance industry, and encourage industry growth. Following the amendments to the UU P2SK, LPS is accelerating the preparation for PPP activation, with a target scenario for July 2027.
In the process of accelerating this activation, Anggito highlighted several strategic issues requiring attention, including membership, coverage, maximum guarantee limits, and funding.
To address these, LPS is completing its organisational foundations by preparing four Board of Commissioners members to oversee guarantee and resolution matters for the PPP. The corporation is also developing institutional business processes, an IT blueprint, and technical regulatory frameworks, alongside human resource development plans.
Preparations include developing an integrated core system for the PPP and an electronic registration platform for participants. LPS is also working on various regulatory frameworks and supporting the implementation of the PPP in collaboration with the Ministry of Finance and the Financial Services Authority (OJK).
To ensure all preparations are integrated and that LPS is ready to manage the PPP, a Project Management Office (PMO) has been established.
“We hope to receive guidance and support from the leadership and members of Commission XI so that the activation of the policy guarantee programme can proceed credibly, effectively, and sustainably to protect policyholders, national financial system stability, and the growth of the insurance industry,” concluded the Chairman of the LPS Board of Commissioners.