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OJK mulls ways to widen scope of non-life market

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The Financial Services Authority (OJK) has voiced its concern over intense competition and capital issues in the general insurance industry.

Mr Supriyono, director of Insurance Supervision and BPJS Health OJK points out that there are 71 insurance companies operating in the general insurance market at present, and that such a fragmented market leads players to compete on pricing, according to a report in Bisnis.

There is concern that price competition can render insurance companies unable to bear their obligations.
“This is something we all pay attention to in the future because we can’t rule out the liabilities carried,” he said.

In addition, capital in the general insurance industry is also a concern of OJK. Mr Supriyono says that the capital or equity of most of the 71 players in the general insurance industry is mostly still below INR500bn ($34.8m) each. Only a few companies have a capital above IDR1tn each.

Strengthening the capital base of insurers is also a challenge because of the limited number of local investors while mergers are not easy to execute.

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The way forward

Mr Supriyono indicated that the OJK is also trying to chart a plan regarding this matter. He said that there is a need to create demand so that the scope of the insurance market niche is enlarged and insurers would not always compete in the same line of business.

He said, “We must also provide education to all stakeholders, including the government. Now the economy is driven more by the government as the state budget spending is very large. So how can we also cooperate with the government to mitigate risk?”

He added, “We need to synergize so that the cake grows.”

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