Indonesian Life Insurance Market Faces Challenges and Shifts in Consumer Preferences

Premium Income Contraction Continues

The Indonesian life insurance industry has seen a continued contraction in premium income, with a 2.06% year-on-year decline to Rp132.85 trillion as of September 2025 ¹

. This contraction follows similar declines in the previous months, with August 2025 seeing a 1.21% drop and July 2025 a 0.84% decrease ¹

Source 1

https://finansial.bisnis.com/read/20251119/215/1929788/aaji-tiga-tahun-terakhir-minat-masyarakat-geser-ke-asuransi-jiwa-tradisional

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Shift Towards Traditional Life Insurance Products

Despite the overall contraction, there has been a notable shift in consumer preferences towards traditional life insurance products. According to the Indonesian Life Insurance Association (AAJI), traditional products now account for approximately 63% of total premium income ²

. During the first half of 2025, traditional life insurance premiums reached Rp55.20 trillion, representing a 6.5% year-on-year growth ²

Source 2

https://finansial.bisnis.com/read/20251119/215/1929837/kasus-gagal-bayar-sisakan-scarring-effect-kepercayaan-masyarakat-terhadap-asuransi

. In contrast, unit-linked products saw a decline of 11.7% to Rp32.40 trillion during the same period ²

Source 2

https://finansial.bisnis.com/read/20251119/215/1929837/kasus-gagal-bayar-sisakan-scarring-effect-kepercayaan-masyarakat-terhadap-asuransi

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Industry Expert Insights

Industry experts attribute the current challenges to the scarring effect of recent high-profile cases of insurance companies failing to pay claims, such as Jiwasraya and Bumiputera ¹

. Wahju Rohmanti, a lecturer in Islamic insurance, suggests that rebuilding consumer trust will be crucial for the industry's recovery. He recommends that companies focus on developing strategies to restore trust and modernize their marketing approaches ¹

Source 1

https://finansial.bisnis.com/read/20251119/215/1929788/aaji-tiga-tahun-terakhir-minat-masyarakat-geser-ke-asuransi-jiwa-tradisional

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Dedy Kristianto, an insurance expert, offers a more optimistic view for the short term, suggesting that premium income may stabilize by the end of 2025 with potential moderate growth in the fourth quarter due to seasonal factors ¹

. He recommends that insurance companies adopt several strategies to boost premium income, including offering more affordable products, enhancing protection education, strengthening digital distribution channels, and simplifying product offerings ¹

Source 1

https://finansial.bisnis.com/read/20251119/215/1929788/aaji-tiga-tahun-terakhir-minat-masyarakat-geser-ke-asuransi-jiwa-tradisional

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Market Outlook

The industry faces both challenges and opportunities as it navigates the current landscape. While the contraction in premium income persists, the shift towards traditional products and potential seasonal uptick in demand offer avenues for growth. Togar Pasaribu, Executive Director of AAJI, remains optimistic about the industry's prospects, citing strong industrial foundations and government fiscal incentives that could support consumer purchasing power ²

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