Economic condition and the development of life insurance companies in Indonesia from 2016-2020
Anindita Nazhifa and Rahmat Aryo Baskoro, MM

Universitas Indonesia
Master of Management
Faculty of Economics & Business
Jalan Salemba Raya 4
Jakarta , DKI Jakarta 10430

Abstract

This research determines the impact of economic conditions on the development of Indonesian life insurance companies. The impact of net national income per capita, interest rate, and inflation rate on gross premium and investment income of all life insurance businesses was explored from 2016 to 2020. This research also investigates whether the market penetration and density of the Indonesian life insurance sector are affected. To all variables, multivariate regression was used in the analysis. Internal parameters such as total asset, ROA, ROE, and debt to equity ratio are also be assessed as control variables to see if they can significantly minimize the uncertain risk posed by macroeconomic factors such as inflation and interest rates. This research found a significant relationship between life insurance gross premiums and net national income per capita, inflation, and interest rates. The dependence of those three on investment income, market penetration, and density is also significant. Life insurance businesses in Indonesia still have poor penetration and density when compared to other financial institutions in other emerging countries. Total Asset, ROE, and DER, have effect on gross premium. Internal company performance, on the other hand, can help to reduce the impact of inflation and interest rates on a company^s gross premium. This study may help life insurance companies in understanding the impact of the national economy on the industry^s development. With all the impact on life insurance gross premium and companies^ investment income, companies should be able to mitigate the risk through product design and pricing.

Keywords: Life Insurance, NNIPC, Gross Premium, Investment, Penetration, Density

Topic: Economics