Poor tech locks insurers into outdated systems

Only 56% of local insurance companies in Indonesia use IT, and 38% have not embraced digital marketing channels.

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An inadequate digital infrastructure has hampered information technology (IT) adoption by Indonesia’s insurance industry despite a government push to fast-track the use of tools such as cloud computing, artificial intelligence (AI), and blockchain, analysts said.

Apart from the Southeast Asian nation’s unreliable internet connectivity, the investment needed to implement advanced IT systems is substantial, Jessica Pratiwi, associate director and Femmy Novaryani, senior analyst at Fitch Ratings’ Asia Pacific insurance team, told Insurance Asia.

The high cost could strain smaller insurers whilst the sector strives to meet stricter global accounting standards, they added.

The recent surge in cyberattacks has also heightened concerns about data integrity and customer trust, dissuading many insurance companies from going digital.

“Challenges in data encryption and integrating advanced technologies like cloud computing and AI further complicate the adoption,” the Fitch Ratings analysts said.

Indonesia’s insurance penetration was 1.39% at the end of 2022, according to the ASEAN Insurance Council, largely due to fewer than half of its citizens being financially literate. Top-ranked Singapore had 10.49%, Thailand 5.02%, Vietnam 2.51%, and the Philippines with 1.98%.

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