Jakarta, Indonesia Sentinel — The General Insurance Association of Indonesia (AAUI) reported a 35.4 percent year-on-year (YoY) increase in insurance claims, reaching IDR 8.3 trillion, up from IDR 6.13 trillion previously.
AAUI Chairman Budi Herawan attributed the surge in claims to a rising default risk among debtors covered by credit insurance. He suspected that the inability of debtors to repay loans was driven by the growing prevalence of online loans and online gambling.
“This increase in credit insurance claims is largely due to 75 percent of claims being defaults, and it’s connected to people becoming trapped in a cycle of online loans and gambling, which impacts their ability to repay credit insurance,” Budi explained during the AAUI performance presentation in Jakarta on Monday (Sept 30), as quoted by CNBC Indonesia.
In the same session, AAUI Deputy Chair of Statistics Trinita Situmeang elaborated that this trend of default claims is expected to persist for some time.
“With credit insurance, it appears that these default claims, in terms of both numbers and profiles, are something we will continue to face, as that is the current profile,” Trinita said.
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This comes amid a spike in the non-performing loan (NPL) ratio within Indonesia’s banking sector. As of December 2023, the gross NPL ratio stood at 2.19 percent, with the net NPL ratio at 0.71 percent. By April 2024, the gross NPL ratio had risen to 2.33 percent, and the net NPL ratio climbed to 0.81 percent.
Meanwhile, the Financial Services Authority (OJK) reported an increase in lending activity through online loans, or peer-to-peer (P2P) lending.
Agusman, Executive Head of the OJK’s Supervisory Department for Finance Companies, Venture Capital Firms, Microfinance Institutions, and Other Financial Services (PVML), stated that outstanding P2P loans reached IDR 72.03 trillion in August 2024. This marked an increase from the previous month’s figure of IDR 69.39 trillion.
In the fintech P2P lending sector, outstanding financing continued to grow, with a 35.62 percent YoY increase in August 2024, up from 23.97 percent YoY in July.
(Raidi/Agung)
