History of Islamic insurance is marked by the establishment of the first Islamic insurance company in 1994 named Family Takaful Insurance. Based on data released by the Financial Services Authority (FSA), until the end of 2012 there were 45 sharia insurance and reinsurance companies in Indonesia. Of these, 5 of which are full pledged Islamic insurance companies (3 life insurance companies and 2 general insurance companies). While the remaining is a sharia business unit (17 units of Islamic life insurance, 20 units of shariah general insurance and 3 units of sharia reinsurance).
Islamic insurance products in Indonesia consist of life insurance sharia, sharia health insurance, sharia unit-linked, education insurance and general insurance.
Although an increasing number of Islamic insurance companies in Indonesia are relatively slow, the growth of Islamic insurance industry assets in Indonesia is quite encouraging. Over the last 5 years (2007-2012), the average rate of Islamic insurance industry assets growth in Indonesia reached 55.13%. At the end of 2012, the growth rate in Indonesian Islamic insurance assets amounted to 42.02% with sharia general insurance and reinsurance companies has a higher growth rate than the sharia life insurance company in the amount of 67.83% and 35.19.
Indonesia with a Muslim majority society since the year 2012 began to realize the importance of sharia insurance. Besides education from various Indonesian Islamic economic institutions and organizations, the development of Islamic insurance industry also cannot be separated from the role of Islamic insurance agent that offer Islamic insurance product excellence intensively because nowadays it is generally focus on retail business, especially sharia life insurance products. A number of Islamic insurance companies also have a robust and sustainable agency system to increase the capacity of the Islamic insurance agents / sales.
Islamic insurance in Indonesia not only focus on the middle to upper market but also provide micro-insurance products with their advantages. Islamic insurance company worked with cooperatives, Sharia Rural Bank, or sharia finance companies in the micro-insurance products.
In its operational activities, an Islamic insurance companies and Islamic business units of conventional insurance companies are supervised by a Sharia Supervisory Board to ensure a level of sharia compliance in any insurance product issued.
Some Islamic insurance unit plans to spin-off into full pledged Islamic insurance company in the coming years. This is good news for the Islamic insurance industry due to become an independent company, the company’s management team will be more focused to grow more rapidly and expand greater to pursue economies of scale like an independent company.
There are several major factors that support the growth of Islamic insurance in Indonesia. Firstly, in 2008 there is minimum capital requirement for conventional insurance IDR 100 Billion and IDR 50 Billion for the Islamic Insurance companies in 2014. Thereby, conventional insurance companies which capital is below IDR 100 Billion can be converted into the Islamic Insurance. Secondly, the high growth in the Indonesian middle class income (people with an income of IDR 5 million / month). Thirdly, several Islamic insurance business units Plan to spin off into Islamic insurance companies in 2014.