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Vol 40 No 2 (2025): May

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Submitted
Jul 17, 2023
Accepted
Aug 13, 2024
Published
May 28, 2025
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Rebuild the Trust: Predicting the Financial Well-Being of Indonesian Insurers

https://doi.org/10.22146/jieb.v40i2.8968
Endang Dwi Astuti
endang.dwi@infovesta.com
PT Infovesta Utama
Muhammad Irfan Hilman
PT Infovesta Utama
Edbert Suryajaya
PT Infovesta Utama

Corresponding Author(s) : Endang Dwi Astuti

endang.dwi@infovesta.com

Journal of Indonesian Economy and Business, Vol 40 No 2 (2025): May

Abstract

Introduction/Main Objectives: The emerging markets’ economic growth relies on stable insurance sectors, which mitigate risk, maintain liquidity, and manage profitability for sustainable growth. This paper aims to examine the financial well-being prediction model using logit regression for Indonesian life and general insurance companies one year and two years before a failure event. Background Problems: The rise of insurance failures erodes people's trust, especially in Indonesia where financial literacy is still an ongoing issue. Novelty: Numerous studies examine the methodology for predicting insurance failure, but some of these procedures have statistical limitations or do not address the unique issue in the emerging markets’ setting. Research Methods: This study employs logistic regression as its methodology and focuses on the life and general insurers operating in Indonesia between 2012 and 2020, using publicly available data. Finding/Results: This study finds the financial well-being of general insurance companies is dependent on their investment performance, profitability, liquidity, change in asset mix, premiums, and surplus growth, leverage, the inflation rate, and change in money reserves. While firm size, the operating margin, premium growth, liquidity change in the asset mix, the combined ratio of loss and expense ratios, surplus growth, and leverage are the key leading indicators of life insurers’ insolvency. Conclusion: Firms with poor investment performance, low premium growth, and extreme levels of leverage are more likely to be insolvent. This study suggests that local authorities should regulate insurance companies' investment strategies, moderate their asset mix changes, and implement sound risk management systems to mitigate performance fluctuations.

Keywords

Probability investment decisions insurance companies bankruptcy
Astuti, E. D., Hilman, M. I., & Suryajaya, E. (2025). Rebuild the Trust: Predicting the Financial Well-Being of Indonesian Insurers. Journal of Indonesian Economy and Business, 40(2), 214 -. https://doi.org/10.22146/jieb.v40i2.8968
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Author Biographies

Endang Dwi Astuti, PT Infovesta Utama

Endang Dwi Astuti is a Product Manager at PT Infovesta Utama, an Indonesian investment technology firm, since 2019. She holds a Bachelor’s in Management from Universitas Padjadjaran and a Master’s in Science Management in Finance from the School of Business and Management, Institut Teknologi Bandung. Her research focuses on investments, institutional investors, and political connections, and she has published several international articles through interdisciplinary collaborations.

Muhammad Irfan Hilman, PT Infovesta Utama

Muhammad Irfan Hilman is a Product Research Analyst at PT Infovesta Utama since 2023. He completed his Bachelor’s in Materials Engineering from Institut Teknologi Bandung and earned a Master’s in Science Management in Finance from the same institution. His research interests include investment, financial modeling, and macroeconomics. He actively collaborates across departments on research projects, contributing to product features, reporting, and consulting.

Edbert Suryajaya, PT Infovesta Utama

Edbert Suryajaya has been President Director at PT Infovesta Utama since 2023. Previously, he served in the research department from 2009, with his last role as Head of Research. He holds a Bachelor’s in Food Technology from Universitas Pelita Harapan and has been a CFA charterholder since 2013. Specializing in investment strategy formulation and instrument evaluation, his research spans investment, financial modeling, and macroeconomics. Edbert regularly collaborates with researchers from diverse backgrounds on initiatives aimed at optimizing investments, shaping business strategies, and implementing good investment governance.

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