The Influence of Liberalization on Innovation, Performance, and Competition Level of Insurance Industry in Indonesia

Tulus Suryanto, Darul Dimasqy, Reza Ronaldo, Mahjus Ekananda, Teuku Heru Dinata and Indra Tumbelaka
Additional contact information
Tulus Suryanto: Faculty of Economics and Islamic Business, Raden Intan State Islamic University of Lampung, Bandar Lampung 35131, Indonesia
Darul Dimasqy: Departement of Research in Financial Service, Sector Financial Service Authority (OJK), Jakarta Pusat 10710, Indonesia
Reza Ronaldo: College of Islamic Economics and Business (STEBI) Lampung, Pesawaran 35371, Indonesia
Mahjus Ekananda: Department of Economics, Faculty of Economics & Business, University of Indonesia, Depok 16424, Indonesia
Teuku Heru Dinata: Departement of Research in Financial Service, Sector Financial Service Authority (OJK), Jakarta Pusat 10710, Indonesia
Indra Tumbelaka: Departement of Research in Financial Service, Sector Financial Service Authority (OJK), Jakarta Pusat 10710, Indonesia

Sustainability, 2020, vol. 12, issue 24, 1-25

Abstract: This study aims to reveal the impact of liberalization on innovation, performance, and the level of competition for insurance industry players in Indonesia based on insurance data from 2006 to 2018. The research method used is quantitative with the support of panel data. The analysis technique to explain the findings uses an aggregate model and Threshold Regression analysis. Descriptive and econometric research types were chosen to make it easier to explain the findings. From the results of data analysis using three experimental models, it shows three findings. First, in the aggregate, there is a significant negative relationship between liberalization and innovation. In the Threshold Regression model, a negative impact occurs on companies with low premium income, whereas in high premium income companies, the result is positive. This is due to the availability of resources to large companies to optimize the adaptation of liberalization in terms of innovation. Second, higher liberalization can encourage insurance companies to perform more efficiently and increase net premium income. Third, the negative impact of liberalization on competition shows that the higher the deregulation, the lower the game. These findings indicate that in the aggregate, global insurance financial liberalization has had a significant impact on the development of the insurance industry sector in Indonesia. However, liberalization can be different for groups of small companies and groups of large companies. The expected implication is that the government needs to adopt a long-term policy strategy that can encourage the sustainability of insurance companies: both high-income companies and low-premium-income companies. Besides this, it is hoped that insurance companies pay more attention to innovation, significantly improving the quality of human resources as a competitive advantage in facing global competition.

Keywords: competition; innovation; insurance; liberalization; performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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