Medical cost inflation in Indonesia is estimated to be 13.6% in 2025 (after general price inflation), the highest rate in Asia, according to the Global Asia Insurance Partnership (GAIP).
This GAIP report titled "Sustainable Private Health Insurance in Asia", written by Mr Craig Thorburn, reveals that medical cost inflation is now the biggest threat to the healthcare financing system in Asia.
In February 2026, the Chairman of the Indonesian General Insurance Association (AAUI) Mr Budi Herawan stated that around five general insurance companies had stopped selling health insurance products due to the gap between premiums and claims.
These conditions indicate that the health insurance industry faces serious challenges stemming from high claims burdens and product sustainability risks.
Although the Financial Services Authority (OJK) reveals that health insurance claims are still increasing, both for life and general insurance, it maintains that the claim ratio remains within manageable limits.
"To maintain performance quality, companies need to strengthen underwriting, claims management, and control healthcare costs," said Mr Ogi Prastomiyono, Chief Executive of the Insurance, Guarantee, and Pension Fund Supervisory Agency of the OJK, in a written statement.
The GAIP report noted that, faced with concerns about high medical inflation trends, claims ratios that were unsustainable consistently exceeding 90%, and concerns about the moral hazard impacts and overutilisation, the authorities in Indonesia proposed a mandatory 10% co-payment rule in early 2025. Public pushback, largely from consumer organisations, raised concerns about the financial burden on vulnerable groups, a “breach” in the expected contract of existing clients with “full coverage”, and some concerns that this would not improve the relatively low penetration rate for insurance in Indonesia.
The OJK engaged with the legislators, leading to a revised approach in which the 10% mandatory risk sharing model was replaced with a 5% optional model. Insurers must offer one product without risk sharing to address concerns about benefit reductions. A medical advisory board was established that would oversee service quality and address concerns that efforts to reduce overtreatment did not lead to “under-treatment”.
Existing insurers have a transition period through to December 2026 to align their health insurance products to the new requirements.