Early Warning System for Sharia Insurance Companies in Indonesia
and Malaysia at 2013-2015 periode
Sylva Alif Rusmita, Puji Sucia Sukmaningrum, and Zata Atikah Amani
Universitas Airlangga, Surabaya, Indonesia
Keywords: Comparison, Early Warning System, Islamic Insurance Indonesia and Malaysia.
Abstract: The purpose of this research is to know the health of Islamic insurance companies in Indonesia and Islamic
insurance companies in Malaysia using early warning system during the period of 2013-2015. Early warning
system is the measurement where those ratios will provide early warning. This research method uses
quantitative methods, and using sample of three Islamic insurance companies in Indonesia and eight Islamic
insurance companies in Malaysia. Assessment of financial performance using early warning system is
measured by the ratio of change of surplus ratio, underwriting ratio, incurred loss ratio, commission ratio,
management ratio, investment yield ratio, premium growth ratio, and retention ratio. The data used is
secondary data which is being collected of annual financial report from 2013-2015. The results show all of
the ratios on Islamic insurance companies in Indonesia and Malaysia in good health. But when viewed from
per ratio, health level in Islamic insurance companies in Malaysia is better than Islamic insurance companies
in Indonesia.
1 INTRODUCTION
Islamic Economics is a branch of science that
develops and grows to solve the economic problems
caused by greed and injustice. Here the Islamic
economy grows and comes to reach falah with
maslahah as a goal to avoid from harm.
The development of Islamic economics in
Indonesia develop rapidly since the monetary crisis in
1997 which have impacted on liqyuidity of
conventional bank. However, Bank Muamalat was
established in 1992 to survive when the crisis
occurred. Various Laws supporting the system of
Islamic finance institutions began to be made by
Government, such as Law Number 7 of 1992
concerning Banking as amended by Act Number 10
of 1998 and Act Number 23 of 1999 concerning Bank
Indonesia which at the same time received direct
support from the Indonesian Vice President Jusuf
Kalla.
The development of Takaful or Islamic Insurance
in Indonesia which is also involved in the
development of sharia banking industry has a positive
impact on the development of sharia insurance
industry in Indonesia. The development of Takaful
was driven by the demand of sharia banking which
requires insurance protection for every asset in
Islamic banks, such as the company's assets and third
party assets.
Insurance is one of the non-banking financial
institutions engaged in services which is also one of
the pillars that can promote economic growth in
Indonesia. On chapter 246 of the Code of Trade
Commercial Law which explains that insurance is an
agreement, whereby an insurer binds himself to an
insured with a premium to provide reimbursement to
him because of a loss, damage or loss of expected
profit, which he may suffer because of an event that
is not certain.
The explanation above also relates to the
definition of insurance in the business view which
explains that a company whose main business
receives or sells services, transfers risks from other
parties, and earns a share of risk among its customers
(Ali, 2004: 60).
Sula (2004: 33) defines takaful in the sense of
muamalah is mutually carrying risk among fellow
people, so that among others be the insurer of other
risks. Thus takaful is a shared responsibility between
the Muslims and in this case is aimed at helping, and
guaranteeing another Muslim in matters of
righteousness (Hasan, 2014: 19).
Rusmita, S., Sukmaningrum, P. and Amani, Z.
Early Warning System for Sharia Insurance Companies in Indonesia and Malaysia at 2013-2015 periode.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 135-140
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
135

The system implemented in this Takaful
insurance is based on ta’awun principle which is
helping each other in the good way of spending funds
tabarru 'or ibdah funds, donations, and charities
intended to bear the risk (Amrin, 2006: 5). It known
as sharing of risk on Takaful insurance, while
conventional insurance applied transfer of risk.
Table 1: Comparison of Total Assets for Sharia Insurance
in Indonesia and Malaysia in 2013 – 2015 (on trilion).
Sharia
Insurance
2013
2014
2015
Indonesia
Rp 16,66
Rp 22,36
Rp 26,52
Malaysia
Rp 65.171
Rp 70.812
Rp 76.930
Source: Indonesia Insurance Statistics by the Financial
Services Authority & Annual Report by Bank Negara
Malaysia (which has been reprocessed).
Based on data published by the Financial Services
Authority (OJK), the total number of sharia insurance
companies reached 8 units consisting of 5 units of
sharia life insurance, 3 units of general insurance
sharia, and 0 units of reinsurance sharia. The total
number of sharia business unit companies reaches 45
units consisting of 19 units of sharia insurance, 23
sharia general insurance and 3 units of Islamic
reinsurance with total assets reach Rp 26.52 trillion in
2015 or grow 18.6 percent from Rp 22, 36 trillion in
the past year. Based on the data, industry in the field
of services that is sharia insurance will continue to
grow rapidly can be one of the financial sector that
can also be interpreted as part of the main movement
of the Indonesian economy.
Based on the publication results from Bank
Negara Malaysia globally, takaful industry has grown
rapidly, it is because takaful industry appeals to both
Muslim and non-Muslim consumers. The Industry is
expected to grow by 15-20 percent per years with
total contribution estimated to reach USD 7.4 billion
of total assets of USD 16.1 billion by 2015, and
currently stands more than 110 takaful companies
around the world. It is also offset by Malaysia and
Indonesia which are the main markets in the
development of takaful insurance.
Based on data published by Bank Negara
Malaysia, total assets of sharia insurance in Malaysia
after converted to the Indonesian currency exchange
rate of Rp 3,113.17 per RM 1 amounting to Rp 76,930
trillion in 2015 with sharia life insurance assets
amounting to Rp 66,588 trillion while general
insurance assets of sharia amounting to Rp 10,342
trillion. Of the total assets increased by 8 percent from
Rp 70,812 trillion in 2014.
Although there is an increase in total assets of a
Takaful company but in financial matters is the most
important issue in supervising financial performance.
Especially the supervision of financial performance
of sharia insurance industry which has specific
criteria in its performance assessment, it is necessary
to have the provision of Early Warning System
(EWS) or an early warning system to solve problems
if they occur in the future.
Early Warning System or usually referred to as an
early warning system that aims to determine the
extent to which the financial health of a company.
Satria (1994: 5) describes the usefulness of the Early
Warning System (EWS), which states that:
In many countries EWS calculations are used to
help insurance commissioners measure financial
performance and assess the health of an insurance
company by detecting earlier impending insolvency
shortages, identifying firms that require more
rigorous monitoring and immediate attention , and
determine the level (grading) of insurance companies.
According to Satria (1994: 133) there are nine
important ratios that are often used in assessing the
financial performance based on the Early Warning
System (EWS), but in this study will use 8 ratios
including the Ratio of Surplus Change, Underwriting
Ratio, Claim Ratio, Management Cost Ratio,
Investment Return Ratio, Premium Growth Ratio,
and Own Retention Ratio.
The formulation of the problem in this study is
how the health of sharia insurance companies in
Indonesia with Malaysia using early warning system
during the study period 2013-2015?
The purpose of this study is to find out the health
of sharia insurance companies in Indonesia with
Malaysia using early warning system during the study
period 2013-2015
2 THEORY AND DEVELOPMENT
OF HYPOTHESIS
Sharia insurance or better known as takaful, at-ta'min,
and tadhamun are mutual efforts to protect and help
between a number of people or parties through
investment in the form of assets or tabarru 'funds and
provide a pattern of return to face certain risks
through akad sharia (Aziz, 2010: 190). Sula (2004:
33) defines takaful in the sense of muamalah is
mutually carrying risk among fellow people, so that
among others be the insurer of other risks.
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
136

2.1 Sharia Insurance in Indonesia
The development of sharia insurance industry players
during the last five years can be classified according
to the form of the implementation of sharia business
activities, namely pure sharia (full fledge) and part of
sharia (Sharia unit) and described as sharia life
insurance company, insurance company.
Based on the growth of total assets of sharia
insurance industry in 2013 has grown in terms of
assets of 20.43 percent, in 2014 by 25.71 percent, in
2015 decreased increase of only 18.2 percent, and in
2016 increased growth again to 20.42 percent. If from
2013 to 2016, the total assets of the sharia insurance
industry experienced an average growth every year of
21.19 percent. This may reflect that the sharia
insurance industry continues to be in demand by the
public and is beginning to be trusted as a financial
institution that can be coupled with conventional
insurance that is better known to the public at large.
2.2 Sharia Insurance in Malaysia
The development of Takaful industry in Malaysia
began in the early 1980s inspired by the needs of the
Muslim community in Malaysia, which was later
used as an alternative to sharia-based for conventional
insurance, as well as complementing the operations
of sharia banks established in 1983.
The general insurance industry of sharia in
Malaysia has experienced remarkable growth since
more than 20 years ago. This is evidenced by the
increasing number of sharia general insurance
companies along with decent industrial performance
diakuin and a good progressive with a broad market
structure and a variety of products provided by
general insurance operators of sharia. Although sharia
general insurance is formed early and leads from
sharia life insurance from total contribution since the
beginning of the Malaysian sharia insurance but
nowadays sharia insurance has more than 71 percent
of total contribution obtained from sharia insurance
industry in Malaysia (Bank Negara Malaysia, 2004 ).
2.3 Early Warning System Analysis
Early Warning System (EWS) using a series of test
ratios (test ratios) applied to the financial statements
of general insurance companies to measure the
company's financial capabilities and performance.
There are 8 important ratios used to measure financial
performance According to Satria (1994: 67-72). They
are surplus ratio, underwriting ratio, claim ratio,
growth ratio of premiums, commission ratio, cost
management, ratio investment, premium growth
ratio, and retention ratio
3 RESEARCH METHOD
The research is using quantitative approach.
Analytical technique used is descriptive statistic, that
is statistic technique used to analyze data by
describing data which have been collected before
(Anshori and Iswati, 2009: 116)
3.1 Operational Definition
The operational definition contains explanations /
specifications of the variables that have been
identified, the measurement of variables, and the
scale / size used. he operational definitions of the
variables used in this study are surplus ratio,
underwriting ratio, claim expenses ratio, ROI,
Growth ratio premium.
3.2 Data
In this study used the type of quantitative data in the
form of secondary data. Secondary data is primary
data that has been processed further and presented by
primary data collector or by other party and usually
presented in the form of table or diagram (Siagian and
Sugiarto, 2006: 17). Where the data comes from the
company's financial report downloaded on the official
website of the Takaful company. Secondary data used
in the form of annual financial statements from each
website of Sharia Insurance in Indonesia and sharia
insurance in Malaysia period 2013-2015
3.3 Sample
In this research, sampling technique used is purposive
sampling. Anshori and Iswati (2009: 105), stated that
purposive sampling is a technique of determining
samples with certain considerations
The sample used is a full sharia insurance
company in Indonesia registered in the Financial
Services Authority prior to 2013 and a full sharia
insurance company in Malaysia registered with Bank
Negara Malaysia and publishes and publishes its
annual financial report for the period 2013-2015
through each insurance company sharia. Total sample
from Sharia Insurance Indonesia are three companies
and Sharia Insurance Malaysia are ten companies.
Early Warning System for Sharia Insurance Companies in Indonesia and Malaysia at 2013-2015 periode
137

Table 2: Reseach Sampling.
Sharia Insurance in Indonesia
1
PT Asuransi Takaful Keluarga
2
PT Asuransi Jiwa Sharia Al-Amin
3
PT Asuransi Jiwa Takaful Umum
Sharia Insurance in Malaysia
1
AmMetLife Takaful Berhad
2
Etiqa Takaful Berhad
3
Great Eastern Takaful Berhad
4
Hong Leong MSIG Takaful Berhad
5
HSBC Amanah Takaful (Malaysia) Berhad
6
Zurich Takaful Malaysia Berhad
7
Prudential BSN Takaful Berhad
8
Sun Life Malaysia Berhad
9
Syarikat Takaful Malaysia Berhad
10
Takaful Ikhlas Berhad
3.4 Analysis Technique
Data analysis techniques in quantitative research
using statistical analysis. Data analysis in this
research uses two stages namely descriptive statistics.
Descriptive statistics present the mean, the lowest
(minimum), and the highest (maximum) values of the
ratios tested: Surplus Change Rate, Underwriting
Ratio, Claim Load Ratio, Commission Ratio,
Management Cost Ratio, Return Ratio Investment,
Premium Growth Ratio, and Own Retention Ratio of
Takaful insurance that is sampled during the period
2013-2015. Descriptive statistics in this study using
Ms. Excel 2013.
4 RESULTS AND DISCUSSION
Based on data analysis the result of this research are:
4.1 Sharia Surplus Ratio
Table 3: EWS Calculation Result on Sharia Surplus Ratio
Changes in Indonesia and Malaysia.
Surplus
Ratio
N
Min
Max
Mean
Std.
Dev
Indonesia
9
0,00
0,30
0,03
0,10
Malaysia
9
0,00
0,00
0,00
0,00
Source: Result of Data Processing.
Sharia Insurance in Indonesia has a better financial
performance when compared with Sharia Insurance
in Malaysia. Sharia Insurance in Indonesia has the
highest Surplus Ratio Change Rate on descriptive
statistic analysis for the average value and maximum
value. Sharia Insurance in Indonesia has an average
of 0, 03 or 3% with the highest ratio of 0,30 or 30%
and the lowest ratio of 0%. While the average
Malaysia Sharia insurance surplus ratio is 0, 00 or 0%
with the highest ratio of 0,00 or 0% and the lowest
0%.
4.2 Underwriting Ratio Description
Table 4: EWS Calculation Result on Sharia Insurance
Underwriting Ratios in Indonesia and Malaysia
Underwriting
Ratio
N
Min
Max
Mean
Std.
Dev
Indonesia
9
-0,01
0,22
0,14
0,06
Malaysia
9
-0,21
0,04
-0,06
0,09
Source: Result of Data Processing.
Financial performance of Sharia Insurance in
Indonesia and Sharia Insurance Malaysia in the
period 2013-2015 based on Underwriting Ratio show
that Sharia Insurance in Indonesia has an average of
0.14 or 14% with the highest ratio of 0,22 or 22% and
the lowest ratio of -0.01 or -1%. On the other hand,
the average underwriting ratio of Sharia Insurance in
Malaysia is -0.06 or -6% with the highest ratio of 0.04
or 4% and the lowest being -0.21 or -21%. So, Sharia
Insurance both countries in good condition, but
Shariah Insurance Malaysia has better financial
performance compared to Sharia Insurance Indonesia
because Sharia Insurance in Malaysia has the lowest
Underwriting Ratio value. It can be concluded that
Sharia Insurance in Malaysia has a good assessment
in the determination of the contribution given to
customers of sharia insurance.
4.3 Description of Claim Expense Ratio
Table 5: EWS Calculation Result on Sharia Insurance
Claim Expense Ratio in Indonesia and Malaysia
Claim
Expense
Ratio
N
Min
Max
Mean
Std.
Dev
Indonesia
9
0,29
0,88
0,50
0,20
Malaysia
9
0,01
0,53
0,31
0,19
Source: Result of Data Processing.
Sharia Insurance in both countries has good
performance, but Sharia Insurance in Malaysia has
better financial performance compared to Sharia
Insurance in Indonesia. It is because Sharia Insurance
in Malaysia has the lowest Claim Ratio Rate. Based
on the Claim Expense Ratio, Sharia Insurance in
Indonesia has an average of 0, 50 or 50% with the
lowest ratio of 0, 29 or 29% and the highest ratio of
0.88 or 88%. While Sharia Insurance Claim Expense
Ratio in Malaysia is 0,31 or 31% with the lowest 0,
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
138

01 or 1% and the highest ratio of 0, 53 or 53%. So it
can be concluded that Sharia Insurance in Malaysia
has a good assessment in underwriting and risk
closing process
4.4 Description of Commission Ratio
Table 6: EWS Calculation Result on Ratio of Sharia
Insurance Commission in Indonesia and Malaysia
Commission
Ratio
N
Min
Max
Mean
Std.
Dev
Indonesia
9
0,06
0,47
0,30
0,13
Malaysia
9
0,21
6,15
2,02
2,62
Source: Result of Data Processing.
Based on the Commission Ratio, Sharia Insurance in
Indonesia has an average of 0, 30 or 30% with the
lowest ratio of 0, 06 or 6% and the highest ratio of 0,
47 or 47%. While, Sharia Insurance Commission in
Malaysia amounted to 2, 02 or 202% with the lowest
0, 21 or 21% and the highest ratio of 6, 15 or 615%.
This illustrates that in the year Sharia Insurance in
Indonesia and Asuransi Sharia in Malaysia have a
good financial performance. However, here Sharia
Insurance in Indonesia has a better financial
performance. Since the Commission Ratio can be
used as a benchmark in determining the acquisition
cost incurred by the company in each industry, where
the cost of acquisition in the Malaysian Sharia
Insurance industry is high, it will be very influential
in the Commission Ratio
4.5 Descriptions of Cost Management
Ratio
Table 7: EWS Calculation Result on Sharia Insurance Cost
Management Ratio in Indonesia and Malaysia
Cost
Management
Ratio
N
Min
Max
Mean
Std.
Dev
Indonesia
9
0,38
0,97
0,78
0.22
Malaysia
9
0,63
17,72
4,88
6,65
Source: Result of Data Processing.
The Management Cost Ratio, Sharia Insurance in
Indonesia has an average of 0.78 or 78% with the
lowest ratio of 0.38 or 38% and the highest ratio of
0.97 or 97%. While, the average Sharia Insurance
Management Cost Ratio in Malaysia is 4,88 or 488%
with the lowest 0, 63 or 63% and the highest ratio of
17.72 or 1772%. This illustrates that in the year
Sharia Insurance in Indonesia and Sharia Insurance in
Malaysia have a good financial performance. Sharia
Insurance in Indonesia has the lowest Ratio
Management Cost, because sharia insurance in
Indonesia is starting to grow so the management costs
incurred are not too high than in Malaysia
4.6 Premium Growth Ratio
Table 8: EWS Calculation Result on Sharia Insurance
Premium Growth Ratio in Indonesia and Malaysia
Premium
Growth
Ratio
N
Min
Max
Mean
Std.
Dev
Indonesia
9
-0,07
0,28
0,01
0.11
Malaysia
9
-0,21
101,84
11,61
33,84
Source: Result of Data Processing.
Sharia Insurance in Indonesia has an average of 0.01
or 1% with the highest ratio of 0, 28 or 0, 28% and
the lowest ratio is -0, 07 or -7%. While, the average
Ratio of Growth Insurance Premium Sharia in
Malaysia amounted to 11,61 or 1161% with the
highest ratio of 101,84 and the lowest ratio -0.21 or -
21%. Sharia Insurance in Malaysia has a better
financial performance when compared with Sharia
Insurance in Indonesia due to Sharia Insurance in
Malaysia have in the Ratio of Premium Growth more
sustainable than Sharia Insurance in Indonesia. The
shariah insurance premium in Malaysia has increased
every years where the factors that influence are the
level of education, the level of awareness of citizens
and government regulations which require citizens to
have sharia insurance.
4.7 Retention Ratio
Table 9: EWS Calculation Result on Sharia Insurance
Retention Ratio in Indonesia and Malaysia
Ratio
Retention
N
Min
Max
Mean
Std.
Dev
Indonesia
9
0,27
0,42
0,37
0.05
Malaysia
9
0,10
0,69
0,44
0.20
Source: Result of Data Processing.
Sharia insurance in malaysia has a healthier financial
performance when compared to sharia insurance in
indonesia due to sharia insurance in Malaysia
increase in own retention ratio higher than sharia
insurance in Indonesia. The reasons that affect the
level of own retention ratio is the ability to deal with
the risks. Sharia Insurance in Malaysia is prefer to use
reinsurance to protect their contribution received
Early Warning System for Sharia Insurance Companies in Indonesia and Malaysia at 2013-2015 periode
139

5 CONCLUSION
Based on the results of the financial performance
assessment using the ratio of Early Warning System,
on the Ratio of Surplus Change, Commission Ratio,
and Management Cost Ratio Sharia Insurance in
Indonesia has better financial performance than
Sharia Insurance in Malaysia. While Islamic
Insurance in Malaysia has better financial
performance than Sharia Insurance in Indonesia when
on Underwriting Ratio, Claims Expense Ratio,
Surplus Growth Ratio, and Own Retention Ratio. On
the other site, this research also found that external
factors influence the financial performance such as
the awareness and knowledge of Indonesian citizens
about how importance the insurance, second is
government regulations that support the sharia
insurance itself. Third is the level of public health to
every citizen in Indonesia as well as in Malaysia, and
many others factors.
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