THE INFLUENCE OF FOREIGN INSURANCE AFFILIATES, MARKET SHARE, OWN RETENTION RATIO, CLAIMS RATIO AND COST RATIO ON THE PERFORMANCE OF GENERAL INSURANCE COMPANIES IN INDONESIA

Abstract


INTRODUCTION
Insurance is an agreement between two parties, in this case the insurance company as the first party and the policyholder as the second party. The obligation of the insurance company is to provide reimbursement to the insured or policyholder due to the occurrence of the insured event according to the agreement. The obligation for policyholders is to make premium payments to insurance companies.
There are 70 general insurance companies in Indonesia with total assets as of 31 December 2021 reaching IDR 183.63 trillion. The general insurance industry's total liabilities as of December 31, 2021 reached IDR 115.30 trillion and a capital of IDR 68.33 trillion. General insurance industry assets in four years grew by 42.54% from Rp128.70 trillion at the end of 2017 to Rp183.45 trillion at the end of 2022. The growth in liabilities in four years was 49.93% and the capital growth in four years was by 31.56%.
The performance of the general insurance industry in 2021 is shown by the aggregate return on equity ratio of 8.30%. The aggregate industry ROE tends to decrease, the ROE in 2021 is lower compared to 2018 and 2019. The lowest aggregate industry ROE occurred in 2020 which was only 7.11%. When using the average method, the average ROE of general insurance companies in 2021 is 8.16%. The average ROE value of all general insurance companies is lower than the ROE value of foreign affiliated companies. In the last four years, the average ROE for the general insurance industry and foreign affiliated general insurance companies is as presented in the following The average ROE of the general insurance industry tends to decrease and the ROE in 2021 is lower when compared to the ROE in 2018 and 2019. Meanwhile the ROE for foreign affiliated general insurance companies tends to decrease and the average ROE in 2021 is only 9.62 % lower than the previous three years which was above 11%. The average ROE of foreign affiliated general insurance companies is always better than the average ROE of the general insurance industry in the same period.
The decline in ROE for both foreign-affiliated insurance companies and general insurance companies is of course a concern for regulators and investors alike. Insurance regulators use ROE as an indicator of company performance. Investors have an interest, namely to get profit or added value from the investment or capital invested. In addition to the decreasing value, the ROE in the insurance industry also has a significant difference between the industry average ROE and the average ROE of foreign affiliated general insurance companies.
Foreign shareholders in an insurance company, regardless of the percentage of ownership, are required to be a similar insurance company or have a subsidiary of a similar insurance company. These provisions aim that apart from being able to contribute in terms of capital, foreign shareholders can also provide their competence regarding the insurance industry through knowledge transfer to insurance players in Indonesia. Contributions from foreign parties are expected to develop the insurance industry and improve the performance of the insurance industry.

Data Type
The research data is secondary data sourced from the annual financial reports of general insurance companies for the 2018-2021 period which were submitted to the IKNB-OJK Directorate of Statistics and Information. The research uses the financial reports submitted by the company.

Population
The population from the data are all general insurance companies operating in Indonesia. The total population of insurance companies in this study in the last 4 years was 284.

Research Sample
The sample of this study uses a sample of insurance companies, both those with foreign ownership and companies that do not have foreign ownership, with the same composition (number of companies) each year. The data analysis process was carried out with the SPSS program/software. Of the 190 data used as the object of analysis, there are 13 data that are outliers so that 177 data can be used.

Data analysis technique
Multiple linear regression analysis is used to determine the relationship between the five independent variables with one dependent variable which is the main analysis in the study. Further analysis of multiple linear regression was performed after the data met the classical assumption test. Multiple linear regression has the following equation: Y=a Before entering the regression model, several classical assumption tests are needed, namely data multicollinearity tests, data normality tests, data autocorrelation tests, and data heteroscedasticity tests. Statistical software, namely the IBM SPSS Statistics version 28 program, is the main tool in regression analysis and classic assumption tests.

Normality test
The results of the normality test from the SPSS program are as shown in the following table: The data shows that the data is normally distributed, which is indicated by the value of Asymp. Sig is 0.200 which is greater than 0.05.

Heteroscedasticity Test
The heteroscedasticity test with the help of the SPSS program shows the results of the scatterplot graph. The graph concludes that there are no symptoms of heteroscedasticity in the regression model because the points spread randomly, and are spread both above and below the number 0 (zero) on the Y axis.

Multicollinearity Test
The multicollinearity test with the help of the SPSS program concludes that there is no multicollinearity among the independent variables by looking at the tolerance value or the Variance Inflation Factor (VIF) value which is within the resulting t limit, namely tolerance> 0.10 and VIF limit <10.00, so can be concluded

Autocorrelation Test
The test results show that the DW (d) value is 2.186. Using a significance table value of 5% with a sample size of 177 (n) and a number of independent variables of 5 (k=5), a dL value of 1.696 and a dU value of 1.812 are obtained. The DW (d) value is 2.186, which means that it is greater than the dU value, which is 1.812 and less than (4-dU) or 4 -1.812 = 2.188. This means that it can be concluded that there is no autocorrelation problem. The significance value of f is 0.000 and the fcount value is 16.361. The magnitude of the ftable at α=0.05, the amount of data (n) is 177, and the number of variables X (k) is 2.27. Thus, because of the significance of f <0.05 or 0.001 <0.05 and the value of fcount> ftable or 16.36 > 2.27, which means that foreign ownership, market share, claims ratio, own retention premium, and expense ratio, have a significant effect on ROE is simultaneously received.

Determination Coefficient Test
The correlation coefficient between market share, claims ratio, own retention premium, expense ratio, and foreign affiliation to ROE is 0.569 and the coefficient of determination (R2) is 0.324. These figures mean that foreign insurance affiliation, market share, claims ratio, own retention ratio, and expense ratio have an influence on ROE of 32.4% with a strong correlation value and the remaining 67.6% is influenced by other variables not examined.

Analysis of Influence of Foreign Insurance Affiliates
Foreign shareholders are required to have good knowledge and experience regarding the insurance industry and be able to provide expertise in the insurance sector through transfer of knowledge to insurers in Indonesia. Contributions from foreign parties are expected to develop the insurance industry and improve the performance of the insurance industry.This is in line with Shameem D (2021), which concludes that the effects of foreign direct investment in the insurance sector include increasing product innovation and customer service, optimal use of resources, healthy competition, improvement of infrastructure facilities and new approaches to risk management. . as Shareholders in general, including foreign shareholders, certainly have a goal, namely that the invested capital can produce results in the form of a good rate of return on capital. Associated with agency theory, this goal ultimately causes shareholders as principals to have an interest in placing management who has the capacity to run a business. Research by Mwangi, Mirie & Murigu, Jane (2015) found that the greater the leverage, share capital, and qualitative factors of management capabilities, the better the company's performance.
Based ondescriptionTherefore, with good knowledge of insurance companies, strengthening capital and good management appointed by shareholders, foreign ownership of the insurance industry in Indonesia is expected to improve the performance of insurance companies as measured in ROE.
Results analysis linear regression shows that foreign affiliation The magnitude of the valuetcount for foreign affiliates (3.286) > ttable (1.654) and the sig value (0.001) is less than 0.05, which means that foreign affiliates have a significant effect on the performance of general insurance companies.Furthermore, the data also shows that in the 2018-2021 period the average ROE value of foreign affiliated general insurance companies is significantly better than that of local insurance companies. The ROE of local insurance companies is 5% to 7.51% while the average ROE of foreign affiliated companies is 9.62 to 12.29%.

Market Share Influence Analysis
The results of the linear regression analysis show that market share has a negative effect on the performance of insurance companies.Based on the results of the analysis, the value of t count for market share is (2.158) > t table (1.654) but in the opposite direction (negative)and the sig value (0.032) is less than 0.05.This is not in line with the initial hypothesis that market share has a positive effect on insurance company performance.
Market share has a negative effect on performance, which can be explained through the existing data condition approach in the general insurance industry. The large number of actors in the general insurance industry has led to quite tight competition in the general insurance industry. Many general insurance companies have a market share below 1%. The Based on the table above, in the last four years there were 91 companies that had a market share above 1% and there were 99 companies that had a market share below 1%. Of the 91 companies that have a market share above 1% in the last 4 years, there are 45 companies that have performance below the industry average. Meanwhile, of the 99 companies that have a market share below 1%, there are 36 companies that have performance above the industry average. Thus it can be concluded that having a large market share does not always have good performance or conversely having a small market share does not mean having poor performance. Furthermore, the not too strong relationship between market share and performance in Rajendra Maharjan's research (2016) concluded that insurance companies generate profits through the effective use of resources where this can lead to the emergence of monopoly power.

Analysis of the Effect of Own Retention Ratio
The greater the retention ratio itself means the greater the premium received by the company which will become the company's income and the greater the risk borne by the company. Conversely, if the retention ratio is small, then the portion of the premium that becomes the income of the insurance company is also small and the premium received by the reinsurance company becomes the income of the large reinsurance company. Based on this description, under conditions of a reasonable claims ratio, as well as a good expense ratio, a large self-retention ratio can make a large contribution to the company's profits. As research from Ozcan Isik (2021), the retention premium ratio has a significant effect on the profit performance of domestic insurance companies and foreign affiliated insurance companies.
Based on the regression analysis, the retention premium ratio itself has a positive and significant impact on ROE. Thus, the more retained, the more positive impact on ROE. The amount of the calculated t value for Own Retention Premium (6.927) > t table, (1.653), with a sig value of 0.001 <0.05 thus Self-Retention Premiums for the Indonesian general insurance industry have a positive and significant effect on ROE.
The positive and significant impact of self-retention premium on profit is also supported by the condition that the risk profile of general insurance industry products in Indonesia is quite good. Based on the data, the claim ratio in the 2018-2021 period is in the range of 40% to 46%, which means that general insurance companies generate premiums that exceed the claims that occur.

Claims Ratio Influence Analysis
Claim payments are recorded as an expense in the insurance company's income statement. Thus, in theory, the payment/claim expense will reduce the insurance company's profit. The number of claims paid divided by the premium received is the claims ratio.
This claim ratio basically assesses the quality of the insurance company's underwriting when carrying out risk selection and handling claims. In general, a smaller claims ratio indicates better underwriting quality. Claims ratio with a percentage of more than 100% is very dangerous for the company's financial condition considering that the funds collected from incoming premiums are not enough to make claim payments and are not enough to pay for the company's operational costs. These conditions will erode the company's profits and will reduce financial performance including the ratio of return on equity. Angga Firmansyah Putra Hasibuan, Isfenti Sadalia, Iskandar Muda (2020), the claim ratio has a significant influence on the profitability of insurance companies. In other studies it is known thatcost ratios, claim ratios, and company size significantly affect company performance, namely research from Mazviona W, Dube M, Sakahuwa T (2017).
Based on the results of the regression analysis, the value of t is calculated for the claims ratio2.580 > t table, (1.6536), but in the opposite direction, with a sig value (0.011) <0.05, thus for general insurance companies in Indonesia, the claim ratio has a negative effect on performance/ROE. This result is in line with several previous studies.

Cost Ratio Influence Analysis
ascompany in general, there is also a cost component for the companyinsurancein addition to claim costs, namely other operational costs. These operational costs are incurred by insurance companies in obtaining insurance premiums which are usually dominated by acquisition/commission costs. Thus, in theory, these costs will reduce the insurance company's income, meaning that costs in theory have a negative impact on insurance income which ultimately has a negative impact on performance. To assess efficiency, operational costs are compared with the premium earned by the company, otherwise known as the cost ratio. The expense ratio is calculated by comparing the costs incurred with the premiums earned.
Previous research, Arintoko, Ahmad Abdul Aziz, Habibah (2021) concluded that the BOPO variable and debt ratio have a negative and significant effect on company profitability. Company efficiency can also increase profits compared to market share. Sugiharto's research, Toto (2022) concluded that the expense ratio has a significant negative correlation with the performance of life insurance companies.
Based on the results of the regression analysis, the t value for the Cost Ratio is 7.101 > t table, (1.6536), but in the opposite direction, with a sig value of 0.000 <0.05, thus for the general insurance industry in Indonesia, the cost ratio negative effect on ROE. This result is in line with several previous studies.

CONCLUSION
Research in order to determine the effect of foreign affiliation, market share, own retention, claims ratio and expense ratio on the performance of insurance companies concludes that: a. Foreign ownership and own retention ratio have a significant effect on the performance of insurance companies b. Market Share, Claims Ratio and Cost Ratio have a negative and significant effect on the performance of insurance companies c. Foreign affiliation, market share, claims ratio, own retention premium, and expense ratio, together have a significant influence on the performance of an insurance company. d. Foreign affiliates, market share, claim ratio, own retention premium, and expense ratio have an influence on performance of 32.4% with a strong correlation value and the remaining 67.6% is influenced by other variables not counted in this study.