Insurance
From The Report: Indonesia 2014
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Rising disposable incomes, consumption growth and sustained investment are key factors in the sector’s recent continued expansion and future potential growth. While still small compared to its potential, Indonesia’s insurance market is attracting global underwriters and reinsurers. The life segment, which comprised roughly two-thirds of premiums in 2012, is the market’s key growth driver. The segment has seen annual expansion of 25.6% in the decade to 2012. The inflow of foreign direct investment into the Indonesian market, particularly from Japan, has led to a wave of mergers and acquisitions in the insurance sector that can be expected to increase competition. In January 2013, oversight of the sector was handed over to a new independent regulator, the Financial Services Authority, which will work to help institute new regulations for the market. Stricter regulations imposed under a comprehensive framework by the new regulator will bolster underwriters’ financial and technical capacity, while growing affluence, rising awareness of natural disasters, and the need for financial planning will be key drivers of long-term growth.
This chapter contains an insurance dialogue between David Beynon, President Director, Tokio Marine Life Insurance Indonesia, and William Kuan, President Director, Prudential Indonesia; and interviews with Elvyn G Masassya, President Director, Social Security Agency; and Tim Shields, President Director, ACE Jaya Proteksi.

Articles from this Chapter

Overview

Growth mode: New opportunities and rising demand lead to sector expansion
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While still small compared to its potential, Indonesia’s insurance market is attracting global underwriters and reinsurers. Only 6% the size of China’s market, according to SwissRe – at roughly Rp147trn ($14.7bn) in combined life and non-life premiums in 2012 – Indonesia’s market has sustained annual growth of over 20% in premiums and 26% in assets over the past five years, according to the Jakarta-based credit rating agency Pefindo. Yet with penetration of only around 1.3% for life and…

Interview

David Beynon, President Director, Tokio Marine Life Insurance Indonesia; and William Kuan, President Director, Prudential Indonesia: Interview
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Interview:David Beynon,William Kuan How are life insurance firms tailoring their strategies to attract Indonesia’s growing middle class and what progress has been made? DAVID BEYNON: With regards to capturing the middle class, we believe there is a universal sales model that will be able to cater to all classes and would avoid the need for such tailoring. This model is known as “single need-based selling”. While many new firms adopt “product push” tactics that may initially…

Interview

Elvyn Gaji Masassya, President Director, Social Security Agency (BPJS): Interview
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Interview:Elvyn Gaji Masassya How do you assess the roll out of the new social security system so far, and what remaining challenges will there be before full implementation? ELVYN GAJI MASASSYA: The new social security system was established at the beginning of 2014 and is set to be fully operational by July 2015. This new system will bring many positive changes to the Indonesian public and, in fact, many of these improvements are already well under way. One key goal is to encourage as many…

Analysis

Frontier for takaful: Making space for a growing segment
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In the world’s most populous Muslim nation where over 85% of the population ascribes to the faith, Indonesia’s sharia-compliant insurance segment (takaful) remains marginal at a mere 3.9% of industry assets in 2012, according to a June 2013 report by rating agency Fitch. While proportionately small compared to neighbouring countries like Malaysia and Brunei Darussalam, the market has grown rapidly since the first takaful underwriter – Malaysian-backed Syarikat Takaful – launched in 1994.…

Interview

Tim Shields, President Director, ACE Jaya Proteksi: Interview
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Interview:Tim Shields To what extent is the insurance sector engaged in a “war for talent” and how can this be mitigated? TIM SHIELDS:The financial sector, and particularly the insurance industry, has experienced phenomenal growth in the last few years. This is clear from the sector’s double-digit growth and the bullish entrance of new companies, both domestic and international, into the market. In 2011, Indonesia’s non-life insurance penetration was only 0.6% of GDP compared…

Analysis

Broadening health coverage: Expanding the net and extending benefits
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As the government plans to begin reforming its social security system in 2014, private underwriters expect more profitable growth in health insurance. While there are five parallel schemes providing social security, some 37% of Indonesians, or around 88m people, have no health insurance and faced spiralling out-of-pocket medical expenses in 2012, according to the World Health Organisation (WHO). Meanwhile, private health policies are sold mainly as riders on life insurance, though intense competition…

Analysis

Weathering the storm: Creating the tools to handle natural disasters
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As one of the countries most exposed to natural catastrophes (NatCat) such as earthquakes and floods, Indonesia’s relatively low insurance penetration has historically meant that the government must shoulder the lion’s share of losses. With earthquake and flood policies usually sold as standalone covers, a growing incidence of catastrophes has driven increased penetration, albeit from low levels. “Natural catastrophes like earthquakes and tsunamis have been driving premiums for property insurance…

Analysis

Letter of the law: The legal framework is catching up with sector growth
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After taking over from the Indonesia Capital Market and Financial Institution Supervisory Agency, the new Financial Services Authority (OJK) is leading a regulatory overhaul of the sector. More aggressive than its predecessor, OJK is implementing new governance rules for underwriters and has set new premium tariffs and caps on commissions for highly competitive motor and property classes – all ahead of a major overhaul of the existing 1992 Insurance Act, which was under debate at the House of Representatives…