Foreign life insurance firms gain popularity

Leony Aurora, The Jakarta Post , Jakarta

Although joint-venture life insurance companies have managed to increase their share of the local market, many are still experiencing losses, according to a survey.

Investment and Banking Research Agency (Inbra) said in the survey's summary report, which was made available to The Jakarta Post on Monday, that the companies' market share had increased to 49.5 percent as of 2002, compared to 42.2 percent in 1999.

Domestic players clinch the remaining market share, or 50.5 percent.

However, many of the joint ventures -- usually carrying the foreign partner's banner -- have not been able to reap profits for some time. According to the report, nine of them have been suffering losses since 1999, while Inbra listed 13 joint venture insurance firms as having suffered losses in 2002.

Allianz Life Indonesia, for example, suffered a loss of Rp 121.8 billion (US$14.32 million) in 2002, while ING Aetna Life Indonesia, which was recently bought by AJ Manulife Indonesia, saw a Rp 83.1 billion loss.

"It's part of the cycle of an insurance company," said Inbra executive director Beni Sindhunata. He said an insurance company would usually see losses for the first seven to eight years.

"The question is how long they can survive," he said.

Another reason for the recurring losses was the high marketing fees charged by agents. "That's why many insurance companies now offer bancassurance," said Beni.

Bancassurance is a term that describes the insurance schemes offered by banks on behalf of insurance companies.

"It is cost-effective and cheaper than agents," said Beni. Banks also benefit from the ensuing fee-based incomes and from expanding their services.