Life insurance business expected to forge ahead
JAKARTA (JP): The Indonesian Insurance Council (DAI) predicts that this year's life insurance industry will far exceed 1998's growth, after their survey shows a better than expected growth level during the first half of 1999.
The council's survey on performances of 36 local and joint- venture insurance companies revealed that a sharp rise in new premiums' income and policyholders has contributed to the significant growth in the first half of 1999.
One of the council's executives, Angger P. Yuwono, told a media briefing on Friday "And considering that new business always starts growing during the second semester of a year, we're confident that 1999's premium income would exceed last year's by 50 percent."
Based on the survey, total premium income for the first half of 1999 reached 60 percent of the entire premium income for last year.
"We made, in total, Rp 1.89 trillion (US$ 236 million) in the first half of 1999. Compared with last year's Rp 3.13 trillion total premium income," Anggar said.
The survey disclosed new premium income (premiums of new policyholders) to have reached Rp 1.163 trillion, comprising Rp 1.05 trillion from individual insurances and Rp 113 billion from group insurances.
"What strikes us as surprising, is the fact that from the Rp 1.05 trillion of individual insurances, Rp 776 billion worth of premiums have been paid in full, in advance instead on an installment basis," Angger said, adding that this shows people had large amounts of money available for investment.
However, while new premium growth was impressive in the first half of 1999, income from continued premiums (premiums of old policyholders) during the same period, only constituted 43 percent of total continued premium income in 1998.
Nevertheless, as the second half of the year constitutes a significant growth period in the insurance industry, DAI expected the total income of continued premiums to reach the same amount as in 1998.
DAI also surveyed the growth of new policyholders and registered over 233,000 new participants during the first half of 1999, which now totals 9,242,908 participants.
Meanwhile, claims made during the first half of 1999 dropped from Rp 5.20 trillion to only Rp 1.30 trillion, exceeding the amount of total premium income of only Rp 1.16 trillion during that period.
"What is interesting here is that the amount of claims for cash value dropped from Rp 2.83 trillion last year to only Rp 338 billion," said Angger, who is also vice president of PT Asuransi AIA Indonesia.
Furthermore, investment of life insurance companies during the first half of 1999 also plunged, with only Rp 305 billion compared to Rp 3.11 trillion during 1998.
DAI estimates this drop to have been caused by the decline in investments in U.S. dollar-based assets.
In addition, the decline in time deposit rates and promissory notes made investment in the money market also less attractive than last year, DAI reported.
"We cannot compare this year's investment climate to last year's, when interest rates skyrocketed," Angger said, explaining that Rp 305 billion still constitutes a decent amount of investment.
Angger said that in the future an investment information center should be established to allow insurance companies to boost their investment performance.
He added that policy products could be designed in such way that investment risks could be reduced by having policyholders share the risk through a participating investment policy product.
"Tying interest rates for policyholders to the investment rates earned by insurance companies would reduce the risk of lost," Angger explained. (03)