Life insurance business expected to forge ahead
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)