Life insurance industry manages well amid crisis
Life insurance industry manages well amid crisis
By Tertiani ZB Simanjuntak
JAKARTA (JP): Unlike the country's ailing banking sector, the
life insurance industry has fared well in coping with the
country's economic crisis.
According to the Indonesian Insurance Council, growth of
premium income of the life insurance industry surged by 32.77
percent to Rp 4.86 trillion (about US$648 million) last year
despite the crisis.
The 1998 growth level was below the 38 percent level recorded
in 1996, but it was far higher than the 27 percent in 1997.
The council estimates that the life insurance industry will
fare better this year given the significant increase in the
premium income recorded by major life insurance players in the
first semester of this year.
Several major life insurance companies, mostly foreign joint
ventures, have aggressively launched their latest products to win
a larger slice of the growing market.
Besides introducing new products, they have also opened new
offices to strengthen their marketing network.
PT Asuransi AIA Indonesia, for example, recently launched two
new products offering not only a varying period of premium
payment but also emphasizing the savings aspect of the schemes.
One of the new products is Provider 88. It offers life
insurance coverage, with seven or 21 premium payments until the
policyholder reaches 88 years of age. The other product is ARTA
15, which provides 15 years of life insurance coverage with only
five years of premium payment.
The Indonesian-American insurance joint venture director and
general manager, Mark S. O'Dell, said the products also presented
two benefits, namely an annual bonus and, starting from the
second year of the contract, guaranteed cash value every three
years.
"It's like savings in a bank, but with more benefits," he
added.
AIA expects that its new insurance schemes will contribute
between 35 percent and 45 percent of this year's premium income.
Another joint venture company, PT Zurich Life Insurance
Indonesia, has also recently launched an innovative product
called Zurich Link.
The company said the new scheme, which allows customers to set
their own investment choice and determine the level of their life
insurance protection, would be able to compete with other
insurance companies' products.
Zurich Life president Ronald A. Cheyne said that the new
product offers options for customers to invest in investment
funds set in four currencies: the rupiah, pound sterling, U.S.
dollar and Australian dollar.
Cheyne also said that customers could either put their
investment in several currencies or only one, and could withdraw
either part or all of it at any time.
PT Asuransi Jiwa Bumiputera John Hancock, which entered the
individual life insurance market in December 1994, expanded its
education savings and advice service to boost its market segment.
The company expected that its University Savings Plus would
give a further boost to its future premium income.
Zurich Life marketing head Handojo G. Kusuma also shared the
same optimism that the company's latest product would also
receive a good response from the market and contribute greatly to
the company's premium earnings.
He estimated that the product, targeted at married
professionals, would be able to attract 2,000 policyholders by
the end of this year.
"Amid the tight competition in the life insurance market,
there is still a wide gap for Zurich Life to fill," Handojo said.
Bumiputera John Hancock president David W. Cottrell said that
the company now covered about one percent of the individual
insurance market, but believed it would increase in the future.
"With our expansion strategy, we are targeting to gain 5
percent of the market by 2002," he said, adding his company has
planned to open new branch offices.
Angger P. Yuwono, the head of the life division of the
insurance council said that the increase in the life insurance
market was partly contributed to growing uncertainties in
society.
"Besides, people are turning to life insurance because it also
serves as a good investment alternative," Yuwono said.
Other insurance experts have also said that the social unrest,
which rocked the capital and other parts of the country in May
1997, was one of the factors which contributed to the increase in
new policyholders.
"The May unrest, which left hundreds of people killed, tells
the public how important it is to have insurance coverage," one
analyst said.
The growing insurance market has also lured investors to enter
the insurance industry.
According to the insurance council, at least six life
insurance companies were established in 1998 alone, bringing the
number of insurance companies in the country to 59, including 23
joint ventures.
Yuwono acknowledged that the number of policyholders dropped
slightly to 19.58 million in 1998 from 21.5 million in 1997, but
he believed that the number of policyholders would jump by about
50 percent this year.