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.