Life insurance industry posts impressive numbers
JAKARTA (JP): The life insurance industry in Indonesia recovered at an impressive rate this year with most indicators for the first three quarters already exceeding those recorded for the entire 12 months of 1999.
The Indonesian Insurance Council (DAI) said on Thursday that total returns on investment for the industry reached Rp 1.08 trillion (US$113 million) between January and September, compared to Rp 868 billion for all of 1999.
Total income from insurance premiums reached Rp 5.30 trillion for the nine-month period compared to Rp 5.38 trillion in all of 1999, according to a survey by the council.
The industry invested a total of Rp 12.89 trillion in the first nine months, up from Rp 9.86 trillion for the year 1999.
The industry paid out Rp 3.19 trillion in claims in the first three quarters, close to the Rp 3.31 trillion paid out in 1999.
"The industry is back to normal after a prolonged economic crisis. It is now in good health," Tridjoko Santoso, head of the council's information and promotion department, said at a news conference on Thursday.
The survey was based on returns from 49 life insurance companies, including 22 foreign joint-ventures.
Tridjoko however admitted that the industry was still well below the level reached in 1998, the year the Asian financial crisis hit the Indonesian insurance industry.
In 1998, the life insurance industry however still recorded an impressive total return on investment of Rp 4.03 trillion, due mainly to the high deposit rates -- reaching over 70 percent at one time -- as the government fought to sustain the rupiah exchange rate.
The industry's return on investment however plunged to Rp 868 billion in 1999 along with the drastic fall in deposit rates and the decline in investment in U.S. dollar-based assets.
Tridjoko predicted that the recovery process will accelerate in the last quarter of 2000 and into next year with the increasing competition within the industry.
"I think premium income will increase by 35 or even 40 percent in the fourth quarter, from an average of 25 percent in the first and second quarters," he said.
At the end of September, the ratio of insurance participation is 7.55 percent of Indonesia's population of about 210 million.
"That number is very small compared to Singapore or Malaysia. The number of insured people in Singapore has reached around 70 percent of the total population," Tridjoko said.
But this is all the more reason why foreign insurance companies were vying for the Indonesian market, he said, noting the growing number of multinational life insurance companies operating in the country.
The arrival of these multinational companies, which are usually backed with strong assets, solid management and a corporate culture could pose a serious challenge to the Indonesian life insurance companies, he said.
He proposed that local insurance companies adopt the management concepts and corporate cultures employed by the large foreign companies.
"We have to learn from them if we want to survive the competition," he said.
Tridjoko also predicted that competition will become more fierce in 2003 when the free trade agreement within the Association of Southeast Asian Nations (ASEAN) comes into force. (03)