Life insurance: one sure way to plan one's future

Godo Tjahjono, Vice President, Sun Life Financial, Jakarta

Various pictures, mostly unpleasant, are conjured up in your mind when you hear the word "insurance".

This is especially true in the case of Indonesian consumers as the overall perception of insurance in Indonesia is not positive, largely due to the highly aggressive and forceful selling methods by a number of insurance agents as well as the unsatisfactory experience some people infrequently have in dealing with insurance companies.

At the end of 2002, the total number of insured clientele in Indonesia was close to 34 million, covering both corporate and individual customers. About 30 million people own life insurance policies thanks to their employers and the companies' benefit policies, while another four million customers pay for the insurance premiums individually.

In regard to individual customers, the low penetration level or relatively unsuccessful sales is again mostly due to their negative perception or miscomprehension about insurance. Other factors hampering insurance companies is the low awareness among the public concerning the importance of being covered with life insurance and resistance based on some pseudo-cultural factors. Most of the people here are still thinking in the short-term and many are consumptive, in the negative connotation of the word.

Though the country has the world's fourth largest population of more than 210 million, from the current marketing perspective this large number does not necessarily mean real potential. In marketing terms, the market for insurance policies is simply defined as those who have the need as well as the purchasing power, which might be roughly translated as people living in urban areas, in the 25 to 45 age bracket, with a monthly household expenditure of at least one million rupiah and a minimum monthly income of three million rupiah. Another important prerequisite is they should be well-educated.

Based on figures from the Central Statistics Agency combined with those from Media Research for the year 2003, approximately 13 million people nationwide meet the above criteria. For the past five years this number has not grown significantly. As the economic theory goes, it will take a higher annual GDP growth to create more employment to make this segment grow further. With the four million people insured to date -- lower than 20 percent of market penetration -- quantity-wise, at least, there should be optimism for better business for insurance companies.

Sun Life Financial conducted a survey in 2002 among 505 respondents who meet the above criteria in Jakarta and Surabaya. Some interesting and valuable findings came out of the research: Insurance was spontaneously referred to as an appropriate vehicle for long term savings in relation to their uncertainty concerning their financial future. One of the main reasons given for not having a life insurance policy is that they do not know how to get information without being subject to the hard-sell tactics of insurance sales people.

The respondents also said that the principle reasons behind the final decision for an insurance company include the company's good reputation, convenient services and value for money products. However, the research also reveals that in this particular segment, although they do have enough money, about 70 percent of the respondents did not have long-term financial plans.

This research clearly shows that, with a good "educational" campaign, business opportunities are abundant as long as demands in the market can be identified in a more focused way. The other good news is about the improvement in the attitude of most potential customers, who are now willing to learn more about the product, the "rule of the game" and care to measure the credibility of insurance companies during their selection period.

The principle of "Four Cs" -- customer benefit, cost, convenience and communication -- of marketing mix also apply to insurance products. Customers basically purchase the benefit of products or services. However, explaining or communicating in a pleasant-to-the-ear way the benefits of death, as in life insurance products, is a tough job, because to most Indonesians it is an unthinkable, untouchable or super-sensitive subject.

But one can turn it around and talk about the benefits during one's lifetime and focus, instead, on the capabilities of life insurance products in fulfilling the consumers' needs for various financial protection, like long-term saving and even as an investment. This way the entire benefits of life insurance products are expanded in a less gloomy way.

In the matter of life insurance policies, price is rather irrelevant, but value for money is top priority for these mostly highly educated customers. To create better value for money products, insurance companies are well advised to avoid price and compensation war as well as the unhealthy competition in giving customers huge, almost unaffordable, discounts and commissions for agents, because ultimately all these will be more costly to the companies compared with the revenues from the premiums, especially in the first year.

Convenience here also includes a kind of "after-sales" service, which means that insurance companies should be more open and transparent in their information. They must leave the long- gone days of short-term sales-oriented tactics that bring the undurable happiness of a successful transaction. Rather, becoming more marketing-oriented and aiming for long-term successes by maintaining customer loyalty plus striving to provide more and more value for money products would eventually be more fruitful.

In today's era of hypercommunications, strangely enough, a number of insurance companies, especially those dealing in life insurance policies, still talk in a rather heavy, serious or even frightening tone. They should realize that painting pictures of a bright future, like a pleasant retirement, golden and not old years, best education for children and less uncertainty and so forth are more melodious and, finally, selling.

The communication theme created by Sun Life Financial -- called "Plan Your Future" --, for example, is more relevant and works better. The concept of life insurance is revamped. It is not to protect your life, but one's financial goal. So, for instance, life insurance will ensure that whatever happens to the parents, funds for the education of children will be available in a number of years from the start of a policy. Hence, one of the important financial goals is protected and a real sense of security is provided.

An important part of a long-term financial plan, life insurance products combined with mutual funds can provide a highly competitive investment return. In view of the safe-and- secure returns of life insurance policies for a wide range of benefits, including maintaining your standard of living during your less productive years later in life, this type of investment should be given a serious thought. Not next year, but, preferably, today.