Indonesia Life Updates 2015

The value of unit-linked products will likely expand at a faster pace this year although insurers have seen constant declines in the growth of new premiums over the last three years. Indonesian Life Insurance Association (AAJI) communications director Christine Setyabudhi said the association hoped to book growth in the instrument, which combines insurance and investment, by 10 to 15 percent this year.

The target is lower than the 18 to 20 percent growth set for traditional insurance premiums.

Unit-linked new premium expansion has demonstrated a declining trend since 2013. Data from the AAJI showed that the product’s contribution to total life insurance premiums decreased from 46.84 percent in 2013 to 45.84 percent in 2014 and 45.12 percent last year.


Total new premiums reached Rp 57.60 trillion (US$4.31 billion) as of September last year.“Our survey shows that unit-linked holders prefer to buy traditional insurance products after purchasing one to two unit-links,” she said on the sidelines of a seminar on Friday.

However, she said unit-linked development had been overwhelming in the past five years as its premiums dominated total insurance.In 2015, unit-linked products contributed Rp 72.34 trillion, or 56.22 percent, of the insurance industry’s total premium of Rp 128.66 trillion, according to an unaudited report from the AAJI.

In 2014, the instrument reaped Rp 66.53 trillion, or 55.14 percent, of premiums worth Rp 120.65 trillion.The data also showed that unit-linked premiums grew by 8.73 percent year-on-year (yoy) last year.

Christine, who is also the president director and CEO of insurance company BCA Life, said several insurance companies had carried out market expanding measures to invite more people to buy unit-links.“They have tried to open middle and lower markets by offering cheaper monthly premiums, some of them starting as low as Rp 500,000,” she said.

Unit-links tapped just 1.4 percent of the country’s gross domestic product (GDP) last year, up from 1.11 percent in 2014, according to AAJI data.

The penetration rates were lower than those of total life insurance, which reached 3.1 percent of GDP last year.Indonesia Stock Exchange (IDX) evaluation and company monitoring unit head Poltak Hotradero said there was still enough cake for industry players given the low penetration of insurance in the public.

A similar view was expressed by Financial Services Authority (OJK) non-bank financial industry monitoring head M. Ihsanudin. He said life insurance companies could benefit from the positive macro-economic situation to tap deeper into the market.

“Now, we need to increase insurance agents and the public’s financial literacy so that they will share the same optimism,” he said.OJK data showed that the equity of the country’s life insurance industry stood at Rp 71 trillion and its assets were worth more than Rp 330 trillion as of December last year.

The value of the assets constituted 41 percent of Indonesia’s total insurance business assets.

Meanwhile, as much as 29 percent of the insurance industry’s portfolio was dominated by stocks, 24 percent by mutual funds, 17 percent by time deposits and 16 percent by bonds.