Businessman Insurance

As a sole proprietor - you probably got a lot on your plate. You're likely responsible for creating a business plan, running day-to-day operations, strategizing growth, assisting customers, and doing many other tasks. Running a business usually requires long hours and a lot of focused work.

If you weren't around to spin all those plates, your loved ones and business could suffer significant financial hardships. We'll review five reasons you need life insurance  to protect your business and family and the types and amounts to consider.

Types of life insurance for sole proprietor
There are two main types of life insurance: term and permanent. Term policies cost less than permanent but only last for a set period. For instance, you could buy a 10- or 20-year term life policy.

You could purchase an additional term policy or transition to a permanent policy in the future. Permanent policies are more expensive but protect you for your entire life.

Why business owners need life insurance
Here are five reasons you likely need life insurance when you work for yourself.

1. Protecting your family finances. If you have children, a spouse, partner, or aging parents who depend on your income, their finances could suffer significantly without a life insurance benefit. The lump-sum payment to one or more of your beneficiaries would allow them to pay any expenses, such as your funeral, everyday bills, and future goals like going to college or buying a home.

2. Qualifying for a business loan. In many cases, you must have life insurance to qualify for a business loan from a private lender. You typically need a term policy that would cover your loan repayment period. Your lender has significantly less risk when you have a life insurance policy to safeguard your liability.

3. Serving as collateral for a business loan. Life insurance can also serve as collateral for a small business loan. The policy pays off your loan if you die, and the remaining benefit goes to your beneficiaries. You typically need a permanent policy with a cash value that could get assigned to your liability.

4. Protecting your business partner or key man. Life insurance should be a critical part of succession planning if you want your business to continue operating after you're gone. Whether you're a solopreneur or have  key people in your business, such as partners or employees, life insurance helps keep your business running until a successor can take over or your heirs sell the venture.

5. Selling your business share. If you own a business with partners or have key employees, life insurance can be an essential tool for allowing them to buy out your heirs. Instead of your family taking over your business, they could sell your share to one or more successors. The company could continue running without you, and your family would receive a lump sum or structured payout.

How much life insurance is needed
There's no one-size-fits-all answer for the right amount of life insurance you need as an entrepreneur. However, a general rule is to have at least five to ten times your annual income.

If you're using life insurance solely to protect loved ones, consider how much savings you have and what their future expenses may be. For instance, add up costs such as your funeral, mortgages, car loans, childcare, elder care, and the cost of college. Also, consider any business liabilities your estate could be responsible for, including outstanding loans, payments to employees or contractors, lease or mortgage payments, and taxes.

If you purchase life insurance to qualify for a business loan, the coverage amount typically must equal the loan amount. So, if you're taking out a $200,000 loan, your life insurance policy needs to have at least $200,000 worth of coverage.

Also note that you can have multiple life policies. For instance, as your income increases you might purchase additional term policies to layer on extra coverage for your family. You could have a separate permanent policy for your business needs.

ZhongAn Buys Into Bank Aladin

China's online insurer ZhongAn Online P&C is buying a stake in Indonesian tech-based syariah lender Bank Aladin. ZhongAn was co-founded by the chairmen of Alibaba Group, Tencent Holdings and Ping An. The firm is interested in capturing the potential market in South-east Asia's largest economy that still has low insurance penetration. Indonesia's syariah banking is also an underpenetrated market, despite the country being home to the world's largest Muslim population.

Bank Aladin - A joint press statement issued in the afternoon says that ZA Tech, a ZhongAn unit in which Softbank also has a stake, has become Bank Aladin’s strategic partner that will act as an investor and a business partner, and will strengthen the Jakarta-based bank’s ecosystem.

ZhongAn's reported investment plan comes as Indonesia becomes one of the hottest investment destinations in the region. It witnessed record deal value last year, with fresh foreign capital pouring into the country in a wide range of tech-based sectors.

Companies in Indonesia raised a total of US$8.56 billion (S$11.64 billion) through initial public offerings and rights issues in 2021, beating pre-pandemic figures. Indonesia ranked third last year in South-east Asia, trailing behind only Singapore (US$18.48 billion) and Thailand (US$13.61 billion. These figures do not include deals done outside the Indonesia Stock Exchange.

Ribbit Capital - in October last year (2021), US venture capital firm Ribbit Capital, a fintech solution partner of the world's largest retailer Walmart, bought a stake in Jakarta-based Bank Jago  that also counts Singapore sovereign wealth fund GIC as an investor. In March last year, GIC acquired an approximatel 9% stake in the bank for about three trillion rupiah (S$284 million).

ZhongAn  - was established in late 2013, initially catering to Alibaba's online shoppers. It has since expanded to offer other services on various platforms, giving comfort to shoppers who buy merchandise at an unfamiliar store.

In early 2019, ZhongAn and Singapore-based Gab formed a joint venture (JV) to enter the digital insurance distribution market in South-east Asia. The JV created a digital insurance marketplace that offers insurance products through Grab's mobile app.

Syariah Banking - Newly established tech-based lenders in Indonesia are enthusiastically tapping syariah banking in the country, vying for a potential customer base of 45 million. Syariah banking assets in Indonesia represent a mere 6.5 per cent of total banking assets, dwarfed by Malaysia's 29 per cent and Saudi Arabia's 65 per cent.

Syariah banking assets in Indonesia were recorded at 631.58 trillion rupiah at the end of July 2021, according to data from the Indonesian financial service authority.

Bankers say growth has been stymied because syariah banks, unlike conventional banks, are not ubiquitous, with hardly any physical branches or automated teller machines. In a country with more than 100 banks, attention has been focused on conventional banking, with few syariah products and services available.

South-east Asia's largest economy currently has only two tech-based syariah banks, Bank Aladin and Jakarta-based Bank Jago. The latter launched its syariah mobile banking app in February. 

GOpinjam

Touch 'n Go Group (TNG Group) launched micro-loan product, GOpinjam, which charges borrowers interest rates of between 8% and 36% per year. With this addition to its suite of services offered via its Touch 'n Go eWallet, the group is looking more like a digital bank even though it did not put in an application for a digital banking license.

TNG Group does not need to transform into a bank and emphasized that it is comfortable with its position in the e-wallet industry, being the “intermediary” between users and financial institutions.

The rates are designed to cover the cost of the products, which are high risk. Miicro-loans offered via GOpinjam address a market segment which typically relies on unlicensed money lenders, and provide a safer and better alternative to these borrowers.

GoTo IPO

Tokopedia the online-shopping startup that merged with ride-hailing company Gojek to create GoTo, is one of the junior Li’s first major bets in Southeast Asia, a region he’s been targeting to diversify his empire.

Li, 55, started backing the firm in 2017 and sat on its board until 2020. He unsuccessfully tried to combine Tokopedia with one of his blank-check companies before the deal with Gojek came along, giving rise to Indonesia’s biggest tech firm.

Now GoTo has raised US$1.1 billion in one of the world’s largest initial public offerings this year. Based on its pricing, Li’s stake — owned via three vehicles — is worth US$900 million. That would take his net worth to about US$5 billion.

In 2019, his Hong Kong insurer, FWD Group Holdings Ltd, bought a Thai peer for US$3 billion and set up a 15-year life insurance distribution agreement with Vietnam’s largest lender. The following year, he agreed to acquire a 30% minority stake in PT Bank Rakyat Indonesia’s life insurer.

He then teamed up with PayPal Holdings Inc co-founder Peter Thiel to establish a special-purpose acquisition company scouring opportunities in Southeast Asia. The Hong Kong billionaire has since backed three SPACs focusing on the region, two of which have listed. One of them merged with Singaporean online real estate platform PropertyGuru Pte and started trading last month.

Li also owns Southeast Asia’s second-largest streaming service. Viu had more paid subscribers than Netflix Inc in the region last year, trailing only Disney Plus.

By backing GoTo, the Hongkonger joined investors including Softbank Group Corp’s Vision Fund, Alibaba Group Holding Ltd’s Taobao China and Sequoia Capital India. He’s getting one of the biggest individual windfalls from the listing: His stake will be worth more than those of the company’s chief executive officer or its co-founders.

But with the dot-com bubble burst, shares of PCCW Ltd, now its telecom and media business, began to slump. By 2009, the company had lost 99% of its market value, and when Li tried to buy it out a court ruled the plan had been manipulated. In 2005, he sold 20% of it to a state-owned firm now part of the China Unicom Group to cut down on debt after borrowing US$12 billion to fund PCCW’s purchase of Hong Kong’s then dominant phone company, Cable & Wireless HKT Ltd.

The billionaire’s comeback started when he decided to get into the insurance business. He bought some of ING Groep NV’s Asian insurance units in 2012, later creating FWD. The firm is now vying for one of the most anticipated Hong Kong listings this year.

Sun Life Indonesia and CIMB Niaga

Sun Life Indonesia and CIMB Niaga have signed a new agreement expanding their current bancassurance partnership for an additional term of 15 years, starting January 2025.

The new agreement will also enable Sun Life to provide insurance solutions through all channels, combining Sun Life’s comprehensive range of policies with CIMB Niaga’s extensive distribution network of 427 branches across Indonesia. At present, Sun Life’s policies are offered through digital and out-of-branch channels.

This partnership will see Sun Life able to accelerate its long-term strategy for distribution growth through bancassurance. CIMB Niaga, meanwhile, will be able to enhance its value position by providing insurance solutions and addressing customer needs.

Life Insurance Corporation Of India - Lost Market Share

Life Insurance Corporation of India (LIC), which is getting set for its initial public offering (IPO), continues to lose its market share to private insurers such as SBI Life, HDFC Life, ICICI Prudential and Max Life.

The life insurance market in India is highly concentrated with the top five insurers accounting for 87% share in 2020. Although LIC continues to be the leading insurer, its market share has declined from 71.8% in 2016 to 64.2% in 2020. SBI life moved up from being third-largest insurer in 2016 to becoming the second-largest insurer in 2020. Similarly, HDFC Life became the third-largest insurer in 2020, moving up from the fourth position in 2016.

Except for LIC, all the top four life insurers have registered double-digit growth during 2016-20. The gross written premium of LIC grew at a CAGR of 7.6% during 2016-20, whereas SBI Life registered a growth of 24.4% followed by HDFC Life with 18.7%.

Distribution channels - LIC's sales growth has slowed down during the last few years due to its high dependence on the traditional agency-led distribution model. Whereas private insurers have a more diversified distribution network. In 2020, over 94% of LIC’s first-year premiums were generated through agents and insurance advisors, with banking and alternative channels such as corporate agents, brokers and insurance marketing firms (IMF) accounting for 3.4% and direct marketing at 2.2% share.

Bancassurance - However, private insurers that are mostly backed by banks have increasingly adopted the bancassurance channel, which has allowed them to increase sales by leveraging their existing customers. SBI Life generated 56% of its new business from the bancassurance channel followed by agencies with 17% share and other channels at 27%. Similarly, HDFC Life generated 61% share of new business from bancassurance followed by 19% from direct marketing, 13% from agencies, and 7% from brokers and others.

Digital - Additionally, digital initiatives of private insurers to enhance customer service have also provided them an edge over LIC. This includes the ease of onboarding customers and agents through digital solutions, real-time tracking of claims as well as virtual meetings with customers to resolve their queries.

LIC’s market share is expected to continue to decline due to its high dependence on traditional distribution channels and low technology investments as compared to private insurers.