Indonesia Life Insurance Association (AAJI) chairman Hendrisman Rahim said the business would increase by up to 20 percent next year under a positive scenario of a robust economy and by 10 percent assuming an economic slowdown.
“It has been shown that in the worst situation, we’ll still see around 10 percent growth,” he said on Friday during a press briefing on the third quarter performance of the life insurance industry.
He pointed to 2013, when the life insurance industry still saw a 5.8 percent year-on-year (yoy) increase in revenue to Rp 113.93 trillion (US$8.5 billion). It even saw growth of 8.6 percent in investment income, despite market turmoil in the first half of that year.
The country’s economy grew by 5.04 percent yoy from January to September this year, Central Statistics Agency (BPS) data show. However, the life insurance industry over the same period booked a 78 percent yoy increase in revenue to Rp 158.65 trillion.
The association said the industry’s outlook was still positive, as the nation’s economy was estimated to grow by 5.1 percent next year.
Hendrisman acknowledged that volatility in the financial markets following Donald Trump’s victory in the US presidential election was likely to pose a challenge to the industry’s investment. Yet he was optimistic that effect would be limited and not harm the industry.
AAJI data reveal that mutual funds investing mostly in the capital and money markets still contribute the lion’s share to the industry’s investment at 32.7 percent. Stocks and government bonds follow at 27.8 percent and 14.8 percent, respectively.
Christine Setyabudhi, AAJI communication and inter-institution division head, said mutual funds would still contribute a bigger portion as they offered higher returns. “There is a shift from deposits [to mutual funds] because, as time goes by, the deposit rate is getting lower,” she said.
In the January to September period, deposits amounted to Rp 49.22 trillion, a 17 percent decrease from Rp 59.54 trillion in the corresponding period last year. Meanwhile, mutual funds contributed Rp 126.24 trillion, a 34.7 percent yoy increase.
As of September, the industry has pocketed Rp 36.45 trillion of investment returns, or 23 percent of the industry’s revenue. This reversed the situation from a year ago, when the industry saw Rp 15.91 trillion in losses from investment.
In the first nine months of this year, new premium income surged by 20 percent to Rp 69.4 trillion yoy, while existing premium income grew by 7.9 percent to Rp 46.6 trillion yoy.
AAJI communication head Nini Sumohandoyo said bancassurance contributed most to premium income at 42 percent. Insurance agents and direct marketing and telemarketing (DMTM) channels followed with 39.8 percent and 18.2 percent, respectively.
Bancassurance is a partnership between a bank and an insurance company to use the lender’s branches to sell insurance products to its clients. Most of them offer single-installment premiums, which contributed around 75 percent of the total premium payments, she explained.
Regardless of that fact that most of the premium income came from bancassurance, Nini said the industry players would keep recruiting insurance agents. The AAJI targets to have around 700,000 certified insurance agents by the end of 2017. As of September, the association recorded a total of 520,281 agents. Nini said the number of insurance agents had grown steadily at around 7 percent a year since 2014.
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