Life Insurance Indonesia Updates

The life insurance industry expects to book at least 20 percent growth in total revenue this year despite macro economic challenges including the rupiah’s depreciation.The target is lower than last year’s growth of 33 percent to Rp 167.76 trillion (US$12.85 billion) from Rp 125.82 trillion in 2013, according to the Indonesian Life Insurance Association (AAJI) report.

“We are optimistic about our target because the life insurance industry remains solid despite the rupiah depreciation and a slow economy. An average growth between 20 percent and 30 percent is good enough for us,” AAJI chairman Hendrisman Rahim said on Thursday.

He added that the life insurance industry had been majorly affected by the weakening of the rupiah against the US dollar and predicted that the rupiah would strengthen in the first half of this year.According to the AAJI’s latest assessment, Hendrisman said, the domestic life insurance industry would suffer only if the rupiah fell to 16,000-17,000 per US dollar.

“We have conducted a stress-test simulation that shows that a rupiah between 16,000 and 17,000 per US dollar would start to affect our liability ratio,” Hendrisman said.In addition, Hendrisman said, the Financial Services Authority (OJK) planned to merge state-owned reinsurer PT Reasuransi Internasional Indonesia (Reindo) with PT ASEI Reasuransi Indonesia to create Indonesia Re, a local and more powerful reinsurance company, as part of its efforts to retain dollars in the domestic market.

Given Indonesia’s relatively small reinsurance business, the domestic insurance industry, especially general insurance, routinely pays out large sums of dollars for overseas reinsurance.“The reinsurance merger plan will help Indonesia reduce forex outflows and the current-account deficit.

Usually, Indonesian insurance companies pay for reinsurance in the fifth month or May, so we can expect to see a boost to the rupiah soon,” Hendrisman said.Indonesia’s current-account deficit narrowed to 2.95 percent of gross domestic product (GDP) last year from 3.18 percent the previous year. Previously, the size of Indonesia’s current-account deficit has reached 4 percent of GDP, which has worried investors and put pressure on the rupiah.

The rupiah, along with other emerging-market currencies, has been under selling pressure because of increased demand for dollars amid better conditions in the world’s largest economy, with US central bank the Federal Reserve expected to raise interest rates mid-year.

The rupiah was trading at 13,008 per dollar on Thursday, strengthened from 13,164 per dollar a day earlier, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).Meanwhile, the World Bank has forecast that Indonesia’s economy will grow by only 5.2 percent in 2015, lower than President Joko “Jokowi” Widodo’s target of 5.7 percent.Despite economic slowdown, Indonesia’s life insurance industry still managed to post a skyrocketing 458.2 percent growth in investment returns to Rp 40.84 trillion last year, from Rp 7.32 trillion.Hendrisman said the huge jump was prompted by the industry’s strategy to buy stocks when Indonesia’s stock market slumped in 2013, reaping the results when it rebounded in 2014.

“We are expecting investment returns to grow between 20 and 30 percent further this year, especially on the back of stocks and mutual funds,” he explained. - See more at: http://www.thejakartapost.com/news/2015/03/20/life-insurance-eyes-stable-growth.html#sthash.eKrZuKg1.dpuf

Do You Need Life Insurance

If you are like many other people, you'll spend plenty of time worrying about whether you are saving enough for retirement and give relatively little thought to the issue of life insurance.

Life insurance often gets short shrift, partly because many people come at it with preconceived ideas, and that, according to advisors, results in some fairly common mistakes. Very often, people buy life insurance right after they get married or have their first child and don't give it another thought until their policies are set to expire.

One of the most common mistakes people make with regard to life insurance is assuming that their lives aren't going to change, and so they plan for a short time horizon on the insurance front. By midlife, many people are in the throes of raising children and paying off mortgages and may want higher levels of coverage but have difficulty getting it. Sometimes as we get older, we lose our insurability because we are no longer as healthy or we can only get the coverage we want at an exorbitant price.

The first issue to consider when it comes to life insurance is whether you need it at all. The answer to that question hinges in large part on whether your death would create a financial hardship for a surviving spouse and any children in terms of lost income.

If someone else depends on your stream of income, then it makes sense to consider life insurance.
One of the biggest mistakes some married couples make is insuring one partner, the primary breadwinner, and not the spouse who has stepped back from his or her career to take care of children. That can be a costly mistake if the stay-at-home parent dies, advisors say. Among other issues, the surviving parent may face much higher child-care expenses.

How To

So you've decided to buy life insurance. What now? The next step, advisors say, is to determine how much of a death benefit you really need. The death benefit is the amount that an insurer pays out to the designated beneficiaries of a policy if the owner of the policy dies.

Some advisors undertake an exhaustive needs-based analysis that takes a number of factors into account, such as how much it would take to pay off mortgages, send kids to college and replace lost income.

Those in the market for life insurance should also consider how long they'll need coverage, which will help them determine what type of policy to buy. Life insurance comes in two forms, term or permanent, although some policies are a combination of the two.

Term insurance provides coverage for a specific period of time, and the premiums are typically fixed during that period. Many experts say term insurance is the right choice for most people because you buy coverage for only as long as you need it, although that involves some guesswork.

"Change in health status is one of the more common reasons why someone would come to us and say, 'I think I need to change my short-term coverage to long-term coverage. We are going to look at what they have right now in terms of life insurance and what options their policies offers them in terms of conversion" to different types of policies or longer-term policies.

Permanent insurance includes universal and whole life. As the name implies, permanent insurance provides lifetime coverage. Often such policies build a cash value that their owners can access before death through loans or withdraws, much like tapping the equity in your home.

Not surprisingly, permanent insurance will typically end up costing you more than term insurance. It can also be complex and thus confusing to many consumers. What's more, some critics of permanent insurance argue that even policies that accumulate a cash value may represent mediocre long-term investments as compared to other options, such as mutual funds.   

Lee Kuan Yew - The Greatest

Passed away March 23, 2015

Lee Kuan Yew became Singapore's first prime minister in 1959 and held onto power for over three decades, overseeing the island's transformation from a port city battling crime and poverty into one of Asia's most prosperous nations.

Kuan Yew, a British-educated lawyer, is widely credited with building Singapore into one of the world's wealthiest nations on a per capita basis with a strong, pervasive role for the state and little patience for dissent.

Kuan Yew co-founded the People's Action Party (PAP), which has ruled Singapore since 1959 and led the newly born country when it was separated from Malaysia in 1965.

“I ignore polling as a method of government. I think that shows a certain weakness of mind - an inability to chart a course whichever way the wind blows, whichever way the media encourages the people to go, you follow. If you can't force or are unwilling to force your people to follow you, with or without threats, you are not a leader.” – Lee Kuan Yew.

Medical Premium Up Up Up

An insurance company has sent a letter to inform me of the 30% increment in the medical insurance that I have bought for more than 10 years. This will mean a RM350 increase bringing the total to RM2,000+. On top of that I have to pay GST of 6% which will amount to RM120+.

I am a retiree and I am not a civil servant. I am neither poor nor rich. I am not entitled to aid for the poor except for BR1M of RM350 this year and I am not surrounded by maids or live a life of luxury. I have contributed to the Malaysian economy and to the Inland Revenue Board. Today, I have to rely on my hard earned savings which is diminishing before my eyes. I will have to pay a lot more for my other insurances and necessary consumption. Who can I turn to?

It is very distressing to note that healthcare and a lot of medications are not GST zero rated. Those drugs that are GST exempted are few as many are replicated from the same molecule. Aging is bad enough and to fork out more money for necessary medication is terrible. Please exempt healthcare medicine from GST.

The prime minister said that healthcare in Malaysia is one of the cheapest in the world. Our income is also one of the lowest in the world. EPF had recently announced that 80% of contributors who retire today have savings below the poverty line. The ringgit weakness and the cost of living are a concern for most Malaysians.

It is sad and painful to hear of billions of ringgit lost in government projects and wastages when the rakyat have to pay more taxes. I see this as the tip of the iceberg as our quality of life declines further. Is there a solution?

Letter from a Retiree

Life Insurance 2014 Updated

 
Malaysia’s life insurance industry recorded a 6.9% growth in insurance protection to RM1.17 trillion for all policies combined in 2014, its industry body said on Friday. The Life Insurance Association of Malaysia (LIAM) said the amount was 6.9% higher than the RM1.09 trillion in 2013.

 

Sum Assured

“The sum assured per capita in 2014 has also recorded an increase to RM38,449 from RM36,387 in 2013,” it said. LIAM president Vincent Kwo said the healthy performance of the life insurance industry reflected the people’s rising awareness on the importance of insurance protection. 

 

Malaysia’s life insurance industry provided insurance protection to 12.4 million lives (counting lives with multiple policies as separate lives) in 2014, an increase of 148,574 when compared with year 2013. Kwo said the increase in the number of lives covered by life insurance and higher sum assured protection reflected a higher level of financial literacy among Malaysians. 

Protection Gap

However, based on the Protection Gap Study undertaken by University Kebangsaan Malaysia and LIAM in 2013, there is still a huge protection gap for families with life insurance. 

 

“On average, the gap ranges from RM100,000 to RM150,000. This means that the average sum assured of RM38,449 is still way below the amount needed to support one family member in the event of the death or disability of the breadwinner,” said Kwo. 

Penetration Rate

He added the current penetration rate, as at 54%, was considered low as the government’s plan was that 75% of Malaysians be insured by 2020. There is a need to develop suitable insurance products to meet the different life stage needs of customers and introduce new delivery channels to reach out to the remainder 50%, of which a high percentage of the population could be concentrated in the rural areas. 

“Additionally, insurers could also leverage on their existing customer base for upselling or cross-selling initiatives given that even among those who have insurance coverage, in most cases they were not adequate,” he added. 

Growth

Based on preliminary figures, the life insurance industry in Malaysia grew by 5.5% in 2014, as measured by new business annual premium equivalent (APE).  APE comprises of the 10% single premium and 100% annualised premium. New business total APE in 2014 was RM4.71bil as compared with RM4.47bil in 2013. 

As for group insurance business, it recorded a 5.1% growth. In terms of individual business, investment-linked policies continued to outpace traditional policies with the former growing at 11.1% compared with the latter which shrunk by 1.6%. On total new premium basis, the industry grew 9.3% in 2014, with total premium volume recording RM8.95bil.

 

The total premium for in-force policies grew moderately at 5.8% in 2014 for individual and group policies combined. The life insurance industry also registered an increase of 21.3% in claims payouts amounting to over RM8.4 billion as compared with RM6.9 billion in 2013.

Claims

The high growth in claims payouts was contributed mainly by higher medical claims and bonus payments to policyholders. Medical claims increase was contributed mainly by strong growth in medical insurance business in recent years and partly by medical inflation. 

Increase in bonus payments was mainly due to the increased popularity of the cash bonus type of policies in recent years. The increase in death claims meanwhile was moderate at 7.6% in line with the increase in in-force sum assured 

Commenting on the outlook for 2015, Kwo said the economy’s strong fundamentals would continue to underpin the life insurance industry with expectations of a robust strong single digit growth.

EPF Updated 2015

Nearly 80% of workers who will turn 55 this year will not have enough savings in their Employees Provident Fund (EPF) to live above the poverty line, according to figures released by the fund’s chief executive officer.

Datuk Shahril Ridza Ridzuan said for the next 20 years, the workers would not have enough in total EPF savings to enable them to live on RM800 a month, which is close to Malaysia’s average poverty line income of RM830. This is because most of them had low wages when they started contributing to the fund in 1980s, and continued earning relatively low salaries till they turned 55, said Shahril, who did not provide a number for this batch of retirees.

The revelation shines the spotlight on the problem of low incomes among a majority of Malaysian workers, even as Putrajaya said it aims to make Malaysia a high income nation in five years’ time. According to Shahril, more than 75% of its 14 million EPF contributors earn less than RM2,000 a month.

About 15% earn between RM2,000 and RM5,000 a month, while those earning more than RM5,000 are in the top 10%. The EPF has set RM196,800 as a savings threshold that would allow a contributor to spend at least RM800 a month for the next 20 years. The threshold is revised every three years to take into account inflation.

Only about 20% of its contributors who turn 55 this year are expected to have RM196,800 in total savings. That percentage is likely to stay about the same in the coming years, said Shahril.

“Historically, we have a low wage environment, so that percentage has inched up only a little. “This is why we tell contributors not to take out their savings till they are 60, when they really retire. “That extra five years can earn them an extra 40% through compound interest,” Shahril said when met after a talk organised by the Chevening Alumni Association in Kuala Lumpur last night.

These figures, he said, reflect the new reality of working life in Malaysia, as people will have to work beyond 55 in order to save enough to live out the rest of their lives. “This is the trend in developed countries and we are getting there. The reality is that you cannot retire and enjoy yourself at 55 any longer.”

 That age was set in the 1950s and has not been changed to take into account longer life expectancies, he said, adding that these days, people expect to live through their 70s. This trend is compounded by the fact that Malaysia is a rapidly ageing nation. In 2030, 17% of the population will be aged above 65, he said.

In 2040, people aged 65 will outnumber younger individuals. “So we need policies to deal with this, such as financial literacy training so that young people are aware of the need to save for retirement and how to integrate old workers into the market.

 “These are issues that advanced economies have to deal with and we are getting there,” said Shahril.

Health Insurance

In Malaysia - health insurance is not that big a deal, especially when it comes to women. You either have a cover from your job that pays a certain percentage of your expenses - maternity included - or you share a plan with your family members and not really look into too many details. And you really can't be blamed either.

Life insurance takes more importance over health any day and a glance through a regular 20-something woman's investment portfolio will show a huge chunk of her savings going into life insurance with health as only a secondary option. The reason? We pretty much think that we are never going to fall sick, ever!

It's surprising that we have this lackluster attitude towards health when we are probably the ones who need it the most. Just pause and reflect on your daily routine. You are a homemaker in the morning, probably getting your kid ready for school while cooking a meal for the family and also rushing to finishing off your daily commitments. The stress continues as you deal with a job, family, household chores and unexpected emergencies. Quality me-time, if any, comes in the form of toilet breaks. Phew! With so many parts to play, it's almost imperative for you to take care of your health. Here are five reasons your health needs a plan:

You can't predict your health: You may be healthy now, but tomorrow can be a different story. Even if you lead a healthy lifestyle, dealing with uncertain emergencies and stress are a part of our daily routine. Events such as accidents can affect you, regardless of your age, and the expenses will continue till the time you are cured completely. Make sure you have a fall back option to manage such unforeseen medical expenses and their impact.

The best laid plans can go awry: A critical illness can let your financial goals go for a toss. Uncovered medical expenses have to be paid off with funds earmarked for buying a new house or taking an international vacation. If you are the sole earning member in the family, you might find yourself in the middle of medical debt.

You need a wholesome cover: During a critical illness, you not just incur medical expenses but you might have to think of pending bills.  This is where your health insurance comes in. Life and Health insurance covers your expenses for the medical treatment and also gives you the liberty to use the compensation amount as per your own discretion. Also the premium that you pay towards your health insurance is eligible for tax deduction.

You might not have the money: As per a Forbes article, for every Ringgit you spend for medical treatment, RM0.70 goes in buying drugs. With the addition of good quality private hospitals, treatment charges have shot through the roof. The improvement in technology and services has pushed up the medical cost. With everything from medical costs to doctors' bills on the rise, it is better to have a separate health cover that deals with your expenses.

Lifestyle changes have an adverse effect: Over the last 10 years, there has been a marked change in the lifestyles and eating habits of people. Add to it long working hours, late night parties and smartphone addiction and we have a host of newer medical problems to deal with. It is advisable to have a good cover that takes care of all your medical bills while you recover from the illness, rather than worry about cash.