CB Insights recently published an article on insurance indicating that according to data from the OJK, insurance literacy in Indonesia fell from 17.9 per cent in 2013 to 15.8 per cent in 2017.
Overall insurance penetration in the country of 264 m people ranks among the lowest in the world at less than 2 per cent. As such, regulators are encouraging the use of digital channels in insurance and have publicly voiced that “no regulation is needed to regulate insurance marketing through digital means.”
Today, life insurance is the dominant segment in Indonesia and accounts for two-thirds of the sector. Life insurance hit USD 12.6B in premiums in 2016. Non-life insurance is driven by property insurance and motor insurance, with the two accounting for 54 per cent of the general insurance market. Indonesia is second only to India among the fastest growing P&C markets by premium and the fastest growing market for life premiums, according to Munich Re.
Because banks in Indonesia already have existing customer bases, the primary channel for insurance growth in Indonesia has been bancassurance (insurance companies selling products through partnerships with banks). Life premiums through the bancassurance channel grew 74 per cent in 2016 vs. 6 per cent in traditional agencies, according to Oxford Business Group. Recent M&A deals by foreign insurers, including Zurich’s acquisition of Adira Insurance and FWD Group’s acquisition of Commonwealth Bank of Australia’s Indonesian life insurance unit, have included long-term bank distribution partnerships.
In terms of health insurance, more than 130M Indonesians are registered for the country’s Mandatory Health Insurance Scheme, managed by Badan Penyelenggara Jaminan Sosial (BPJS). BPJS covers medical and non-medical benefits but excludes services such as esthetics, orthodontics, infertility treatments, and drug rehabilitation. BPJS has faced some issues, including a growing number of inactive participants and a major deficit.
A number of tech startups operating in the realm of insurance have focused on financial comparison by providing online destinations to buy insurance products from licensed brokers. However, financial comparison startups such as Experian-backed C88 Technologies have largely focused on simpler financial and banking products, according to the article.