Liga Asuransi – The development of the insurance industry is still interesting to follow. In the second week of October 2023, we summarized seven news related to insurance that you should know.
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Indonesia’s Sandwich Generation: Future Financial Challenges and the Protection Needed
Financial planners project a dramatic increase in sandwich generation in Indonesia, following that 90 percent of Indonesians must be financially prepared for retirement. To overcome this challenge, the sandwich generation is expected to have life insurance as financial protection.
Rista Zwestika, a Financial Planning Expert, highlighted that the surge in the numbers of the sandwich generation is in line with a survey from Prudential, which revealed that 64 percent of Indonesians feel anxious about meeting their future needs.
According to Rista, the sandwich generation is a term that refers to individuals with limited income but who have many dependents or living expenses that must be met. This phenomenon is not only limited to Generation Z but also experienced by the baby boomer generation.
Apart from financial burdens, the sandwich generation also faces psychological hurdles. Therefore, having health insurance is considered necessary. Rista emphasized that the sandwich generation needs to protect themselves with life insurance because the risk of a financial crisis could threaten their income.
Please remember that the amount of insurance premiums must be adjusted to each individual’s financial condition. Rista suggests that having a little insurance contribution is better than having none.
Rista encourages the sandwich generation to see Sharia life insurance as essential to managing financial risk. The presence of life insurance is also considered as one step to overcome the problem of sandwich generation.
Paul S. Kartono, Chief Financial Officer of Prudential Syariah, explained that their company offers the PRRUanugerah Syariah sharia life insurance product, which can help the sandwich generation in preparing inheritance funds, with affordable contributions starting from IDR 500,000 per month.
This article discusses the financial challenges the sandwich generation faces in Indonesia and the importance of life insurance protection to meet their future risks.
Customers of PT Asuransi Jiwa Adisarana Wanaartha (WAL) Fight in Court for Mass Loss Recovery
The class action trial by customers of PT Asuransi Jiwa Adisarana Wanaartha (Wanaartha Life/WAL) began on Wednesday (4/10/2023). As many as 150 of the 504 policyholders who sued were present wearing maroon shirts that read “Flip-flops Pejoeang vs Fugitive 15.9 Trillion” at this inaugural trial. They hope that the court’s decision can help them recover the losses they have experienced.
Customers filed a class action against several parties in this lawsuit, including the Ministry of Finance, the Financial Services Authority (OJK), the Attorney General’s Office, Wanaartha Life, and the Indonesian Life Insurance Association (AAJI). This lawsuit aims to ensure that Wanaartha Life’s default victims can regain their rights.
The General Chair of the Wanaartha Victims Alliance, Johanes Buntoro Fistanio, expressed customers’ hopes that this trial would bring justice and ensure the government’s responsibility towards society. They believe that their insurance purchases are made with guarantees from the government, especially the OJK.
Johanes also noted that even though the OJK approved a liquidation team, customers still needed to receive certainty of payment. With this class action lawsuit, they hope to take an essential role in protecting consumers in the future.
On the other hand, the General Chair and Secretary General of the Indonesian Advocates Association (Peradin), Firman Wijaya, believes that state authorities must be responsible for payment failures in the insurance industry. According to him, insurance products must provide policyholders with guarantees and a sense of security.
Firman also explained that Peradin was also suing the Attorney General’s Office. He said state institutions should have controlled the Wanaartha Life insurance situation better. Firman believes that risk mitigation should have been implemented from the start so that WAL cases do not need to occur.
According to Firman, the state must protect insurance policyholders and the severe impacts experienced by those who have entrusted and invested their money to the state.
The Impact of the Weakening Rupiah on the Insurance Business: Reality and Strategy of PT BNI Life Insurance
Even though the United States (US) Dollar has strengthened in the last few days, it was noted that on Thursday (5/10/2023), the Rupiah weakened and closed at IDR 15,618. This weakening affected various industrial sectors, including the insurance industry. The risks faced include investment volatility in dollars, surrender redemption claims that must be paid by insurance companies, as well as increased claims expenses for dollar-based products.
Even so, Eben Eser Nainggolan, Acting President Director of PT BNI Life Insurance (BNI Life), stated that the impact of the weakening Rupiah against the US Dollar was insignificant in the insurance business. This is due to increasingly smaller US Dollar portfolios in the insurance industry. Eben explained that at BNI Life, they do not have significant exposure or products in US Dollars, and their assets and liabilities are pretty balanced.
Eben emphasized that the portfolio in US Dollars is so tiny that the impact could be more serious. According to him, the strategy to overcome this situation is to invest in US Dollars to meet liability needs. US Dollar-based products offered by BNI Life include Dollar-based unit link products and traditional Dollar-based insurance.
Even though the Rupiah exchange rate against the United States (US) Dollar strengthened slightly, the US Dollar index experienced a slight decline. The majority of currencies in the Asian region strengthened, with the Korean Won, Chinese Yuan, Japanese Yen, Philippine Peso, and Singapore Dollar all strengthening.
Forexindo Berjangka Profit Director Ibrahim Assuaibi explained that private salaries in the US in September 2023 turned out to be lower than expected, indicating that the labor market in the country was experiencing a decline. This has raised doubts about whether the Federal Reserve will raise interest rates again this year, causing US Treasury yields to fall from their highest level in 16 years.
From the domestic side, the government is optimistic that the national economy will continue to grow and become more inclusive, which is expected to improve the welfare of all levels of society.
Zurich Life Increases Insurance Penetration in Indonesia Through Education, Innovation and Accessibility
PT Zurich Topas Life (Zurich Life) revealed that one of the main challenges faced by the insurance industry in Indonesia is the uneven penetration level throughout the country. President Director of Zurich Life, Richard Ferryanto, stated that differences in economic strata between large and small cities and low levels of literacy regarding the importance of insurance are the main factors.
Richard stated that life insurance companies, along with other companies in the industry, continue to make efforts to educate customers. This is done to increase public understanding of insurance products.
Richard revealed that Zurich Life implemented three strategic pillars to overcome this challenge. First, they focus on developing distribution channels, including increasing the number and quality of agents and partners to educate the public about insurance products. Second, Zurich Life continues to innovate in its products to meet growing needs. They conduct research and work closely with regulators to address market needs.
Third, Zurich Life simplifies its insurance products to make them more loved and easily accessible to the public. By implementing these three pillars, Zurich Life is confident it can continue developing the market and serving more customers.
Zurich Life’s Chief Agency Officer, Banie Zulvanshah Alman, revealed that Zurich Life is still focusing on first-tier cities, such as DKI Jakarta, Bandung, and Surabaya, which are metropolitan. However, he also stated that there is a possibility that Zurich Life will expand its business to second-tier cities or areas of rising urbanities through collaboration with various distribution channels, including agents.
Starting from IDR 500,000, Indonesians can prepare inheritance funds and long-term financial planning
PT Prudential Sharia Life Assurance (Prudential Syariah) introduces a new product in the form of traditional Sharia life insurance intended to protect inheritance. Paul S. Kartono, Chief Financial Officer of Prudential Syariah, revealed that this product, called PRUANugerah Syariah, provides the public with the opportunity to get the benefits of established age funds, which can reach up to 100 percent of the total contribution paid at once. This product is valid for life, up to 120 years of age.
Paul explained that with contributions starting from IDR 500,000 per month, PRUAnugerah Syariah is expected to reach more families in Indonesia, helping them prepare for inheritances reaching billions. This contribution is considered affordable to obtain significant protection for families in Indonesia, and Prudential Syariah strives to get as many customers as possible.
PRUAnugerah Syariah products offer several significant benefits. First, the benefits of established age funds are expected to reach 100 percent of the total contribution that will be paid at once. These funds can be used to meet family needs, prepare for retirement, and achieve the desired lifestyle.
Second, this product protects up to age 120, even after established age fund benefits have been paid. Third, there is insurance compensation of up to 150 percent, valid from the start of membership and can be used as an inheritance if the policyholder dies.
Fourth, compensation for death due to accidents can reach 350 percent, especially during the Eid homecoming period and Umrah and Hajj pilgrimages. Fifth, there is an accessible contribution benefit if the participant is diagnosed with one of 60 critical illness conditions by the terms and conditions in the policy.
This product also offers flexibility in payments with payment periods of 5, 10, or 15 years, which can help prepare inheritance funds and long-term financial planning. Apart from that, customers can save up to 50 percent of contributions, and a Waqf service allows part of the insurance compensation benefits to be donated.
PRUAnugerah Syariah is a comprehensive and affordable Sharia life insurance solution for individuals who want to protect their inheritance and achieve long-term financial security.
The Strengthening of the Dollar Exchange Rate Has an Impact, Estimated Increase in Redemption Claims in Life Insurance
The sluggish condition of the rupiah exchange rate against the United States (US) dollar has raised concerns about the possibility of an increase in redemption claims (surrender) at life insurance companies. Great Eastern Life Indonesia’s Finance Director, Fauzi Arfan, revealed that if the rupiah continues to weaken to Rp. 20,000 per dollar could trigger an increase in redemption claims, where policyholders cash in their investments before maturity.
However, Fauzi explained that the weakening of the rupiah did not significantly impact the company itself. The impact is only seen in an increase in redemption claims if the US dollar exchange rate experiences a significant increase. He emphasized that currently, the condition of the rupiah cannot be categorized as necessary, especially when compared with data from December 2022.
Fauzi explained that life insurance companies use year-end closing references, including share prices and currency exchange rates, to evaluate the impact of the weakening rupiah. He also revealed that Great Eastern Life had ensured that their assets and liabilities were matched (asset-liability matching), so currency fluctuations had no impact on the company.
Furthermore, Fauzi explained that the company has ensured that the dollar-based insurance products they sell are correlated with the assets they own to protect policyholders. Therefore, the weakening of the rupiah does not change the company’s strategy.
In the last few days, the rupiah exchange rate has experienced fluctuations and tends to weaken. Even though there are fluctuating movements, in published research, Forexindo Futures Profit Director Ibrahim Assuaibi projects that the rupiah will likely close lagging in the range of IDR 15,600 to IDR 15,650 on the next trading day.
The Secret Behind the Increase in Traditional Insurance Products and the Decline in Unit Links, According to Experts
Experts predict that the trend of increasing traditional insurance products and decreasing investment-linked (PAYDI) or unit-linked insurance products will continue until the end of the year. According to Wahyudin Rahman, a Lecturer Risk Management Practitioner and General Chair of the Indonesian Insurance Writers Community (Kupasi), the decline in purchasing unit-linked products could be caused by the public’s understanding, especially the millennial generation, about the essence of insurance as a means of protection.
Wahyudin revealed that people currently prefer to invest separately because of easy access. They also want control over nominal limits and investment instruments such as money market mutual funds and capital markets and keeping money in banks.
Apart from that, Wahyudin highlighted the domino effect of increasing cases of life insurance defaults in recent years, which has also driven the growth of traditional products. Traditional insurance products have certain guaranteed benefits, so they do not have investment risks like unit link products.
Abitani Taim, Chair of the College of Risk Management and Insurance (STIMRA), added that traditional insurance products are more accessible to the public, and insurance premium payments have a specific time limit. In addition, the redemption value of conventional insurance products is more predictable. Insurance default cases related to unit-linked insurance products and OJK regulations affecting sales of these products also contributed to this trend.
According to the Indonesian Life Insurance Association (AAJI), traditional products have taken over premium income previously dominated by unit-linked products. AAJI noted that insurance industry premiums from traditional products increased 12 percent in the semester I/2023 to IDR 43.67 trillion from IDR 38.97 trillion previously.
Several insurance companies, such as PT Asuransi Allianz Life Indonesia and PT MSIG Life Insurance Indonesia Tbk., recorded a decrease in single premiums as a strategy to increase regular premiums. Although this decline may impact the company’s net profit, it is focused on improving the quality of its long-term business by prioritizing everyday premium products over single premiums.
This article is brought to you by L&G Insurance Broker.
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