Indonesian Insurance Top News End of March 2022

Liga Asuransi – Dear reader, how are you? Today we are at the end of March 2022. Hope that your business runs smoothly and successfully.

Compared to the conditions in 2021, it feels that the current business atmosphere is already much better. Business activity is back to normal. For example, Jakarta is now marked by roads that have begun to be filled with vehicles. Office buildings have begun to crowd and also in malls and cafes, everything already looks like the same atmosphere before COVID-19.

The economic revival is also felt in the Indonesian insurance industry. If in previous months insurance news was dominated by news about the challenges, difficulties, and complaints faced by the insurance industry. Later this month the news has begun to shift to news about opportunities and strategies for taking advantage of business opportunities.

For us as insurance brokers, this certainly gives great expectations. Therefore, we can restore the business to its condition before the COVID-19 outbreak.

Signs of economic revival can also be seen with the increasing number of activities in the construction sector. The projects that have been stalled for so long now have begun to move. Some new projects have already begun to be tendered.

Although there is a new challenge, the impact of the Ukraine vs Russia war, it seems that business is still moving even though the impact will be more widespread, especially in the energy and food sectors.

Well, as usual for this late March edition we have selected four interesting news in the Indonesian insurance sector.

We hope this article is useful to you. If you are interested, please share it with your colleagues so that they also understand like you.

OJK Highlights Business Competition and Capital Issues in the General Insurance Industry

Bisnis.com, JAKARTA

Intense business competition and capital issues in the general insurance industry are a concern of the Financial Services Authority (OJK). 

Director of Insurance Supervision and BPJS Kesehatan OJK Supriyono revealed, competition in the general insurance industry is currently quite tight because there are 71 insurance companies engaged in the same market or business line. 

In business lines that have a high level of competition, price competition between companies becomes inevitable. “In the line of business that is fierce competition they then do competition from the pricing side. 

Even though in this insurance, pricing is something very sensitive, depending on the assumptions built,” Supriyono said in a webinar, Friday (25/3/2022). 

Price competition is feared to make insurance companies unable to bear the risks that are their obligations. “This in the future should be a concern for all of us because the liabilities brought by incoming premiums cannot be ruled out,” he said. 

In addition, the issue of capital in the general insurance industry is also a concern for OJK. Supriyono said, the capital or equity of 71 players in the general insurance industry is still the majority below Rp500 billion, only a few companies have capital above Rp1 trillion. 

Strengthening capital is also a challenge because of the limitations of local financiers and merger options are also not easy to do. Supriyono revealed that the OJK is also trying to do mapping related to this and will later be encouraged by regulation.

“It’s also a homework of how we consolidate. Whether then with us concocting higher capital provisions there will be mergers and acquisitions to then be able to get one stronger business actor, “said Supriyono. 

According to him, to strengthen and maintain the sustainability of the general insurance industry, capital strengthening is needed. Insurance companies need a large capital to be able to innovate more in developing products that suit the needs of the community. In addition, the creation of demand is also needed for the insurance market niche to grow. 

This is so that insurance companies do not only compete in the same line of business. “We must also provide education to all stakeholders, including the government. Now the economy is more driven by the government where state budget spending is very large. So how do we also cooperate with the government for risk mitigation, how our industry can be a risk mitigation vehicle for the government, such as state-owned assets insurance, farmers and fishermen program insurance, microeconomics. That then we need to synergize so that the cake grows, “said Supriyono.

Sun Life Is Said to Soon Reach a US$400 Million Bancassurance Agreement with CIMB in Indonesia 

Bisnis.com, JAKARTA 

Sun Life Financial Inc. It is rumored to have approached an agreement to expand bancassurance partnership in Indonesia with a Malaysian lender, CIMB Group Holdings Bhd. Reported from Bloomberg, Thursday (24/3/2022), according to sources familiar with this, CIMB who owns a 91.5 percent stake in PT Bank CIMB Niaga Tbk., is in talks with Sun Life regarding a bancassurance deal. 

In such partnerships, it is usually an insurance company to pay a certain amount of down payment to sell its products at a bank branch. The source, who declined to be named, said the Sun Life and CIMB deal could be worth about $400 million. 

CIMB is considering renegotiating agreements related to bancassurance partnerships in Indonesia, including with AIA Group Ltd. A source said the expansion of the partnership with Sun Life would take over AIA’s partnership with CIMB. 

Increased partnerships will ensure the existence of Sun Life in Indonesia. This Canadian insurance company has had a bancassurance partnership with CIMB in Indonesia since 2009. Sun Life took over PT CIMB Sun Life in 2016. CIMB and Sun Life are said to be still finalizing the details of the deal and talks are still possible to cancel. 

A Sun Life representative said that Sun Life is actively looking for opportunities to scale. However, he declined to comment further on the matter. CIMB representatives declined to comment on Bloomberg’s questions, while CIMB Niaga Bank representatives did not immediately respond to requests for comment.

OJK: Stop Buying Unitlink Products If You Don’t Understand it!

KONTAN.CO.ID – JAKARTA. 

Customer understanding of unitlink products is indeed one of the highlights when this product causes problems in recent times. Indeed, many judges that the sale of this product is not on target.

Seeing these conditions, in the latest OJK rules related to unitlink rules, it is stipulated that companies are obliged to ensure the suitability of unitlink products purchased and selected finances in accordance with the needs, capabilities, and risk profiles of prospective policyholders.

IKNB Supervisory Chief Executive OJK Riswinandi said that previously it planned to require buyers of unitlink products only who already have a Single Identification Number (SID) assuming they have become investors in the capital market.

However, the plan received a rejection from the perpetrators because it was feared that unitlink sales would be limited. Understandably, the contribution of unitlink premium income based on the latest AAJI (life insurance association of Indonesia) data reached 62.90%.

“Finally we facilitate so that this industry is still growing and it is agreed by finally only making a statement signed by the prospective policyholder that he has understood this product,” he said.

For this reason, Riswinandi reminded that prospective policyholders who apparently do not understand about unitlink products, do not need to be forced to continue purchasing unitlink products.

Furthermore, to ensure that prospective policyholders really understand it, there is a need for a welcome call made by other parties in the insurance industry to check that the marketing process really helps prospective policyholders to understand their products.

“The results of the welcome call activity are also we ask for records. Later it could be in the evaluation, the recording process during sales with a welcome call, in sync or not,”

Meanwhile, Riswinandi also emphasized that this unitlink product should not be equated with savings products. Not without reason, he saw that during this time several agents sold unitlink products with the lure of savings.

“The impression is that insurance products associated with this investment are not only protection but also increase wealth because the explanation is that the return will be better than deposits,” he concluded.

Non-Bank Financial Industry Assets Grew 7.71% in 2021

KONTAN.CO.ID 

The Financial Services Authority (OJK) noted that the total assets owned by the non-bank financial industry (IKNB) were still growing in the past year. Meanwhile, the growth recorded in 2021 reached 7.71% compared to the previous year (yoy).

In value, the total assets of the non-bank financial industry reached Rp 2,839.9 trillion in 2021. The largest contribution still comes from the insurance industry which has a contribution of 34.61%, with a value of Rp 982.82 trillion. Just for your information, this value is up 6.86% yoy.

Furthermore, there is a social insurance sector such as the BPJS program which has a contribution of 22.94% of total assets. In third place, there is a financing institution industry that contributes up to 20.55% with an asset value of Rp 583.51 trillion.

IKNB Supervisory Chief Executive Riswinandi said, although IKNB’s assets still recorded growth, the achievement was still relatively small. According to him, this is due to the current conditions, where the priority of the community is more focused on primary needs first.

“So, if we look at IKNB’s assets, the total growth is still single digits,” Riswinandi said in a media gathering, Saturday (26/3).

When viewed in detail, some industries in the IKNB sector are still recorded to grow. It’s just that the pension fund industry is the only one experiencing a slowdown in asset growth.

It was noted that the assets of the pension fund industry only grew 4.07% yoy with a value of Rp 329.55 trillion in 2021. In fact, in 2020, this industrial asset can record growth of up to 7.12% yoy with an asset value of Rp 316.67 trillion.

Meanwhile, there is also an influence on the number of pension fund players who are also decreasing. Considering, the number of pension funders in December 2021 was 212, which decreased by 7 actors from the previous year.

“For pension funds, most of the founders decided not to manage themselves, so many were also transferred to DPLK,” he said.

In addition, Riswinandi also said that some of the problems that occur in pension funds are related to the founder’s debt. Based on his records, there are still some founders of pension funds who still have debts until before they are dissolved.

“But new shareholders are willing to settle the obligations of the previous founders, the dynamic is like that in the pension fund,” he explained.

Meanwhile, the investment value of the IKNB sector also experienced higher growth than asset growth of 8.53% yoy. The value also reached Rp 1,724 trillion.

This information is presented by 

L&G Insurance Broker – The Smart Insurance Broker