This is the Challenge of the Life Insurance Industry in 2022 Version of AAJI – Finance

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The Indonesian Life Insurance Association (AAJI) stated that there are several challenges that will still be faced by the life premium industry in Indonesia, one of which is related to the penetration of life insurance which until now is still relatively low.

Based on AAJI data, based on 273 million people in total Indonesian population, the average penetration of soul premiums in the last 5 years is only approximately 7.1%.

Another challenge is related to literacy which is still fairly low. Based on a survey conducted by the Financial Services Authority (OJK), the premium literacy rate of the Indonesian people was at 19% in the period 2016-2019.

In addition, this insurance product is still a product that needs to be marketed and is not and is immediately sought after by the people. The marketing is still dominant using exclusive meeting methods.

“So, innovation to find new distribution channels is also our challenge in the future,” said Chairman of the Board of Directors of AAJI Budi Tampubolon at a webinar, Wednesday (23/2).

However, Budi is optimistic that the life insurance contribution industry still has very good prospects this year. He said, the Covid-19 pandemic further heightened people’s awareness of life insurance contribution products, both traditional premium products and unitlinks.

He said, the performance of the soul premium industry this year will be better than the previous year. But it will depend heavily on the development of the Covid-19 problem and the policies that the government will take in the future.

Until September 2021, AAJI noted that the total revenue of the life premium industry reached Rp 171.4 trillion, or 38.7% higher than the same period the previous year of Rp 123.6 trillion.

Total life insurance revenue until the third quarter of 2021 was also better than the level before the Covid-19 pandemic, where in the third quarter of 2019 the total life insurance contribution income was recorded at Rp 166.1 trillion.

“All aspects of income have increased. Especially premium income, has exceeded the income of coverage dues in 2019,” he said.

Meanwhile, the total insurance revenue of the premium industry experienced growth of 11.five% on an annual basis as Rp 149.4 trillion until the end of September 2021. Meanwhile, in the third quarter of 2019, the total revenue of coverage contributions was recorded at Rp 146.4 trillion.

He explained that the growth of insurance revenue until the third quarter of 2021 was contributed the most by the increase in new business insurance by 17.6%, using a total value of Rp 94.2 trillion and continued coverage contributions of 2.4% using a total value of Rp 55.15 trillion.

“This is something that is encouraging, because residents are still looking for life insurance contribution products and those who already have it are still continuing it,” he said.

The amount of growth in coverage dues is supported by the increase in sales in the Bancassurance distribution channel. This distribution channel grew 11.8% or a premium value of Rp 70.3 trillion. Meanwhile, distribution channels that experienced a significant increase were other means of distribution channels, including digital which is getting higher 56.33%.

Meanwhile, the distribution channels that experienced challenges were agency distribution channels which fell by 10.1% as Rp 43.5 trillion according to rp 48.4 trillion in the same period in 2020.

“One of the primary causes according to the decline in the number is due to the restrictive conditions of citizen mobility, which is a challenge for our marketers’ energy to meet privately using prospective customers,” he said.

When viewed from the type of product, insurance products associated with investment (PAYDI) or commonly called unit links are still the main contributor to the premium income of the life insurance contribution industry, with a value of Rp 93.31 trillion, or grow 9% on an annual basis.

Meanwhile, traditional premium products experienced a growth of 15.7% on an annual basis, according to the previous rp 48.4 trillion as Rp 56.04 trillion.

In addition, until the third quarter of 2021, claims and benefits that have been paid to customers of the AAJI member premium company amounted to Rp 107 trillion or decreased by 2.0% based on the previous period of Rp 109.6 trillion.

Meanwhile, the value of the placement of life insurance contributions in the capital market in the form of stocks and mutual funds amounted to Rp 285.6 trillion, while in the form of State Securities (SBN) as much as Rp 98 trillion, out of a total investment of Rp 477.8 trillion.

Furthermore, Budi said, the soul premium industry is committed to increasing premium penetration using maintaining the precautionary principle of marketing & selling products, applying the principles of good corporate governance, improving service quality, increasing efficiency both at the scale of companies and industries, and digitalization.

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