Ace Ina going retail, looking to crack top 5 insurance firms

The Jakarta Post , Jakarta | Mon, 07/09/2007 11:07 AM | Business

The Jakarta Post, Jakarta

Already well-known as a top insurance provider for corporations, Ace Ina Indonesia is now investing heavily to reach out to the country's retail customers.

Currently ranked outside the top 10 insurance companies, Ace expects its new market segment, which also includes small and medium enterprises (SMEs), to help it break into the top five within the next five years.

It is an ambitious target, particularly given the tight competition in the industry, as Ace Ina Insurance president director Peter Phelan acknowledged, although he was quick to add that it was not unrealistic.

He talked recently with The Jakarta Post's Dadan Wijaksana to share his views of his company's business plan, as well as the insurance industry as a whole. The following are excerpts:

Question: Ace Ina Indonesia is now reaching out to retail customers. Can you elaborate more on this? Answer: Reflecting the Ace Group's strategy worldwide, also in the Asia Pacific where we have had enormous success in that, we are now also targeting what you might call ordinary insurance customers. It's not the super-rich or rich people, just ordinary people, working people on average salaries. How do you define ordinary?

It's the people who earn maybe between Rp 2 and Rp 6 million a month. These people have insurance needs, as they have assets, they have families, but most people in that target segment in Indonesia -- we know this from market surveys, they do not have insurance coverage.

So, ordinary people are the ones who earn ordinary salaries, and the market segment is indeed large here as a very large portion of the population is within that segment. That's what we are currently aiming at. How do you do that?

The biggest problem with that group or market segment here in Indonesia is accessing it. Because if the premiums are lower they are less attractive in terms of distribution channels and commissions.

For instance, a broker or an agent will not find those customers so interesting because the premiums may be just a few dollars. It does not make it commercially viable for an agent or broker to target those customers.

So, one good way to target them is through telemarketing, where you can have a high volume of sale calls to a large volume of mass customers. We can offer them, relatively quickly over the phone, small amounts of covers -- which actually makes a meaningful difference to their lives. So you now have a telemarketing team in place?

Yes, we have a telemarketing team here. It's small but is growing and it'll continue to grow. To keep a telemarketing team growing you have to also grow your database of people you can call.

So as we grow our database of people, telemarketing increases as well. Certainly, for example in Korea and Thailand, where we have very similar organizations to this one, the telemarketing team, or telemarketers, is in hundreds. So, we'll look to increase it as we grow our database.

Now the telemarketing team is four times the size when I joined the company, which was in September 2006. I'd like to make it a substantial contributor in terms of our distribution, but it will always be driven by our access to a database, which means we're working with partners who have access to that database, such as banks and retailers. Back to retail customers. What is your company offering to them?

The covers which we're looking to offer to that segment would cover the basic risks, to make sure that if the worst happens, something is there to help them. These are the kind of risks we're looking at for that market segment.

Interestingly, people in that market segment -- like their counterparts in Europe or in America, they are the ones who are most likely to be affected quickly if their circumstances change. They do not have savings, the do not have large bank accounts to fall back on to help them.

If the worst happens, then very quickly they will fall into real trouble. So, to have an insurance cover is actually valuable to them. What are the proportions of income currently at Ace Indonesia?

Approximately 75 percent of our business comes from the corporate and the other 25 percent from the retail business. Over the next five years, I'd like to see a change in that balance. Within five years, we want 60 percent of our income coming from the retail sector, while the remaining 40 percent from large companies. By then you expect your company to have broken into the top five largest insurers?

We are currently still outside the top 10, but yes, that's already in our plan that in the next five years, we'll break into the top five. How do you see your company and the industry as a whole performing this year?

On the non-life insurance side, there is downward pressure on the rates, which is having an impact on the growth of the companies, so I'd say 10 percent to 20 percent growth would be the average for the market this year.

But for Ace, we're looking at growth of around somewhere between 30 percent to 40 percent as we're implementing aggressive strategies to secure different distribution channels and products.

We have experiences with that in other counties, which leads us to believe that 40 percent growth is a realistic target. In fact, last year we grew by 40 percent in terms of premium income over the previous year. So, this year's target is not really unrealistic.

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