T

he world’s third-largest life insurer, AIA Group, remains optimistic about its business growth in Indonesia, given the still low life insurance penetration in the country at approximately 7 percent.

AIA Group chief executive and president Mark Tucker said Indonesia still offered business opportunities as the largest market in Southeast Asia with 250 million people, a growing GDP and rising disposable income.

“We have seen the business there continue to grow. We have even moved up in market position,” he said on Friday, referring to the company’s subsidiary AIA Financial Indonesia that has become the third-largest insurance company in the country.

Tucker elaborated that in general, with its growing number of middle-income consumers, Asia remained “the sweet spot” for the Hong Kong-based insurance company.

Globally, the middle class is expected to increase from 1.8 billion people in 2009, including 525 million in Asia, to more than 3 billion by 2020. The bulk of this growth is set to come from Asia.

Going forward, Tucker stated, the company would rely on the structural basis of growth, such as the demographic structure of the 18 Asian markets it operates in, as well as savings and the mortality protection gap, which is estimated to hit around US$40 trillion in 2020.

The company predicted that the protection gap would grow to $1.1 trillion in Indonesia. “That gives us enormous opportunities,” he said.

Meanwhile, AIA Group chief strategy and marketing officer Mark Saunders said the insurance penetration rate in Indonesia might increase to 5 percent over the next five to ten years. “I wish it would be immediate, but these things take time,” he said.

The Indonesian Life Insurance Association (AAJI) previously predicted that the life insurance business in the country would increase by up to 20 percent next year under a positive scenario of a robust economy based on a GDP growth expectation of 5.1 percent for next year.

The group has also rolled out a strategy to change people’s perspective on insurance, from merely waiting for the consumer to suffer from disease or death to promoting a healthier lifestyle. That move is also expected to woo consumers, including in Indonesia, who previously had a negative attitude toward the industry.

AIA Group also expressed its interest in investing more in infrastructure development, a segment it deemed to be in alignment with government policies. So far, AIA has $20 billion of its funds invested mostly in corporate bonds issued by construction firms, which also includes investment in several power plant projects.

“On paper, infrastructure investing should be good, matching investment for insurance companies,” AIA Group chief investment officer Mark Konyn said.

The company said that, taking into consideration several key factors, such as the length and yield of investment, it would invest significantly more.

AIA Group has recorded year-on-year growth of 36 percent in annualized new premiums to $3.6 billion from January to August globally. That figure marks a fourfold increase from 2010, thanks to constant double-digit growth over the years.

The insurer’s new business, the projected future profitability of the new policies and is a key gauge for future growth, has increased by 33 percent year-on-year to $1.9 billion over the same period.