The Jakarta Post
While insurance penetration in general remains low, microinsurance has seen significant growth as more banks partner with insurance firms to offer microinsurance products to low-income earners.
The national survey on financial literacy conducted by the Financial Services Authority (OJK) last year shows that only 17.84 percent or 18 out of 100 people in Indonesia were considered financially literate in terms of the benefits of insurance.
The survey revealed that only 12 out of 100 Indonesians use insurance products and services.
The Insurance Council of Indonesia (DAI) chairman Hendrisman Rahim said that based on the survey, DAI is committed to educating and disseminating the benefits of insurance to the public by working closely with OJK.
'The low penetration level of insurance in Indonesia shows that many Indonesians still don't realize the importance of insurance and financial planning,' Hendrisman told kompas.com, in conjunction with the commemoration of the 9th Insurance Day in mid-October.
The committee chair of Insurance Day 2014, Harry Purwanto, explained the year's theme is 'Savvy Insurance Generation'.
'The reason we picked this theme is to raise awareness among as many Indonesians as possible of insurance products and services. We want to teach people to be smart in choosing the best insurance product according to their needs,' said Harry.
He said the council has launched various activities to educate the public.
Director of Setting, Research and Development of non-bank finance industries from OJK, Yusman, acknowledged the important part played by the insurance industry.
'Insurance is an important component in improving the people's welfare. It also helps people plan their finances and build their financial readiness.'
The great but untapped potentials for insurance policy have prompted several banks to team up with insurance companies to target mid-level, micro segments.
Bank Mandiri, for instance, launched micro services for low- to middle-income populations. One of the products allows people to have an insurance policy with an insurance premium as low as Rp 50,000 (US$4.10). This insurance plan is part of the bank's products called Mikro Mandiri Sejahtera.
The service enables customers to purchase various financial products in one transaction. Aside from the ease of opening an insurance policy, this product also eases the procedure for opening a savings account and investing. The services include microinsurance, tabungan MU savings account products, cicil emas (gold purchasing scheme using installment plans) and micro mutual funds.
'These are not new products, they are services. Microinsurance with an insurance premium of Rp 50,000 or less is already available in the market. There are no new products. They are existing ones but the features accommodate the micro segments,' explained Bank Mandiri micro and retail banking director Hery Gunardi.
These financial products are the fruits of the cooperation between Bank Mandiri and subsidiaries, such as AXA Mandiri Financial Service, Mandiri AXA General Insurance, Mandiri Manajemen Investasi and Bank Syariah Mandiri.
Meanwhile, another state-owned bank, PT Bank Rakyat Indonesia Tbk (BRI) has launched its own microinsurance product for low-income people. The company said the insurance products offer a complete protection package and are quick in settling the compensation payment.
'BRI is building synergy with PT Bringin Jiwa Sejahtera (Bringin Life) as the head of the consortium, PT Asuransi Bringin Sejahtera Artamakmur (BSAM). BSAM and PT AJ Jiwasraya launched microinsurance against accidents and sickness, as well as life insurance,' said BRI corporate secretary Budi Satria.
'The micro insurance products will be targeted to all of Bank BRI micro customers and the general public.'
Benefits customers can expect from the product include daily inpatient benefits of Rp 100,000 per day for a maximum of 90 days within one year and benefits for surgery up to a maximum of Rp 2.5 million per year. There is also an accidental death benefit of Rp 19.5 million, a death benefit due to illness (non-accident) of Rp 2.5 million and an accident-related permanent disability benefit of Rp 5 million.
With a premium of Rp 50,000 per year, these benefits are for the bank customers to receive. One leading point of BRI's microinsurance program is that the customer's spouse can also be included in the program with the total premium of Rp 90,000 per year for both husband and wife.
'Another leading benefit is double claim; the customers can still get the benefits of BRI's microinsurance even though they have another insurance policy or Social Security Management Agency (BPJS). In the claiming process, BRI also makes it easy for customers as they need only to attach the original payment receipt or a copy which has been certified by the hospital, clinic, public health center or licensed practice from the Ministry of Health,' explained Budi.
Growth of microinsurance
Deputy commissioner of non-bank finance industry (IKNB), Dumoly Freddy Pardede, reported significant growth in micro finance products. Currently, 27 companies offer microinsurance products. Thirteen of these companies are specifically focused on life insurance and 14 are risk insurance companies.
'The products on offer are individual accident insurance, death benefit insurance, credit life, health insurance and fire insurance. There are 5,825,513 people in these programs and we expect more people to join,' said Dumoly.
The total microinsurance premium reached Rp 1.22 trillion as of June 2014 and the claim reached Rp 71.56 billion. A product which is popular, he said is Si Peci or Love-Filled Insurance. The product offers benefits in the event of the death of the policy holder in the form of burial preparation, including a Muslim shroud for the deceased and ambulance transport.
Another microinsurance product is called Warisanku. 'And there is also Rumahku Mungil mortgage insurance. The sharia microinsurance product, Sibijak, provides benefit for burial,' said Dumoly.
Unlicensed insurance agent
However, amid the strong growth of microinsurance products, OJK also notes that more than 100,000 marketing agents, either life or general insurance agents, have yet to equip themselves with professional certification.
Data at OJK has shown that there are 267 agent companies, 200 of which are licensed while the rest are not. There are 329,142 certified agents, and 106,463 agents have yet to get their licenses.
The unlicensed insurance agents reached around 24 percent of the total number of life and general insurance agents which numbers 435,605 people.
To anticipate the implementation of insurance laws which are still in draft and to better protect the customers, OJK is compiling the database of individual insurance agents, according to Dumoly.
'Related to the big number of unlicensed agents, we have coordinated with the related associations to speed up the certification process. We can do this by increasing the frequency of agent certification examination, including that in the regions,' he told kompas.com.
Dumoly added that OJK has also asked the associations and industry stakeholders to reduce the cost of agent certification and improve the distribution of the materials for the examination by making use of the Internet.
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