Menu
EASY WAYS TO LEARN TECH

Life Insurance Companies Start to Boost Cheap Products and Mini Premiums

  • Share

The life insurance industry is in a trend of starting to boost the penetration of products with a small premium nominal, in order to reach a wider segment of society.

Chairman of the Board of Management of the Indonesian Life Insurance Association (AAJI) Budi Tampubolon explained that this phenomenon was reflected in the accumulated performance of 58 life insurance companies during the first semester of 2022, where the number of policies and the insured grew rapidly, but premium income fell.

“In the past, it was possible to target a certain segment of society with a small number but a large premium, now it seems that it is more widely targeted,” he said when met in a limited discussion with the media, quoted on Wednesday (7/9/2022).

For information, the number of insureds in the life insurance industry as of June 2022 grew 19.1 percent (year-on-year/yoy) to 73.9 million people. The number of policies continues to increase, currently being 21.9 million policies or growing 10.8 percent yoy.

However, premium income in semester I/2022 experienced a slowdown by 8.9 percent (year-on-year/yoy) to Rp95.68 trillion from previously being able to penetrate Rp105.05 trillion in semester I/2021.

“This indicates that insurance products marketed in the first semester of 2022 have begun to target the lower middle class who want to have protection, but with a small nominal sum insured,” he explained.

Budi emphasized that although the performance of premium income

Generally experiencing a correction, there is still good news in terms of growth in the sharia business line, premiums from group insurance, premiums for health insurance products, and products with regular premium payment types.

In detail, the premium for sharia-based products is still in a trend of continuing to grow from Rp. 6.3 trillion as of June 2020, to Rp. 9.75 trillion as of June 2021, and continues to be Rp. 10.87 trillion as of June 2022.

Likewise, premium income specifically for health insurance products is currently growing 15.9 percent yoy to Rp. 8.6 trillion as of June 2022. Previously, health insurance premiums reached Rp. 7.1 trillion as of June 2020, then to Rp. 7.4 trillion as of June 2021. .

“This means that there are still very specific needs from the community that the life insurance industry must be able to answer. Because even though Covid-19 has many negatives, there are also positive impacts for us in terms of increasing public awareness regarding insurance products,” added Budi.

Meanwhile, based on the type of payment, the portion of regular payments in a trend continues to grow from IDR 48.5 trillion as of June 2020, to IDR 49.06 trillion as of June 2021, then IDR 49.7 trillion as of June 2022. On the other hand, the contribution of single premium type products has actually fallen. 17.9 percent yoy to Rp45.9 trillion.

“This continuous improvement in regular premiums reflects that many people are increasingly understanding the function and usefulness of long-term protection from life insurance products. From the company’s perspective, the increase in regular premiums is also very welcome to create a sustainable business,” explained Budi.

Therefore, in the second semester of 2022, Budi remains optimistic that the commitment of insurance companies to boost products that are widely accepted by the public will contribute to the improvement of industry premium income.

Meanwhile, Head of Product, Risk Management, and GCG AAJI Fauzi Arfan added that from the players perspective, pursuing the type of policyholder who regularly pays premiums even though the nominal is small is being encouraged, because it is profitable from the business side.

“The premium is small but a lot, it’s better than big but only a little, both for the company and for the industry in general. There is no harm in this effort, because it means that the risk will be more evenly distributed,” he explained.

However, boosting small premiums has consequences, in which companies must face challenges in terms of product marketing which must be more practical and digital-based, as well as demands for services that must be faster and completely online.

  • Share