Trend in New Premiums Positive Again Despite Economic Slowdown

Despite the economic slowdown, new premium income at the country’s life insurance companies bounced back during the first nine months of this year after declining by nearly 10 percent last year.

Indonesian Life Insurance Association (AAJI) chairman Hendrisman Rahim said in Jakarta on Monday that the group recorded 16.7 percent growth in new premium income to Rp 57.60 trillion (US$4.1 billion) in the Jan-Sept period this year from about Rp 49.35 trillion in the same period last year.

The growth in new premiums this year is in stark contrast to the performance in the same period last year, during which new premiums went down by 9.6 percent year-on-year (yoy) to Rp 49.35 trillion from Rp 54.58 trillion. 

“The growth in premiums reflects an improvement in people’s awareness of the importance of the long-term protection we offer, despite the bad economy,” he said in a press briefing.

He added that the local life insurance market still had room to grow given its low penetration in Indonesia. “Industry penetration now is roughly 2 percent,” he said. 

A total of 2.15 million new premium contracts were signed by the association’s 53 members as of September. The new contracts raised the total number of insured individual and group customers by 3.9 percent yoy to 56.66 million, Hendrisman explained.

Meanwhile, the group’s existing premium income rose by 15 percent to Rp 43.21 trillion yoy as of September, thereby raising total premium income to Rp 100.80 trillion, a 16 percent increase yoy. 

AAJI communication and inter-institutions division head Christina W Setyabudhi said the recovery was also seen as a result of the healthy growth in the number of agents and bancassurance channels.

By September, the association had 447,407 agents, a 24 percent jump yoy. Bancassurance promotional manpower surged by 164 percent yoy.

Product composition in the period was still dominated by unit-linked, or investment-related, insurance products at 53.7 percent.

However, unit-linked sales grew slower at 12.5 percent compared to traditional insurance products with growth of 20.2 percent. “This might be related to the highly volatile stock and bond markets this year,” she said.

Expense-wise, the group also saw a jump in claim payments. By September it had paid out Rp 61.76 
trillion, a 10.7 percent increase yoy.

“In other words, that was Rp 169 billion worth of claims paid daily,” said Maryoso Sumaryono, AAJI regulation and best practices division head. 

“The biggest factor in increased claims was surrender claims and partial withdrawals due to the economic slowdown, with people needing more cash in hand,” Maryoso said, adding, however, that such claims were still lower than in the second quarter this year.

Although enjoying good new premium growth, life insurance companies recorded a 26.3 percent drop in revenues, mostly caused by a 152.7 percent plunge in investment yield. Income went down to Rp 89.1 trillion this September while investment yield fell to negative Rp 15.91 trillion despite a 5 percent investment portfolio increase.

“The surge was caused by drops in stock and bond values in the period. At the same time, companies shifted their investments to safer, smaller-return assets, such as mutual funds, deposits and property,” Hendrisman said.

The AAJI is upbeat that next year the economy will be even more conducive for the industry. 

It expects premium growth of 20 to 30 percent in 2016 and aims to have 500,000 agents by this year-end to achieve greater industry penetration.

Source:, 15/12/15
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