Good News, Life Insurance Starts To Grow Positively In The First Quarter Of 2021

Illustration. (Photo: Doc. Antara)

JAKARTA - Indonesia's life insurance industry began to show positive growth in many parts of its performance in the first quarter of this year. One of them is shown by the positive growth in the operating income report for the first quarter of 2021 from dozens of companies that are members of the Indonesian Life Insurance Association (AAJI).

In 2020, the life insurance industry recorded a minus value of almost half a trillion rupiah in the first quarter. However, in the first quarter of 2021 signs of a rebound began to appear. Where the life insurance industry recorded a positive income of Rp62.66 trillion.

AAJI Executive Director Togar Pasaribu said to maintain consistency and positive momentum in the life insurance industry, all parties need to continue to carry out literacy and improve governance in order to maintain public trust and raise public awareness of the need for life insurance.

"The increase in activity from the public and the business world can be seen from the increase in income from the life insurance industry. The massive increase in premiums from new businesses and positive investment returns in the first quarter of this year have resulted in a sharp increase in income," he said in a written statement, as quoted on Wednesday, June 9.

Furthermore, Togar also reminded all parties to remain united in maintaining the conduciveness of handling the COVID-19 pandemic. This is because the success of vaccination, which has re-energized the current economic movement, will greatly contribute to the potential for a rebound in macroeconomic growth in the long term.

"The demographic bonus that will occur over the next decade is waiting. We in the life insurance industry see the potential for this business to be huge. The new penetration of around six percent in Indonesia is a positive growth opportunity for the insurance industry in the next few years. We need to adjust the penetration mode. new markets to be in line with existing health protocols," he explained.

One of the innovations that are expected to help the development of the current insurance industry is the use of digital technology for marketing insurance products. Along with technology development, the insurance industry also expects full support from the government and regulators in this regard.

Bancassurance channel premiums and investment returns are the driving force for performance

AAJI announced that the largest element of the life insurance industry's revenue comes from premiums. Total premium income grew by 28.5 percent year on year (YoY) compared to the same quarter the previous year. The total alone reached Rp57.45 trillion in the first quarter of this year.

In the first quarter of 2021, the total premium income from new businesses was recorded at IDR 11 trillion, or equivalent to a growth of 42.3 percent YoY. This figure is higher than the same period last year. Meanwhile, the percentage of continued premiums or those continued by customers increased by 9.3 percent.

The total premium income from the new business worth IDR 37.04 trillion is the largest source of income or equivalent to 59 percent of the total revenue of companies under AAJI.

Chairman of the AAJI Management Board Budi Tampubolon said bancassurance played a major role in increasing the total premium income.

"Interestingly, the growth in total premiums was driven more by a massive increase in premiums from the bancassurance distribution channel," he said.

The growth of this channel mode that utilizes cooperation between banking and insurance has a growth of about 55 percent from the previous period.

"And amazingly, bancassurance contributed more than half of the total premiums obtained in the first quarter of this year. To be exact, around 53 percent," said Budi.

The growth also occurred in alternative distribution channels by 35.0 percent, or contributed 18.8 percent to the total premium income. However, the slowdown occurred in the agency and telemarketing distribution channels, respectively by 5.8 and 14.3 percent.

"The number of agents has decreased because their productivity has also been affected by the pandemic. Limitations in meeting face-to-face with prospective customers are the main cause of the decline in productivity, despite the relaxation provided by OJK," he said.

In this regard, Budi hopes that the government can support AAJI's efforts in meeting the insurance needs of the community and also the growth of the life insurance industry. First, AAJI hopes that face-to-face sales will not be applied permanently, especially during the pandemic and post-pandemic.

"AAJI estimates that the pandemic has resulted in changes in consumer behavior, where the role of digital platforms is increasing. For this reason, AAJI hopes that the Government can provide a technical relaxation of PAYDI marketing to be implemented permanently," he explained.

Second, AAJI hopes that the revision of the PAYDI regulation can help foster optimism in the unit-linked market by providing concessions for investment placement in sub-funds. "Of course, investment placement will be carried out by fulfilling the element of prudence based on the results of the customer risk profile assessment," he said.

Of the types of life insurance products that sold well in the first quarter, the unit link is still the prima donna. Unit links have consistently been the dominating product over the last few years. Even though the Indonesian economy is still affected by the pandemic, unit link sales can still grow 31.7 percent in the first quarter. Its contribution is also very large, which is 62.4 percent of the total premiums of the life insurance industry.

"Positive growth and significant contribution from the Bancassurance channel and Unit Link products are positive achievements. AAJI hopes that the Financial Services Authority (OJK) and relevant regulators can continue to support the development and growth of all distribution channels and product variants available to the public," he said.

By doing so, continued Budi, it is hoped that all distribution channels and life insurance products that are in line with the needs of the community will continue to grow positively in the future.

"AAJI believes that the joint effort of life insurers and their stakeholders plays an important role. Corridor arrangements and best practices policies that are in accordance with market conditions are the main keys to maintaining this positive momentum. AAJI is committed to increasing the implementation of the precautionary principle, protecting and educating its customers," he said.