In this article we explore recent progress within Indonesian InsurTech, and consider whether some of the developments witnessed in India and China can also be brought to bear in Indonesia.
The Indonesian insurance industry is at an early stage of development. Unlike other countries in the region, Indonesia has proven to be an open, scalable and even profitable market for some life insurers. Moreover, a penetration rate of just 1.5% is much lower than similar markets such as India and Malaysia. Although life insurers have thrived in this environment, several patterns of change have now appeared:
First, rapid urbanisation and a rising middle class have created a host of sub-segments that insurers will need to adjust to. Examples include employee benefits, Takaful (Islamic law compliant) insurance, private healthcare, and short-term policies that have all become profitable in other Asian markets.
Second, the Indonesian government has placed healthcare at the centre of the national agenda. For life insurers, the ability to master or at least partner with unfamiliar disciplines within healthcare will be important.
Finally, the success of multinational life insurers in Indonesia has fostered a number of digital developments. Online triage, digitisation of face-to-face sales, and O2O services are among the efforts currently underway.
Ultimately, success in Indonesia will depend on insurers’ ability to navigate the above trends, and each is worth considering in turn.
1. Demographics and sub-segments
The scale of the Indonesian market is bolstered by a young, internet-savvy population. Although Indonesia has several popular mobile payment services – a proven precursor to digital insurance – the absence of a way to connect insurers’ billing systems into Indonesia’s mobile payment services has left insurers and startups searching for alternative ways to get a foothold online.
One of these is Gojek, a super app based on ride hailing that we have previously assessed here. Others of note include Traveloka and PasarPolis, the former is a homegrown travel portal, and the latter an aggregator that is embedding itself across Indonesia’s internet.
According to Tze Leong Chan, Gen Re’s country manager for Indonesia, the popularity of digital apps gives an insight into the psyche of the digital generation: “On the marketing front, these developments have transformed the way incumbent insurers approach their marketing and branding to appeal to the digital generation. For example, Sequis Life, an Indonesian insurance company, has revamped their online sales platform (SuperYou) to have an eye-catching brand including a sales process driven by a chatbot.”
In addition to the digital first customer, several sub-segments have emerged in Indonesia, which the current climate of investment-linked life insurance products cannot accommodate. These include:
Takaful insurance
Although an old concept, Takaful insurance is still a new product in Indonesia, contributing less than 5% of gross written premium. This stands in contrast to Malaysia, which despite having ten times fewer Muslims than Indonesia, manages to generate 20% of its GWP from Takaful products. This has been achieved through years of promotion of the Islamic banking sector, which then acts as a gateway to Takaful insurance, much like China’s mobile payment services acted as a gateway for life insurance. On the digital front, Great Eastern Life and Axiata Digital have recently launched a range of Takaful products designed to meet different needs and scenarios, all of which are serviced via chatbot. Although the sector has significant room to grow, Takaful insurance is a good example of the need to tailor products to a customer segment.
Employee benefits
Although SMEs account for nearly 95% of domestic employment in Indonesia, most of these do not have a benefits package for employees, instead relying on social insurance. In this void, Indonesia has produced a range of employee benefit startups including The Fit Company, CXA, Urban Hire and Mekari, all of which have emerged with various versions of the business model originally conceived by Zenefits in 2005. Of these, Mekari is arguably the most advanced with 15,000 SMEs on-boarded to its payroll, benefits, and accounting portal.
Urban middle class
The distribution of life insurance has not kept pace with the generational and geographic shifts in Indonesia. The younger workforce increasingly view life insurance as a protection tool instead of a savings tool, which is driving demand for product lines such as private health insurance with preventative healthcare services, access to specialists, and global coverage.
Although Indonesia has a young, internet-savvy population, within this segment there are many sub-segments including small business owners and young professionals, and a significant number of them support their parents and extended family members financially. For this group, life insurers will need to move away from short-term investment-linked products and towards products providing long-term guarantees and stable returns, in addition to protection that reduces the need for large amounts of liquid assets to be held. As we are seeing in China, these products for Indonesia’s younger generation may need to rely on a hybrid distribution model, whereby leads can be generated online and then closed offline through remote consultation.
2. Healthcare
Since the introduction of universal health insurance in 2016, the Indonesian healthcare system has been characterised by opposing forces: nearly universal coverage by public health insurance, but dissatisfaction with public hospitals, and patients still needing to contribute significant out-of-pocket sums if they need surgery, prescription medication or medical devices – costs that can easily add up to several times average incomes.
Acknowledging these shortcomings, the government has supported the rise of health orientated startups to minimise in-patient stays and improve early diagnosis. Halodoc and Alodokter are two of the bigger players in Indonesian healthcare. Between these two apps, users can consult with doctors or specialists, book appointments, and even arrange for the delivery of medication.
Elsewhere, Prudential has recently partnered with Halodoc. Prudential’s strategy will be worth observing as the intention appears to be integrating Halodoc into its Pulse app, which itself aims to be a disruptor among insurers by offering a variety of health and wellness services.
Finally, connecting public hospitals, medical institutions and insurance companies so that they can share patient records and standardise medical services will require regulatory support. An example of this can be seen in the departure of the founder of Gojek, an app that will influence Indonesian insurance for years to come, who is now serving as Indonesia’s minister of education and culture. In doing so, Nadiem Makarim has become the latest tech visionary to turn their skill toward public service, as well as acknowledging the impact that regulatory and state-owned organisations will have on the evolution of life and health insurance in Indonesia.
3. Multinational actions
Indonesia is a market where foreign players have built a commanding presence. Multinational life insurers account for a whopping 46% of gross written premium. For example, Zurich Insurance Group has acquired Asuransi Adira Dinamika (Adira Insurance), one the largest property and casualty (P&C) insurers in Indonesia, which may be a harbinger of things to come for local life insurers, and certainly there is no shortage of insurer/InsurTech partnerships.
Other notable Indonesian InsurTechs include:
Insurer | Partner/InsurTech | Partnership Details |
Allianz Indonesia | Bukalapak | Bukalapak is the Amazon of Indonesia. With Allianz developed ‘Buka Proteksi Diri’. |
Great Eastern | Axiata Digital | Life insurance and Takaful, health insurance, home insurance and personal accident insurance. Micro-insurance products will be distributed on the Axiata Digital platforms, including Boost e-wallet and Aspirasi. |
Allianz | Gojek | Offering personal accident and health insurance to ride hailing drivers and passengers. |
AIA | Gojek | AIA participated in Gojek’s F round of financing and will develop products tailored to specific segments of Gojek’s users. |
Asuransi Sinarmas | Ping An One Connect | Equipping Asuransi Sinarmas agent training and agent incentive programs. |
MassMutual Ventures | Qoala | MassMutual Ventures invested in Qoala, which is currently developing scenario-based travel and gadget insurance. |
Conclusion
The Indonesian life insurance market is poised to take off in the next decade. Although the first wave of Indonesian InsurTech brought a familiar mix of aggregators and sales-orientated efforts, life insurers are increasingly moving beyond distribution to tackle systemic challenges in healthcare, and appeal to new market segments that reside in urban areas. Although this market is a good example of experimentation and innovation, it also has challenges. The absence of a dominant mobile payments service, which has been a precursor for life and health insurance in China, may hinder life insurers trying to leverage digital methods in the short term. However, the real opportunity in Indonesia is not cross-selling insurance on internet platforms, but instead to connect with the emerging market segments through new product development and services that align with the individual strengths of life insurers.