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Life Insurance Sector in Indonesia

By Bona Pasogit Post a Comment
Life Insurance Sector in Indonesia

As with most Asian life insurance markets, ILPs are the dominant product class. For Prudential Indonesia, the largest player, ILPs generated 99%10 of total premium income in 2014. Typically, protection products are sold as riders to ILPs. 

In Indonesia, the strength of the ILP proposition has been underpinned by the stock market performance. The Jakarta Stock Exchange Composite Index (“JKSE”) grew at CAGR 22% between January 2010 and May 201311, and premium income grew at CAGR 17.7% from 201012 to 201213. Indonesia’s life sector saw strong growth in premiums from 2006 to 2012.

Life insurance is the by far the biggest segment, with 46%1 of total insurance premium income in 2014. International insurers dominate and are mainly focused on Investment Linked Products (“ILPs”) 

From June 2013 through to December 2013, the JKSE was in negative territory and consequently premium growth was relatively flat in 2013, compared to 2012. This trend continued into 2014, where GWP rose by ‘only’ 8.1% to IDR 116 trillion, and new business premium growth was negative. 

2015 however, was a far more resilient year. The JKSE peaked in March 201514 and the Asosiasi Asuransi Jiwa Indonesia (“AAJI”) data for the first nine months of 2015 (“9M15”), showed premium income increased 16%, to IDR 100.8 trillion15. 

New business and renewals both grew at around the same level. The uptick in 2015 performance may be attributable to: 

  • growth in the agency force. The number of licensed agents increased from 361,000 to 447,000, between September 2014 and September 2015 according to AAJI. The agency channel remained the largest contributor to GWP in 9M15 with a 45.3% share15 
  • increased focus on maximizing the productivity of bancassurance channels. Bancassurance delivered 36.6% of premium income in 9M1515 
  • expansion of traditional protection products (which are not as cyclical as ILPs).

Life insurance – top players

The Indonesian life segment is relatively concentrated among 10 large companies, which accounted for 75%9 of GWP in 2014. Overall, the leading multi-nationals, which have a commitment to the region, have shown a competitive advantage relative to the privately owned domestic players. 

We profile below the largest 6 in the following pages. Aside from Sinarmas MSIG, all the top 10 life insurers achieved strong growth during the period 2010 to 2014. 

While Prudential Indonesia has the largest market share and greatest profitability - 22.6%9 of total market premiums in 2014, up from 19.7%16 in 2013 – AXA Mandiri is the fastest growing. 

1. Prudential Indonesia 

PT Prudential Life Assurance (“Prudential Indonesia”)’s position as the leader in the country’s life insurance industry is founded on: 

  • early investment and focus on the market (established in 1995) and a well established brand name 
  • an agency force of upwards of 237,000 – around half the number of licensed agents, and over 380 independent marketing offices across Indonesia 
  • an asset management arm, that has generated market leading returns. Prudential Indonesia had AUM of over 56.4 trillion as at 31 December 2014.

Prudential Indonesia has a high focus on unit linked sales – 99% of total premium income in 2014. It was also the largest Sharia Life insurer in 2014, with total ujrah received of IDR 1.71 trillion1 – approximately half the market. Prudential Indonesia had 2.4 million policyholders in 2014. 

2. AXA Mandiri 

While Prudential has followed an agency led model, PT AXA Mandiri Financial Services (“AXA Mandiri”) has focused on bancassurance. A JV was formed with Bank Mandiri in 2003. Bank Mandiri was the largest bank in Indonesia by assets at 31 December 2014. 

The current shareholding of the joint venture is 51%17 owned by Bank Mandiri, 49%17 owned by the AXA group. AXA Mandiri products are mainly marketed through financial advisors placed in the branches of Bank Mandiri, though AXA Mandiri also have a strong telemarketing presence. 

AXA Mandiri estimated in 2014 that it had 23%17 market share of Weighted New Business Premiums (“WNBP”) from bancassurance and a 40.7% WNBP market share from telemarketing. Similar to Prudential Indonesia, the majority of sales are Individual ILPs (Individual products and ILPs were 96% and 80% of premium income in 2014, respectively), with a target customer base at the high end. 

AXA Mandiri had 3.0 million17 policyholders at 31 December 2014. The AXA Group also owns two other life insurance companies in Indonesia, which may need to be sold or consolidated with AXA Mandiri by October 2017 in line with the single presence policy introduced in the revised 2014 insurance law. 

3. Allianz Indonesia Life 

Allianz entered Indonesia’s life market in 1996, and has adopted a multi-channel multi-proposition approach, with: multi-bank partnerships (6 banks) with in-branch advisors an agency force (over 14,00018 in 2014) early focus on digital distribution products targeting customer segments from HNWI to micro. 

PT Asuransi Allianz Life Indonesia (“Allianz Indonesia Life”) had over 6million18 policyholders in Indonesia in 2014 – significantly more than the nearest competitors. 

This reflects an early focus on microcredit-insurance through bank partners, such as Bank Tabungan Pensiunan Nasional (“BTPN”), a private local bank with a focus on microloans to small family owned businesses. Its premiums were roughly evenly split between protection and savings classes in 2014.  

4. AIA Financial 

AIG originally established presence in Indonesia with the acquisition of Lippo Life in 2004. Following the AIG bail out during the 2009 global financial crisis, the business was renamed PT AIA Financial (“AIA Financial”). 

Due to the 2009 issues at AIG, sales suffered and AIA Financial fell behind Asia regional competitors in Indonesia, such has Prudential and AXA. Since the AIA Group IPO in 2010, and separation from AIG, there has been renewed focus on the Indonesia market. 

Expansion has focused on development of bancassurance partnerships, and currently AIA Financial has ties with nine banks. The largest bank partner in Indonesia is BCA (the largest private bank). However, BCA separately acquired its own life insurance license in 2014, which may impact this channel. 

AIA Financial had 1.2 million19 customers in Indonesia in 2015. Its product focus is mainly ILPs and AIA was the second largest Sharia Life insurer in 2014. 

In 2015, according to AAJI data, AIA Financial became the second largest life insurer in Indonesia wih GWP of IDR 11.2 trillion (of which 67% was generated through bancassurance); leap frogging Allianz Indonesia Life, AXA Mandiri and Indolife Pensiontama. 

5. Sinarmas MSIG Life 

Sinarmas MSIG Life is a joint venture between Sinarmas (one of the largest conglomerates in Indonesia) and Mitsui Sumitomo Insurance Group (“MSIG”), of Japan. MSIG acquired 50% of Sinarmas Life in 2011 for IDR 7 trillion. 

Sinarmas Life had grown by selling mainly endowment and investment linked products to high net worth customers, primarily through bancassurance, and was the second largest life insurer by premiums in 2010. 

Sinarmas MSIG Life had slipped to the fifth largest life insurer by 2014, with retraction in GWP, while the overal market has grown rapidly. 

Strategies to improve Sinarmas MSIG Life’s performance include a refocus of enhancing the existing bancassurance relationships and development of new bancassurance partnerships, as well as efforts to increase active agent numbers and digital distribution. Customer numbers increased from c. 0.6 million in 2013 to 1.0 million in 2014. 

6. Manulife Indonesia 

The Manulife Group established a presence in Indonesia in 1985, and has more than 2.3 million22 customers, with 10,000 employees and agents across 25 cities. 

PT Asuransi Jiwa Manulife Indonesia (“Manulife Indonesia”) has bancassurance agreements with 14 banks. The principal partner is Bank Danamon. Bank Danamon is one of the largest privately held banks in Indonesia, with over 3,200 branches. 

Manulife Indonesia won the Bank Danamon bancassurance agreement from AIA in 2013. Manulife Indonesia’s principal product focus is ILPs which generated over 51%24 of premium income in 2014.

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