Understanding the Opportunities of Insurance in Indonesia

Indonesia seems to offer an interesting opportunity in the insurance industry with the development of the country’s digital economy and rising financial literacy, many companies are starting to create new channels to reach the nation’s rapidly rising consumer class. With the stigma around insurance, such as complicated registration and ineffective claims processing, tech-driven startups have been trying to tap into this opportunity. 

Mr. SP, who has been in the general insurance industry for the past 18 years, shared the potential of Indonesian insurtech sector that has been catching the attention of global businesses trying to get a piece of this growing market. Keep on reading to know more about the insights shared by our expert network Indonesia

How big is the renewal insurance market in Indonesia? 

Mr. SP shared that the renewal insurance market in Indonesia is most prevalent in vehicle or auto insurance, which stands to be the second-biggest portfolio. He estimated the size in 2019 is around 20 trillion rupiah GMV, and so the potential unit in the last 15 years is around 13 million unit, which Mr. SP considered to be a huge opportunity for insurance companies. 

Currently, in Indonesia, more than 50% of new car customers would still decide to buy the cars with loans, which are usually covered by multi-finance and banks. Meanwhile, the rest would go directly to insurance companies to buy the new cars. After customers are finished with their loan, Mr. SP estimated the next year average chance of renewal insurance to be around 40-70%. This also comes with several factors, one being the customer’s experience. If they felt that the insurance company procedures are too complicated or the service is not to their expectations, the probability of the customer renewing their insurance is only 30%. 

What is the potential of insurtech companies in the auto insurance market?

With an estimation that 25-30% of insurtech companies already securing the auto insurance market, most of them usually pursue renewal insurance for used cars. By the help of recruiting a mix of agents with and without customer connections, insurtech companies then consider the age of the car. Most companies would prioritize customers whose cars have been owned and used for up to 5 years, since people would usually still think that it is important for them to protect their car. With an estimation of 90% of customers that would still highly consider renewing their car insurance, Mr. SP expressed that this is the main potential for insurtech companies to pursue. However, they must also be careful because around the age of 5 to 10 years is when that probability starts to decrease to around 50-60%.  

Which distribution channel is the most suitable to capture the market right now?

Mr. SP explained that the Agent model is still the best channel to capture the Indonesian market. This is due to the behavior of the people loving to talk and valuing guarantee, security, and accessibility. The customers indulge in knowing that whenever they have a problem, their agent and insurance are just one call away. All they have to do is talk with their designated agent, and let the agent do all the work. 

Even though, it is estimated that only 10-25% of insurance agents would successfully sell a product every month, Mr. SP shared that most of the GMV contribution in the market still comes from the top 100 agents, with them being able to rake in 5-10 billion per year. 

The main challenge right now is for insurtech companies to recruit good agents, and according to Mr. SP this can be done by offering them time freedom, better service workshops, and a range of product portfolio and services. 

If insurtech companies all pursue the same portfolio, how can they compete?

Several of insurtech companies don’t really pay attention to the after-care service. As mentioned previously, Indonesian people really value the quality of service. Which is why, Mr. SP advises insurtech companies to focus on innovate services to satisfy customers, and it will surely help in increasing their retention rate. 

Do you see any insurtech start up possibly selling life insurance?

Not really. This is because life insurance in Indonesia is not only a product, but the customers also see it as a service and concept. Because of this, insurance agents are once again being put in the spotlight as the best distribution channel. When insurtech companies would like to start selling life insurance as part of their product portfolio, they may find a hard time in refining their agents when it comes to certification, service training, and other factors. 

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About Mr. SP 

Mr. SP has been in the insurance industry for over 18 years and is currently leading as the Head of Insurance in one of the prominent digital payments platforms in Indonesia. He has prior experience handling different types of insurance, from the traditional product to the more modern one such as insurtech. He has also played a big role in building one of the biggest insurtech platforms in Indonesia and has served in various insurance companies giants.