Jasa Raharja, Prudential Life Assurance, AXA Mandiri Financial Services, Commonwealth Life.
Indonesia’s life insurance industry is confident premiums will surge by 25 percent this year, as rising incomes prompt a skyrocketing in customer numbers in the second half of the year.
The total combined premiums collected by 43 life insurers in Indonesia hit Rp 49.7 trillion ($5.2 billion) in the first half of the year, up 17 percent from the same period a year ago, the Indonesian Life Insurance Association (AAJI) said on Friday.
The growth stood at 15 percent in the first quarter and 18 percent in the second, a Jakarta Globe calculation shows.
AAJI chairman Hendrisman Rahim said life insurers could post a 25 percent growth in total premiums this year. Major life insurers operating in Indonesia include Jasa Raharja, Prudential Life Assurance, AXA Mandiri Financial Services and Commonwealth Life.
“[Premiums] usually peak in the fourth quarter,” Hendrisman told reporters during a media conference on Friday. “As the disbursement of government money to various projects increases, money circulation across society also increases. That’s when insurance products are in high demand.”
Government spending usually rises later in the year as clogged bureaucracy and poor planning delay projects. In the first eight months this year, the national government spent just 54 percent of the Rp 1,548 trillion allocation set in the 2012 revised budget.
Hendrisman said that new business premiums, mostly from new customers, rose 17 percent to Rp 34.9 trillion in the first half .
The 25 percent growth target would represent a remarkable second-half surge, given the rise in the first half stood well short of the goal. While government spending in the latter months of the year may increase sales, the fact that the same phenomenon occurred last year will make a year-on-year increase all the more difficult to achieve.
Life insurance businesses have proven popular acquisition targets. Last week New York-listed ACE Limited signed an agreement to purchase an 80 percent stake in Asuransi Jaya Proteksi for $130 million.
Makassar-based conglomerate Bosowa Corporation earlier this month announced that it has allocated $2.6 million to acquire a life insurance company, while Bank Central Asia revealed last month that it opted to establish its own insurance firm instead of acquiring an established insurer.
Hendrisman on Friday said that “new customers now prefer traditional life insurance to unit-linked products,” insurance sold clustered with investments in stocks, bonds or the money market.
The traditional life insurance guarantees a customer will receive the benefits as stated in their insurance policy should it be claimed, but a unit-linked product involves a risk that the benefit will be lower than that reflected in the total premiums paid because of a fallen investment.
“This shows that customers’ awareness about insurance products is improving,” Hendrisman said. He noted that new unit-linked premiums shrunk 7 percent in the first half compared to the same period a year ago.
Less than 5 percent of Indonesia’s 240 million population have life insurance.