Boston, MA -- (SBWIRE) -- 08/17/2012 -- Key Insights And Key Risks
The Indonesia Insurance Report considers the prospects for both life and non-life insurers in the country. As of mid-2012, the latest developments confirm that Indonesia remains one of the most exciting markets for life insurance in global terms. Premiums have been growing at around 25% per annum, as an expanding middle class increasingly takes advantage of the offerings of the life insurers. Most companies in the segment have reported strong, profitable expansion of their businesses, thanks to at least one of the following factors: rapid expansion in agency forces; improved agency productivity; new bancassurance relationships with major banking groups; development of new products.
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The limited data for 2011 that is available suggests the life segment has benefited from rapid growth in lives covered by group insurance products, but not necessarily a rapid expansion in the number of households that are using life insurance. According to the regulator BAPEPAM-LK, around 10% of the population were covered by life insurance as at the end of 2010. Although Allianz alone has over 400,000 micro-insurance clients, it appears that micro-insurance is an opportunity for the future, not the present. Various commentators have alluded to a changing and uncertain regulatory environment as being a challenge for the insurers.
In spite of the generally positive economic environment, and burgeoning sales of motor vehicles, the outlook for the fragmented non-life segment is a little less exciting than that for the life segment. Many non-life companies are backed by local conglomerates or financial institutions that do not necessarily have a competitive advantage in the underwriting of risks - and this is in a country that is prone to natural disasters. In the past, the fragmentation of the segment has contributed to brutal competition in motorrelated lines (which, although less important than in other countries are still the largest component of the segment) and constrained growth in overall premiums. The latest data from the trade association suggests that for much of 2011 premiums in motor-related lines grew nearly as rapidly as those in the rest of the segment. Our forecasts for the segment assume non-life penetration will continue to grow.
As of mid-2012, it remains to be seen what will be the ultimate impact of the regulator's increased capital requirements. We would not be surprised if there is a wave of consolidation, especially if premium growth slows, even if only temporarily.
Over the last quarter, BMI has made the following changes:
- Many of the leading insurance companies have published details of their operations, both in Indonesia and across the Asia Pacific region, in relation to Q112 or 2011. The details have been incorporated into our analysis.
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