Indonesia has the highest growth potential for investment-linked product (ILP) business, compared to several other Asian insurance markets including China and Hong Kong, said research and consulting firm Cerulli Associates.
The growth momentum for ILPs in the Southeast Asian country remains strong even after more than a decade when the first such products were launched.
The report states that Indonesian banks and insurance agents are more keen to promote ILPs, as compared to mutual funds, because of higher fee incentives. It also states that banks typically have exclusive arrangements with insurance firms to sell their products, despite there being no such partnerships with asset managers to distribute mutual funds.
If the financial regulator – the Financial Services Authority (OJK) – however, decides to scrap upfront fees and exclusivity in bancassurance partnerships, it could limit growth prospects.
At the same time, Cerulli points out that the OJK has raised the cap on overseas Shariah investments from 15% to at least 51% since November 2015. It also notes that this may present an opportunity for fund managers to offer foreign-invested Shariah-compliant funds on ILP platforms, if regulators allow it.