AEC a challenge for Indonesia's life sector as it looks for a pick up this year
Source: Asia Insurance Review | Feb 2016
Indonesia’s life insurance industry will face increased challenges as the first phase of implementation of the ASEAN Economic Community (AEC) starts this year – mainly from a rise in competition on both the domestic and regional levels, said Chairman of the Indonesian Life Insurance Association (AAJI), Drs Hendrisman Rahim.
Indonesia’s life insurance companies, which are heavily invested in local financial markets, recorded a 26.3% drop in revenue as of September, mostly caused by a 152.7% plunge in investment yield.
Compared to 103.4% and 12.49% y-o-y declines in the second and first quarters, respectively, the third quarter plunge in investment was the sharpest, according to data from the AAJI.
Income fell to IDR89.1 trillion (US$6.54 billion) in September while investment yield dropped to negative IDR15.91 trillion.
In terms of premium growth, however, he remained optimistic that life insurance companies would show a 20 to 30% growth in 2016 due to a year-end target of 500,000 agents, with an aim to boost industry penetration.
Drs Hendrisman said the optimism was based on the country’s demographic bonus and the low penetration of insurance, but added that premium growth would probably not be able to exceed 30% this year due to the lack of capacity within the industry for penetrating the lower segment of the population.