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Underinsured nation welcomes technology to fill in gaps

Source: Asia Insurance Review | Oct 2019

A low insurance penetration rate, lack of awareness of insurance and a growing digital economy provide enough impetus for InsurTechs in Indonesia. 
By Ranamita Chakraborty
As the adoption of technology continues to grow in Southeast Asia’s largest market and regulations are expected to develop further, the coming years represent a period of change and development for the insurance industry in Indonesia.
Currently, only 1.7% of around 265m Indonesians have some form of insurance according to the Indonesian Insurance Council. The low rate is attributed to a lack of awareness regarding the benefits of insurance.
This is where InsurTechs step in as they tackle the uphill task of driving insurance penetration through technology, exemplified by the successes of well-known e-commerce and ride hailing giants.
“We believe that in every basket of products in the digital economy, insurance will be part of it and 3% of the digital economy will comprise InsurTechs,” said PasarPolis CEO Cleosent Randing.
According to him, the Indonesian digital economy is worth $27bn and is projected to reach $100bn by 2025. At the same time, he noted that Southeast Asia is also growing exponentially especially in the current geo-political situation with trade tensions between the USA and China.
Venturing into the InsurTech market 
PasarPolis is one of the more prominent InsurTechs in Indonesia, being the only company which is jointly backed by Go-Jek, Tokopedia, and Traveloka – the three unicorns in the country. 
In collaboration with both international and domestic insurers, it offers customised insurance products directly to customers and via B2B strategic partnerships such as train travel insurance for the general public and life insurance for Go-Jek drivers.
“PasarPolis was started with the question of how we can really democratise insurance for all, meaning that everybody buys insurance. We do believe that insurance is very, very important especially for the lower and also middle class because there is so much risk faced by them,” said Mr Randing. 
Based on his experience in the digital marketing and insurance industries, Mr Randing founded PasarPolis in 2015 as he wanted to create a company that is sustainable. Prior to that, he started performance marketing firm iProspect Valuklik in 2012 and still continues to be the chairman of the firm.
“We started our operation because we believe that InsurTech is a growing sector and was still very new. We then focused on basically creating insurance and selling it on the (PasarPolis) platform.
On the other hand, Qoala founder and CEO Harshet Lunani said he had already been in InsurTech before ‘InsurTech’ shook up the insurance industry.
“Six or seven years back, the word InsurTech did not even exist. Back then, you would just say micro insurance or something of that sort,” he said.
His foray into InsurTech began seven years ago when he started insurance and mobile health firm BIMA in Indonesia. As smartphones became more readily available, and Mr Lunani then saw the growth opportunity in radically doing InsurTech leading to the birth of Qoala. The firm has only been running for 17 months and was chosen to be a part of the regulatory sandbox initiative by Indonesia’s Financial Services Authority (OJK).
“Timing and meeting the right people matter as well. To do InsurTech well, you need other industries to be good and ready as well. For example, payment, data infrastructure need to be good and other platforms need to be at a level where people are trying new things because when you try new things, there are many risks that can emerge.”
Another InsurTech BCI Digital Asia which is branded as Bindcover is the youngest out of the lot.
A ‘new kid on the block’, it started operating last year but their first service was only launched in March this year on a trial mode. 
Offering B2B insurance products online, it is still in the process of getting a FinTech services license from OJK and will look for investors once it is licensed. Its products are also not commercially available currently.
Describing his recent foray in InsurTech, Bindcover CEO Victor Roy said, “I went to Lloyd’s market last year and then I saw brokers on the floor moving with a bunch of papers and files. Then, I thought how could they be insuring high-tech risks while still doing things in a traditional way. So, I did my research and found out that the financial industry, especially the insurance sector, has one of the lowest technology adoption. That is when I started Bindcover”.
Innovation at its core 
Looking to tackle specific risks faced by locals, InsurTechs in Indonesia have come up with an interesting array of products which can be described as unique and innovative.
Therefore, it is not a surprise that PasarPolis and Qoala both offer flight delay insurance products as the nation’s capital Jakarta is the most delay-prone major airport globally according to flight data sources.
For its flight delay insurance claims process for local airlines, PasarPolis triangulates data from different providers and automatically triggers a pay out, after which it informs the customer about the pay-out via a Whatsapp message.
Typically, 70% of the InsurTech’s flight delay claims payments is disbursed within three minutes. In fact, Mr Randing said that 20% of claims are processed before customers get their luggage. This is unlike typical claims which takes about three to four weeks’ time to be processed.
Fellow industry player Qoala also provides customised insurance products covering hotel quality checks, e-commerce logistics, cancelled movie tickets and phone screen damages - all sold through a wide network of insurance partners.
Mr Lunani said, “People are starting to understand the risk when it comes to buying goods and plane tickets. There are many instances where customers purchase insurance as an afterthought or secondary purchase while shopping on e-commerce platforms.
“At the end of the day, this will lead to more awareness on insurance and overall will drive people to make insurance a part of their lives in the future. That is the most important thing that is required for the insurance industry to move forward.”
Qoala is currently working on a couple of other products for the health and lifestyle industries, including a unique parametric dengue fever product which covers outpatient treatment in all scenarios. 
This means Qoala will issue payments to both dengue fever patients who are admitted and not admitted to hospitals, unlike other insurance products who provide only pay-outs for patients who are admitted. The inclusion is very important as not all strains of the ailment require patients to be admitted and Indonesia has seen a surge in dengue fever cases recently.
Meanwhile, Bindcover aims to tackle another problem faced by customers in a large country where there are problems encountered in finding financial advisers and insurance executives in smaller cities outside Jakarta, Surabaya and Medan. With his ‘AdvisorsAnywhere’ product, Mr Victor seeks to mobilise financial advisors and solve this issue.
Concurrently, the InsurTech is developing a new type of underwriting methodology with its ‘Crowd Underwriting’ product, which will enable commercial insurance brokers or even direct insurance customers to market their ‘risks’ on Bindcover for (re)insurance companies to bid and underwrite part or all of the risks. 
With this, Bindcover seeks to be the “Lloyd’s market in the digital world” and its two new products would be introduced to the market at the upcoming Indonesia Rendezvous in Bali from 16-19 October.
Roadblocks impede progress
Although many potential InsurTech firms are keen to enter the market, it is not easy for both local and foreign firms to venture into the scene.
According to Mr Lunani, the barriers of entry are very high as in the case of most emerging markets where governments and regulators are still getting to grips with fintech and InsurTech.
When asked if it was difficult being a foreigner starting an InsurTech in Indonesia and communicating with the locals, Mr Lunani said, “Yes and no, it depends. I am in Jakarta which is quite urban and more developed, I would say the challenge is reduced but if I was somewhere else in a smaller town or village, it will be more challenging.”
He also said that there is a negative perception about insurance not only in Indonesia but globally. Therefore, name and branding matters especially in the insurance industry. 
Seeking to be a trailblazer by doing InsurTech differently, this is why he named his firm, Qoala which is a play on the name of the iconic Australian animal.
“When we started the company, the first thing someone knows about us is our name. We picked an untypical name as we wanted to set ourselves apart,” he said.
On the other hand, for Mr Randing, the major challenge lies in educating the market as helping people understand insurance will help the market to grow. At the same time, insurance companies should endeavour to develop more customer-centric insurance products.
Echoing similar views, Mr Victor said that changing the behaviour of Indonesians is a difficult task as the national GDP income per capita is below $5000 which leads to less people buying insurance. This is the reason why he chose to venture in the B2B space as businesses have the purchasing capability.
According to him, insurance will grow when the local GDP increases which means opportunities for the industry will be realised in another three or five years.
Another problem facing the market is the fact that price is a determining factor in decision-making when it comes to insurance. 
“Price is not a healthy indicator for service, good price does not equate to good service. We have to bridge that gap a little bit. It can be dangerous over time if that is the only way to measure a product,” said Mr Lunani.
Paving the road ahead for InsurTechs 
Most InsurTechs in Indonesia are aggregators comparing prices of insurance but not adding value as regulators set the tariff for property and motor vehicle insurance. Meanwhile, some of them do product slicing such as turning travel insurance into travel delay insurance and moveable insurance into screen protector insurance, said Mr Victor. Therefore, he said that Indonesia will have more innovative products to come in the near future.
Commenting on the progress of InsurTech, Mr Lunani said, “By the end of 2019, for example, most e-commerce platforms, online travel agencies, ride-hailing companies would have all done one or two insurance products. That is the sort of baseline on which to build on for 2020 and 2021 because this year, everyone is experimenting, just dipping their toes in. You will also see other industries emerging in this space who have never done insurance before.
As usual, the larger players influence the market and then the smaller players react and those are vital if the entire market behaviour were to change,” 
At the same time, he sees that major technology companies in the country are starting to adopt and sell insurance as an add-on product for their customers; this is where InsurTech firms can leverage on the opportunities. A 
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