With a population that has truly embraced mobile technology, Indonesia has in recent times attracted the attention of many InsurTechs. We spoke to Igloo’s Mr Raunak Mehta to get a better idea of what InsurTechs are doing in the market.
The last few years have seen a surge in the number of InsurTechs setting up operations in Indonesia, highlighting the potential for growth of the insurance sector, as well as the country’s readiness to embrace technology.
Speaking to Asia Insurance Review, Igloo co-founder and CEO Raunak Mehta said that Indonesia has always played a pivotal role in terms of being at the forefront of digital adoption in Southeast Asia. Providing tech solutions to insurance companies, Igloo has been operating in the country since 2019.
“If you look at internet penetration itself, you’re talking about a good 70% of the population that has access to internet. Smartphone penetration is also fairly high. And I think you need these kinds of macro trends to be able to bring up an industry that’s based on data and technology and InsurTech is no stranger to that,” he said.
He added that the momentum for InsurTechs in the country has also been helped both by the fact that insurance penetration rates are still fairly low compared to the global average and that there has been a surge in digitalisation throughout COVID-19.
Mr Mehta highlighted several areas of insurance in which InsurTechs help to strengthen, one of them being product innovation. InsurTechs pride themselves in being able to come up with innovative ideas and bring new insurance products that are catered to the needs of certain market segments.
One segment that Igloo has tapped into recently has been the gaming market in Indonesia. The InsurTech has partnered Indonesian e-wallet DANA to offer insurance to the gaming community. The product covers heart attacks and carpal tunnel syndrome.
Carpal tunnel syndrome is just one of the serious health issues that gamers are susceptible to, Igloo said in a statement. According to German Sport University Cologne research associate Chuck Tholl, in an article on The Washington Post, professional gamers perform as many as 400 actions per minute which range from movements like mouse clicks and keystrokes that place a physical load on their fingers, wrist, neck, back and lower arms.
Over time, these repeated movements may lead to a variety of ailments like muscle weakness, tendinopathy, nerve compression and lower back pain. In July 2021, an Indonesian e-sports player Tuturu announced his early retirement due to a severe case of carpal tunnel syndrome.
According to a study by National Center for Biotechnology Information, the prevalence of carpal tunnel syndrome can be as high as 150 cases per 1,000 people per year while with a prevalence of 500 per 1,000 people in high-risk groups.
“As most of these ailments are chronic and harder to detect, professional gamers like Tuturu often continue to play unaware that they already have underlying injuries. In the worst cases, reports also show that extended periods of gaming may lead to fatal heart attacks,” it said.
Video games have gained significant traction over the last few years in Indonesia – according to Statista, revenue in the segment is projected to reach $1.077bn this year and is expected to show an annual growth rate (CAGR 2022-2027) of 7.13%, resulting in a projected market volume of $1.52bn by 2027.
Areas of focus for InsurTechs
Mr Mehta also highlighted the main areas in which InsurTechs are driving insurance penetration in Indonesia. Like many other markets post-COVID, there is a much greater focus on both physical and mental wellbeing, resulting in a greater demand for associated products and services.
Meanwhile heightened levels of inflation, that are affecting the purchase of goods and services in daily life, and hardening interest rates are providing strong tailwinds for products such as credit insurance.
“These are the areas where I’m seeing InsurTechs, in a way, stepping up and really driving insurance penetration in Indonesia, which has improved quite significantly over the last three to four years. It’s still not at the right levels, but it’s very encouraging [growth],” he said.
Improving accessibility and reducing costs
Technology providers like Igloo have carved a niche for themselves in the insurance industry, focused on helping insurers reach a wider range of consumers and lower their operating costs.
“Traditional insurers in Indonesia are waking up to the idea of using digital platforms as a strategic channel for the distribution of insurance, because it doesn’t just solve the accessibility problem, but it also brings down the cost of distribution. And InsurTechs, by virtue of their DNA, play a very critical role on that front,” said Mr Mehta.
The cost reduction will primarily be seen in a few areas. “When you are distributing insurance products via digital platforms, the percentage of the overall premiums that you’re spending on distribution is going to be far less than traditional [distribution],” he said.
“And because you are bringing it to a wider market, there is diversification of the risk pool, so the claims are at a more subdued level and there is a lot of fraud mitigation. Overall, the amount of money you spend on that goes down.”
With increased volume of claims also comes the need for more processing power and technology will allow insurers to scale up their claims processing with minimal impact to cost, rather than manually adding more people to handle them.
What lies ahead
Over the last decade or so, there has been a substantial amount of funding being poured into InsurTech development. But current global economic volatility has already seen this money diminish, which will, in turn, necessitate better management of finances.
“With the tightening that the central banks are doing, there has already been a flight of capital and there will be more flight of capital. So, I think the most important thing for InsurTechs is how they are managing their cash, which will become extremely critical going forward,” he said.
In addition, such global headwinds will also present the opportunity for InsurTechs to innovate a wider variety of products to mitigate the risks presented by inflation.
And then there are regulations that need to be taken into consideration. “Regulatory changes are going to happen over the next six to 12 months. As inflation comes in, government authorities will start dialling down on the accommodative policies that they’ve had in the past,” he said.
He added that regulations will also be tightened to weed out unsustainable players from the market and InsurTechs need to be prepared for these.
“I think you have to be on the front foot and be very proactive with respect to anticipating the regulatory changes that are going to come about,” he said. A