1. Simon A Panggabean
CONTRIBUTOR/JAKARTA
Although
health in-
surance in
Indonesia
has been
growing at a
slower pace
thaninsome
neighbor-
ing ASEAN
m e m b e r
countries,
over the past few years it has shown
more rapid development.
Theoretically, several important
factors have contributed to the slow
growth in Indonesia, such as low
demand and low incomes among
most of the population, the limited
number of insurance companies
available and the substandard qual-
ity of many health services as well
as a degree of legal uncertainty.
Generally, Indonesians are “risk
takers” in matters of ill-health and
death. Sickness and death for reli-
gious Indonesians are perceived as
the will of God or fate; so many still
think that buying an insurance policy
isakintogoingagainstthewillofGod.
This factor results in low awareness
about health insurance coverage. Ad-
ditionally, health facilities are often
insufficient or lacking in the coverage
needed to support the implementa-
tion of health insurance.
To learn about the latest devel-
opments in health insurance in In-
donesia The Jakarta Post recently
interviewed the chairman of the
Indonesian Life Insurance Associa-
tion (AAJI) for the period 2011-2014,
Hendrisman Rahim. The following
is an excerpt from that interview:
Question: For the past few years,
health insurance has grown rapidly in
Indonesia. What is your view of the
current situation?
Answer: As we all know, a prod-
uct like health insurance can be pro-
duced and marketed by life insur-
ance companies, general insurance
companies and state insurance com-
panies like Askes, Jamsostek, Asabri,
Astek, Jasa Raharja, which in some
cases are based on sharia principles.
Health insurance can be purchased
collectively (corporate cover), while
for individuals it usually takes the
form of a rider or additional benefits
after the customer is covered by the
main insurance product.
What factors have contributed
to the increased take-up of health
insurance?
This rapid increase is inseparable
WEDNESDAY September 18, 2013 | Supplement 19
AIA, CIMB strengthen bancassurance partnership
JAKARTA: PT AIA Financial (AIA) and PT Bank CIMB Niaga (CIMB Niaga) have
jointly launched Fortuna X-Tra Protection to strengthen their bancassurance
partnership.
AIA said that Fortuna X-Tra, tailored for customers aged 18 to 55 years old,
was one of the company’s flagship products that combined life insurance and
investment opportunities.
AIA president director Carl Gustini said the launch was a bold testament to AIA’s
commitment as a “real life company” that was constantly engaged and under-
stood its customers and provided suitable solutions for their ever-changing lives
“Single, married, parenthood and retirement are the phases of life that we
have to prepare for. Comprehensive planning can help us realize our financial
goals and live life without worry,” he said.
Prudential, UI collaborate on actuarial studies
JAKARTA: PT Prudential Life Assurance and the University of Indonesia jointly
opened the actuarial specialization program on Aug. 21 to mark their partner-
ship.
Prudential said in a statement that the strategic partnership with the
university was an initial step for the company to advance its commitment to
financial literacy in Indonesia.
Prudential believes that financial literacy will help drive the growth of the
insurance industry and provide an important foundation in realizing a finan-
cially independent nation, the company said.
Prudential Indonesia and the University of Indonesia through magister
management at the School of Economics are working together to encourage
an increase in actuarial studies to produce highly skilled actuaries.
Choosing the right channels for life insurance
Achmad Istamar
Life insurance is officially a trend.
Over the last few years, continued
business and technological develop-
ment have led to the development of
multipledistributionchannelsinthe
life insurance industry. To clients it
is like deciding which restaurant to
go to even when the basic menu is
expected to be same.
Agency
First let us understand the role of
an insurance agent. To the insurance
company, an agent distribution mod-
el is needed to reach the population.
Euro monitor International forecasts
that by 2020, the number of house-
holds with an annual disposable in-
come over US$10,000 (in constant
terms) will reach 31.1 million, up
from 13.7 million households in 2011.
Ifweestimatethenumberofpolicy
holders,thepotentialisatleastdouble
ortriplethenumberofhouseholds.As
their income grows, very likely they
will continue to buy more insurance
policiestoensurethatbenefitsarestill
in line with their lifestyle and family
expenses. Imagine the size of the cus-
tomer facing team needed by the in-
surance companies to cope with this
amazing growth if they were to hire
full-time employees.
Recent studies by Indonesia life
insurance association (AAJI) shows
that face-to-face interactions with
agents remained the preferred way
to buy a complex life insurance
product. Professional agents spend
time listening to what their clients
and prospects say about their needs.
Clients should look for agents that
are willing to exercise and recom-
mend several product options re-
gardless the impact of the selection
to their commission.
AAJI now requires that all life
insurance agents earn certification
for the type of product the agent
sells. Make sure your agent’s license
matchestheproductthatheorsheis
proposing to you. For example, tele-
marketing insurance sales would
not have the license to sell an invest-
ment-linked insurance product.
Services that agents can provide
include periodic reviews of your in-
suranceportfolio.Itissuggestedthat
you look for agents that are qualified
to provide clients with complete
financial planning advice. Many
professional agents are upgrading
their skills and earning certification
from the Registered and even better,
Certified Financial Planner from Fi-
nancial Planning Standards Board.
Also ask them what would be their
involvement in helping clients with
claims, fund withdrawal and client
data update.
As we have learned that an agent’s
services are important to a client, it
would be wise to ask an agent about
contacts of his escalation point.
Whileclientsareinneedofanagent’s
service,agentscanalsogetsick,goon
leave or simply be out of a cell phone
network coverage area. In this case,
your agent’s escalation point contact
would be useful, typically this would
be his manager of superior.
Bancassurance
The bank insurance model (BIM),
also sometimes known as bancassur-
ance, an arrangement in which a bank
andaninsurancecompanyformapart-
nershipsothattheinsurancecompany
cansellitsproductstothebank’sclient
base. Bancassurance is important to
banksforthefollowingreasons.
Banks are now dealing with the
highly challenging business envi-
ronment. Motivated to generate
fee-based income from risk free
products, they are very eager to sell
additional risk-based/wealth man-
agement products and services like
insurance to their customers. Insur-
ance companies benefit from these
relationships by being able to reach
a wide potential customer base at
reduced cost, and also by being able
to leverage established bank’s brand
names in the market.
Inmanypreferredbankingservices,
the balance of the insurance products
purchased is also considered a rela-
tionship balance, qualified to meet the
minimum balance requirement to be
eligible for private banking service.
This way, clients may benefit from the
premium service that the bank pro-
videsasapreferredclient. Tothebank,
the insurance portfolio would also in-
crease the “cost of divorce” for client
tomoveitsmainaccounttoothercom-
petingbanks.
At the same time, by selling life in-
surance products, banks increase their
value to its client, by providing all fi-
nancial solutions under one roof, mak-
ingiteasyandconvenienttoaccess.
To some extent, banks would
also be able to provide clients with a
monthly report covering the custom-
er’s portfolio in the bank, making it
easy for clients to manage all of their
investments and insurance accounts
within the same bank.
However, because banks are not
onlysellinginsuranceproductsandit
is not common for banks to hire in-
surance professionals, banks and the
insurance company have specially
developed products that are simple
to understand and simple to sell. It
is unlikely for banks to sell complex
life insurance products due to this
nature. Bank personnel servicing life
insurance clients are also required to
be licensed. Clients should ask them
about the license covering insurance
products that they sell.
Someinsurancecompaniesarealso
now focusing their efforts on the de-
velopment of alternate channels by
partnering with supermarkets in the
formofjointventuresorin-storesales.
Lifeinsuranceisalong-termprod-
uct, hence clients should have some
idea about the form of partnership
between the bank and the insurance
companies. Are they forming up an
entity or is it just a sales/co-brand-
ing agreement? It would be in the
clients best interest to know what
would happen if either the bank or
the insurance company decided to
not continue the partnership, say 10
years from now. Who would be the
responsible for providing service to
the client in that case? This would
insure that clients would still be able
to leverage a bank’s relationship and
presence in the event of claims or
withdrawal in the future.
To drive growth at a lower cost,
insurance companies are no longer
relying solely on traditional channels
such as agents, banks and brokers. As
a result of continued operational and
technological improvements, new
channels such as social media, mo-
bile and web have emerged.
Although the initial focus of a life
insurance company’s social media
and web strategies in Indonesia has
been aimed at low-level communi-
cation marketing of new products
and services. Social media plat-
forms, along with telemarketing can
also help remove geographical limi-
tations that agents and banks face
when serving clients.
To clients, social media such as
Facebook and Twitter are useful
for obtaining life insurance product
feedback from others.
Websites are a good source for a
company’s rating, financial report as
wellasclientservicesuchasdownload
claim forms, or as simple as locating
the company’s office. When it comes
to financial institutions, a long-term
contract would be essential for the cli-
enttocheckonthelifeinsurancecom-
pany’sfinancialperformance.
Even when the menu at a restau-
rant is expected to be same as anoth-
er one, you will often choose the one
that understands you better, serves
you better, and if you have to leave
your things behind, they know you
well enough to deliver those items
to your home, even without you hav-
ing to ask for that service.
The writer is a Certified Financial
Planner, Accomplished Life Insur-
ance Professional and Lecturer at the
School of Economics, the University
of Indonesia
LIFE INSURANCE
The importance of medical
and health insurance
Good health will always be a
vital element in contributing to
productive human existence and
general well-being. Good health
becomes more and more relevant
as we age, particularly when
there is a family predisposition to
one or other serious illnesses.
Good health and general well-
being plays a vital role in our abil-
ity to forge successful careers,
enjoy various forms of exercise
and ultimately enjoy our lives more holistically. A healthy lifestyle not only
serves to augment contributions to our own life but also to the lives of our
loved ones, the companies we work for and ultimately society in general.
Regrettably, many of us take good health and vitality for granted and often
neglect the fundamentals of maintaining a healthy lifestyle. This sustained
neglect of our health will almost certainly lead to some form of health deg-
radation at some point. Excessive indulgence around smoking, consumption
of alcohol, processed food and/or sugar, will almost certainly accelerate inci-
dences of poor health, often leading to extended periods of incapacity.
Poor health will demand significant capital outlay, specifically in regard
to more serious conditions such as cancer, heart failure and diabetes. Criti-
cal illnesses often require long periods of convalescence and extended re-
quirement for costly medication pre and post operatively. The combination
of medication and absence from work often leads to significant debt being
incurred by the affected individual.
Alarmingly, according to World Bank data, Indonesia has one of the low-
est rates in access to public healthcare at well below one hospital bed per
1,000 people compared to two per thousand in Singapore. When one looks
at accessible physicians, the picture becomes even more concerning. In Sin-
gapore, there are 2 physicians per 1000 people, Malaysia has approximately
1.5 and Indonesia only 0.5 physicians per 1,000 people. Indonesia has only 3
social medical schemes – well below the global average.
As Indonesia strengthens its emerging market status, more and more indi-
viduals will become obligated to become responsible for their own medical
costs and that of their families. Furthermore, medical research indicates that
the following factors are driving medical cost higher:
• Medical research, development and technology.
• Complexity of treatment (often to required or indicated)
• Fiscal incentive to care providers.
• Limitedorpoorfinancialand/orclaimcontrolwithinmedicalnetworks.
The best form of protection against poor health is to invest in some form of
health insurance; health insurance not only protects you from paying money
you might not be able to afford, but also affords you the choice of better medi-
cal care in the event of a medical emergency and/or aggressive medical inter-
vention. Medical insurance should largely mitigate the significant expense
incurred for cure.
The type of medical insurance policy you require is largely dependent on
the benefits you feel are necessary in the event of a serious medical condition.
The Indonesian health insurance market provides a relatively wide range of
options around health benefits and aligned payment. For convenience sake,
Avatar Global Consult has summarized below different categories of health
insurance available. This said, it is always prudent to consult with your insur-
ance agent in relation to your specific health care requirements.
“Medical Expense Insurance” is designed to pay for costs related to hospital
admission. This may include, but is not restricted to, costs incurred for special-
ist consultation, operations, laboratory cost and X-Rays. A medical expense in-
suranceplanwillonlypayfortheactualcostoftreatmentrequiredandinmost
instanceswillhaveamaximumamountpayableandadefinedlistofconditions
covered. It must be noted that insurance companies will not pay for conditions
that existed prior to the purchase of this type of medical plan.
Should you ,however, require extended benefits that pays an amount of
money aligned to a critical illness i.e. cancer; stroke or heart disease, then it is
advisable that you consider a “Critical Illness Insurance Plan”. This medical
plan will pay for a critical illness clearly defined and diagnosed by a recog-
nized medical professional or institution. As with any other health insurance
policy, critical illness insurance will generally impose a waiting period before
cover comes into effect.
Critical illness is in the opinion of medical experts a vital component of
any medical coverage, as the cost of treatment for diseases such as heart or
kidney failure (among others) is very high. It is also important to note that
statistics suggest that 1 in every 3 claims paid is a diagnosed critical illness.
Lastly, it is important to realize that “critical illness cover” is “age sensi-
tive” when it comes to coverage costs. The younger you are, the more cost
effective the premium will be because the probability of acquiring a critical
illness is statistically much lower. The older you are when you take out ‘criti-
cal illnesses coverage”, the more expensive it becomes.
“Disability Income Insurance” is a further extension of coverage that pays
for income lost in the event of a serious medical condition. “
“Long-Term Care Insurance” is designed to cover medical costs for an ex-
tended period of time that may include your retirement.
Medical science has progressed incredibly fast over the last two decades;
the cost of this progression has been significant and has meant that ulti-
mately, the patient has been labored with extra costs to sustain the pace of
progression. As the quantum leap in medical science continues, medical care
will become more and more expensive and in some instances prohibitively
so, is it not time that we all consider medical insurance as an integral part of
our insurance portfolio?
The writers are co-founder & managing partners of Avatar Global Consult.
Avatar Global Ltd is a financial services consulting and advisory entity, with
the implementation intent of creating massive strategic advantages for clients
being part of its fundamental strength.
Garth Ibbetson Eddy K A Berutu
Hendrisman Rahim
Indonesian awareness of health
insurance improving: AAJI
from the active role of marketers,
insurance companies, hospitals
as well as changes in the law,
which has made such cover-
age compulsory. Another
major factor, according to
me, is the cost of health
services and medica-
tion, both of which go
up every year. Also,
the emergence of a
number of new fatal
diseases, such as the
ebola virus and, more recently, bird
flu. Global warming, in my opinion,
has also contributed somewhat to
the increase.
How high is awareness among the
public about the importance of health
insurance?
Awareness has started to im-
prove, which makes us happy. More
people are starting to understand
the importance of health insurance
coverage.
What is the market share of health
insurance holders, both individuals
and corporations?
Unfortunately, the AAJI does not
have such data, which is provided
by insurance companies. However,
we estimate the percentage is defi-
nitely significant. As an illustration,
although this is not a reference, the
unaudited data of life insurance as of
the second quarter (Q2) of this year
shows that the number of corporate
or collective holders was 68,539,928
or 28 percent of Indonesia’s popula-
tion, which totals about 240 million.
Medical claim payments as per Q2
2013 amounted to Rp 2.14 trillion.
On top of these totals, one can add
figures from general and state insur-
ance companies. So, in my opinion,
the market size is extremely large.
What is the increase in health in-
surance development in Indonesia?
In 2010, the number of collective
or corporate holders amounted to
22,995,851, which reflected growth
of 7.29 percent. Then in 2011, there
was a major increase of 84.55 per-
cent with the number rising to
42,439,063, while in 2012, the num-
ber of holders rose by 20.03 percent
to a total of 50,938,661.
How many insurance companies
are currently members of the AAJI ?
Forty-eight companies are AAJI
members.
How many of the total AAJI mem-
bers offer health insurance? What is the
developmentsituationamonghealthin-
surancecompaniesinIndonesiatoday?
About 33 companies now offer
health insurance products.
With the full operation of the
Social Security Providers (BPJS)
and the application of the National
Health Guarantee (Jamkesnas)
scheme slated for Jan. 1, 2014, insur-
ance companies will not be allowed
tosellthosebenefitsthatarecovered
by Jamkesnas. Currently, insurance
companies are preparing health in-
surance products that offer differ-
ent benefits from those provided by
Jamkesnas, such as hospitalization
at a standard above first class or at
overseas hospitals and so forth. For
such matters, we plan to sit down to
discuss and coordinate everything
with the BPJS and, hopefully, the
BPJS and the AAJI will sign a mem-
orandum of understanding (MoU)
on claim procedures and payments.
What is meant by a unit-linked
product?
This is a life insurance product
that includes investment benefits
as detailed in the unit. It can also be
packaged to include additional ben-
efits or a rider for health insurance,
as is the case in traditional life insur-
ance policies that offer whole life or
endowments.
What is the AAJI’s opinion of in-
surance companies that break regula-
tions concerning, for example, claim
payments? And what steps does the
association take if an insurance com-
pany is involved in a dispute with a
customer?
In the case of delayed or unpaid
claims, it is wise to review things
on a case by case basis. Sometimes,
customers are also cheeky by not
disclosing the required material in-
formation when making a claim. It is
best that customers are honest when
filling in their insurance forms by
providing full and complete data to
avoid problems during the claim ap-
plication. When this is done, life in-
surance companies will fulfill their
obligations regarding claims.
According to AAJI data, the to-
tal number of claims and amount
paid out from 2009 until 2012 is as
follows:
So, the life insurance industry
has already paid claims for 2009
through 2012 totaling Rp 220.32 tril-
lion, which is not a small figure. If a
customer experiences any difficulty
when making a claim, we suggest
that he or she contacts the Indone-
sian Insurance Mediation Agency
(BMAI), which offers a free service.
YEAR CLAIMS GROWTH
(in Rp trillion)
2009 36.22
2010 64.87 79%
2011 55.21 -15%
2012 64.02 16%
TOTAL 220.32
Insurance News Brief
Darma