By Elisa Valenta
Like other businesses, the insurance industry is vulnerable to the coronavirus pandemic and the slowdown in global economic growth. The Financial Authority Services (OJK) noted that the growth trend of insurance, particularly life insurance, premium has decreased in the first quarter this year.
Life-insurance premium income slumped 13.8% compared to the same period last year. Meanwhile, general insurance premium income still managed a slight growth of 3.65% year-on-year, which is a significant drop compared to 15.65% growth in full year 2019. In total, as of March, the insurance industry collected Rp17.5 trillion of premium income, a 7.51% contraction from same period last year.
Chairman of Indonesia Life Insurance Association Budi Tampubolon says the performance of life insurance companies is inline with the performance of the capital market, which also been struggling with the pandemic. The unprecedented collapse in bond yields is another financial risk that executives and analysts are fretting over.
“Especially if interest rates stay low and insurers struggle to earn a decent return on their massive portfolios. Insurers also have credit risk in their huge investment portfolios,” Budi tells Forbes Indonesia.
Large-scale social restrictions also make it difficult for life insurance agents to sell unit-linked products. In Indonesia, the regulation still requires insurance agents to meet face-to-face with buyers to sell unit-linked product. The unit-linked insurance is the biggest contributor to life insurance premium income.
Thus, the association has submitted a request to the regulator to ease the policy. The association asked that unit-linked marketing be carried out through digital meetings.
“The life insurance industry is still waiting for the OJK to respond, it has been more than a week since the request was made to the regulator,” says Budi.