The general insurance industry has begun to taste new business opportunities by entering the business of marketing insurance products wrapped in investment (Paydi) or unitlink.
Executive Director of the Indonesian General Insurance Association (AAUI) Bern Dwyanto said, since the issuance of Circular Letter of the Financial Services Authority Number 5/SEOJK.05/2022 concerning Insurance Products Associated with Investments (Paydi) in March 2022, there have been two companies that have applied for related permits. unitlink products to the Financial Services Authority (OJK).
The two companies are PT Asuransi Bintang Tbk and PT Asuransi Sinar Mas.
Bern explained that PT Asuransi Bintang Tbk is currently applying for a license for a Paydi product with additional protection in the form of motor vehicle insurance and property insurance.
Meanwhile, PT Asuransi Sinar Mas proposed two Paydi products, consisting of one product with a short-term coverage period and one product with a minimum coverage period of 5 years. Both products have basic protection against the risk of death due to personal accidents.
“Paydi products belonging to general insurance do not provide guaranteed returns or a guaranteed interest rate,” said Bern to kontan.co.id, Friday (26/8).
Bern assessed that Paydi’s product is not an investment product, but a basic long-term insurance product that offers more efficient insurance costs by imposing additional insurance fees on a monthly basis and provides an opportunity for customers’ unused premiums to grow through the chosen investment medium.
“This product is the customer’s choice which in the end is expected to increase insurance premiums. Paydi is also expected to increase insurance penetration in Indonesia,” he said.
As an illustration, insurance penetration in Indonesia last year only reached 3.18%, while general insurance penetration only reached 0.47%. The average world insurance penetration is 7.3%.
Bern said, many cases that occurred in the sale of Paydi products or life insurance unitlinks were generally due to mis-selling. Therefore, in an effort to prevent mis-selling of Paydi products, AAUI began to design literacy programs for the public and insurance agents.
“The regulation on the obligation to record the PAYDI sales process is also considered to help cover the possibility of mis-selling from salespeople,” said Bern.
One of the general insurance companies that is preparing to market Paydi products, namely PT Asuransi Bintang Tbk (ASBI). President Director of Asuransi Bintang Hastanto Sri Margi Widodo said that his party had passed the first licensing process for Paydi products with vehicle and property riders , Bintang Flexy InvestStar. Also currently answering several questions posed by OJK.
“Especially for Paydi licensing , it is quite complicated because the company also has to prove the readiness of the Paydi management information system, so that the licensing document also includes the results of the multi -year User Acceptance Testing (UAT) with various transaction scenarios that occur, from closing, top up, withdrawal, switching, to surrender , as well as the ability to record and retrieval in the sales process and welcoming calls ,” said Widodo.
Widodo explained, in Paydi’s marketing process, specifically for general insurance, the challenge is to procure a supporting information system that supports Paydi, because according to him there are very few (or even no) General Insurance Systems that support Paydi.
“What is currently available is a life insurance system , related to this, Asuransi Bintang has developed its own system for Paydi since 3 years ago which we have prepared to be able to live when Paydi’s permit is issued,” Widodo said.
Nevertheless, he believes that the issuance of SEOJK Paydi has opened new business opportunities for the general insurance industry to enter the long-term business through service and cost advantages.
Widodo said that Asuransi Bintang’s sub-funds for Paydi’s products include fixed income, stock funds, and mixed funds. He is also optimistic that the company’s premium income can grow between Rp 20 billion – Rp 40 billion Annualized Premium (ANP) with the PAYDI product.
“It depends on how quickly we can complete the licensing. We are not grandiose for 2022, because we really need market education and even our own employees,” Widodo said.
He said, regarding Paydi’s products, which in the future will provide steady revenue through the Variable Fee Approach model, the goal is more to fertilize / develop portfolios, not to premiums up front.
“Like life insurance, Paydi products are more suitable to be evaluated through the embedded Value Valuation method rather than just an initial closing premium,” he explained.
