Countries around the world are struggling to contain the Covid-19 pandemic and its economic impact, Indonesia is no different and the impact on the country’s economy is very evident. The Government estimated that around 5.5 million people will be unemployed by the end of 2020, a rate of 8.1 to 9.2 percent, up from an unemployment rate of 5.28 percent last year. The country’s economic growth reached 2.97 percent in the first quarter, the slowest pace in 19 years and the BFSI companies felt the heat of this economic slowdown.
The Insurance Industry’s contribution to its GDP still remains lower than 3% as per the recent figures and this signifies the huge potential opportunity for growth. Insurance is indeed developing into a highly competitive market in Indonesia’s urban centers, but it remains difficult to sell in rural areas. This has created opportunities for InsurTech companies, for example – PasarPolis offers more than 100 micro-insurance products that are affordable including health, accident, damage, and missing items insurance; Qoala provides insurance cover for smartphones, cars, and motorcycles by leveraging big data, machine learning, IoT and blockchain; Fuse focuses on an insurance comparison, faster purchase, and easier claims processing. The industry is confident in the trajectory of the market, with 80% of insurance professionals believing that conditions would improve or remain stable in the years to come, according to the latest PwC survey.
Meanwhile, rapid advancements in the country’s digital economy are improving insurance literacy and also opening up new distribution channels to reach Indonesia’s fast-growing consumer class. The integration of insurance products with popular digital platforms commonly known as super apps like Gojek, Grab, Tokopedia, and Bukalapak, seems to be the most common trend. The transactions on these apps have increased dramatically after the pandemic forcing people to buy online, so buying insurance products through them is an easy first step to adopt digital insurance. While agent distribution still has the highest share (40 percent), the share has been steadily on the decline for the last three years. Indonesian Life Insurance Association (AAJI) forecasts that total life premiums generated through the bancassurance channel will grow by 15-30% every year and will eventually surpass the agent distribution channel to become the most dominant channel in the near future.
Indonesian InsurTech is still in its nascent stages and COVID-19 has affected the growth plans of most players. Let’s have a look at how the pandemic has affected the InsurTech Industry
|Market Outlook||Positive outlook for Early-stage Players: Early-stage InsurTech players have a positive outlook in the market, as the pandemic presents a good opportunity for them to go digital|
Incumbents going digital: Incumbents are making the most of the situation by going digital for instance direct meetings have been replaced with video calls and in-person signatures with e-signatures. Many incumbents have launched end to end digital service(eAzy Claim app by Allianz) following changes to digital insurance marketing by the Financial Service Authority (OJK)
Demand for micro-insurance products: As the awareness of health risks increases, the demand for related micro-insurance products is on the rise due to its affordability
Positive Investment Climate: Qoala raised $13 million in Series A funding in April and this showcases the fact that investors have a positive outlook about the InsurTech market in Indonesia
|Organisation Outlook||New Ways of Working: Inline with the industry trends today early-stage InsurTechs are rationalizing costs through a reduction in rentals by adopting new ways of working|
Business Continuity Plans: Current global crisis has made organizations put much more stringent and robust measures in place to not only cope with the here and now, but to mitigate damage in years to come
|Business Model||e-KYCs: Open banking platform could see incumbents assisting smaller Fintechs with reducing the technical costs associated with enforcing Know-Your-Customer (KYC) checks or determining creditworthiness for loans (via advanced APIs)|
The rise in Digital Payments: Owing to the COVID-19 pandemic, insurers have seen a rise in digital payments as new and renewal policy payments are made online
Paperless Way of Working: Qoala leverages machine learning (ML) to speedily process claims in a single day using a completely paperless, digital process while helping insurers reduce costs and risk of infection
The insurance sector is facing the impact of a regressing economy due to Coronavirus and the need to come up with new customisable products to suit the demand with COVID-19 specific policies. The customer needs are changing quickly and there is a need for digital products to meet the demand. This calls for conducting rapid experiments in order to design the product without compromising on the most important questions that need to be answered.
The rapid experiment is a step-by-step process derived from the Design Thinking Methodology that helps in validating ideas to solving complex business challenges through prototyping and testing with the end customers. It helps in saving months of design, engineering, and development costs since there is constant validation and pivoting based on data rather than assumptions. These experiments can be tailor-made to suit your business needs.
Greyamp Consulting has been very successful in helping companies in the BFSI sector in realizing their full potential by developing products at scale that meet the ever-changing customer expectations.
The Insurtech sector in Indonesia is very much in its fledgling stage and has huge growth potential. The pandemic has certainly impacted the industry in the short term but it has accelerated digitization to unimaginable heights. Capabilities such as e-KYC, contactless processing, self-service portals are no longer aspirational but they have become essential to customer needs. The pandemic also presents a huge opportunity for rapid experimentation that helps teams to build the minimum amount to test the most important questions. With these rapid experiments, organizations can validate assumptions, test the hypothesis, and discover ideas that were previously impossible to achieve.