Insurance and Insurtech in Indonesia

Summary of this blog post can also be digested in presentation form.

In the past decade, the insurance industry in Indonesia has been growing from IDR 125 trillion in 2010 up to nearly IDR 500 trillion this year. Despite this growth, penetration in population is still very small. In terms of economic contribution,, insurance spending only account for 2.3% of GDP while the number of private insurance policy holders also less than 3% of the population. In 2014, national health insurance (BPJS Kesehatan) was established by SBY Administration. Current coverage for this is estimated around 75% of population or ~180 million people. With the rate of growth and low penetration of private policy holders,  Insurance market in Indonesia is a massive untapped opportunities. 

Current market value are still majority contributed from Life Insurance. Based on Insurance Association data, more than 80% of gross written premium are from Life Insurance product such as Term-life, Whole-life and Investment Bundled Product (Unitlink). Unit Link is the most sold product of all life insurance, with contribution of more than half of premium sold in 2014. For general insurance, market size are driven by car and motorcycle insurance.

In terms of distribution and sales channel, majority of insurance sales are still driven by agents and banc assurance. Agent solve the needs of consultation and product knowledge due to the complexity of insurance products. While for banc assurance, insurance companies are helped by bank agents and customer services to advocate their product to banks existing customer base. 

Recent surge in insurtech makes many people buy insurance online. However they mostly buy simple, one-time product such as flight, delivery or gadget insurance which have simple straightforward policy. Price is usually very cheap as well. Online channel drive high-frequency, low-value transactions. Hence in terms of total market gross premium value, it will still likely contributed by life-insurance sold by agents.

Insurance principal can be divided into two big categories : Life insurance and general insurance. Both have distinct market dynamics. Life insurance are quite concentrated with Prudential as clear market leader. Most of the big players in Life Insurance also foreign entities such as Allianz and Manulife. General insurance on the other hand is quite fragmented with Sinarmas, Jasindo and Astra closely competing to be top 3. Sinarmas and Astra premiums are driven by auto and property insurance while Jasindo and other state-owned insurance (Tugu, Askrindo) are contributed by industry insurance supporting other SOE (e.g Marine, Oil & Gas insurance).

Key Insurance Players Overview in Indonesia

With low market penetration and sales mainly driven by offline channel, Insurance market are just prone to be disrupted by digital players. From big insurance principal who goes digital up to rising startup who try to break through using innovative products.

Continue reading “Insurance and Insurtech in Indonesia”

How To Develop Loan Product ?

This month marks my 2 years tenure in Amartha. After almost decade of experience in telco industry and straight outta Manchester Business School Innovation studies, in late September 2017 i jumped headfirst into fintech startup world. It was challenging and exciting ride with constant learning every single day of the week.

One of my key learning from leading Amartha’s Business Development team is how to design loan product. Amartha core business is micro-loan for rural women and as bizdev, my task is to explore new loan product opportunities. In this post, i will brain dump my learning in developing loan product for micro-business segment.

Hope its useful!.

Continue reading “How To Develop Loan Product ?”

How LinkAja Might Win ?

LinkAja has officially grand-launched last June. It represents collective efforts of Indonesian BUMN (state-owned enterprise) to gain market share in emerging digital payment space. Clashing with the likes of Gojek, Grab-backed OVO and Alibaba-backed DANA.

Images from LinkAja.id

Things are not starting smoothly for them. The grand launch has been delayed couple of times due to technical issues, experts doubts their agility to compete and they’ve slouched to 4th place below DANA. Even though a year ago, T-Cash was fighting head to head with OVO to gain 2nd place.

So whats the move going forward ? Heres my quick thoughts on how LinkAja can win

Non-Smartphone Features

Gopay, Ovo and DANA all require smartphone to use. On the other hand, telco-based wallet such as T-Cash can be operated from dumb phones using USSD command. LinkAja can leverage this to offer more inclusive experience.

To process payments, user can just provide their mobile phone and approve payment via sms-delivered OTP. This could be beneficial to push LinkAja usage in rural areas where mobile internet coverage is spotty.

Digitizing Government Payments

In my experience, government payments are mostly in cash. From paying traffic fines, renewing your driver license or paying annual vehicle tax, LinkAja could be leveraged to make all of this cashless. Toll-road, Commuter Line and TransJakarta has been successfully converted to 100 percent cashless hence its not impossible to expand this into any sort of government payments.

For government institutions, cashless payments could make their payment processing more efficient and reduce fraud as well. This could be incentives for policy makers or public institution leaders to push LinkAja adoption in their organization. LinkAja could capitalize this putting registration and cash-in booth on every government institution that accept cash payment.

Leveraging Combined User Base

LinkAja is an evolution T-Cash. Telkomsel has 100 million existing user base. There also four state banks backing LinkAja up : Bank Mandiri, BNI, BRI and BTN. The four combined (also known as HIMBARA) represented almost 200 million accounts. Not to mention user contribution from Pertamina and Jiwasraya.

As i mentioned in my previous article, massive user base dont mean much if there are no clear benefits for Telkomsel or HIMBARA to use LinkAja over other wallet provider.

Good example of this is initiative to link integrate current account to LinkAja balance. Hence if you are one of HIMBARA bank users, you dont have to constantly top up, just link your account and LinkAja app could substitute your card as payment method.

Another ideas might be to use LinkAja as easier method to do peer to peer transfer. User can transfer money from any of HIMBARA bank to any mobile phone number since primary identifier for LinkAja (0r any other wallet) is mobile number.

Loyalty points is another angle that state owned enterprise could collaborate with LinkAja. Points from Telkomsel top-up, Pertamina petrol station, any payments from HIMBARA banks will be consolidated in LinkAja.

The key is to make the experience using LinkAja much much better for existing BUMN customer base compared to non-user. If its not, then LinkAja would not have advantage over other big 3 wallet provider no matter how many state enterprises backing them up.

Investing : Next Frontier in Indonesian Fintech ?

In current Indonesian context, when somebody talk about fintech they mostly refer to lending. In DailySocial surveys, more than half of respondent associated fintech with online lending services with payment as a close second. Number of fintech funding activities also skewed toward this direction with 60% of total 14 deals in 2018 went to P2P lending startups. If you browse through fintech list in OJK website, only P2P lending are listed even though insurance and investment fintech falls under OJK supervision. There are currently 113 registered lending fintech as of June, far more than any other types of fintech combined.

Two things from this: Indonesian fintech growth so far still contributed by lending thus other financial services is underutilized. This leaves lots of room to grow for fintech ecosystem going forward. Second, with lending companies already reach hundreds, fintech players need to think hard what will be the next play.

So what could be the next phase for Indonesian fintech ? my take is on investing. Of all the financial services, it is the least inclusive with less than 1% registered investors in a 270 million population. Number of investors has been growing double digits for four years straight and most of the growth are contributed from younger segments.

In this article, i wrote overview on investing landscape in Indonesia, challenges and how this sector has big potential to drive further fintech growth going forward.

Continue reading “Investing : Next Frontier in Indonesian Fintech ?”

Second Act : OVO Strategy to Expand Beyond Wallet

This is series of study case analysis that i like to write from time to time. I am a big fan of Ben Thompson’s Stratechery and these essays are inspired by Ben’s work. Check out my last post on LinkAja.

On second week of April, Dealstreetasia broke the news that Indonesian payment wallet provider OVO has acquired online mutual fund startups, Bareksa, for 20 mio USD. This news came just merely a month after OVO acquisition of P2P Platform Taralite. Taralite acquisition has enabled OVO to offer credit-card-like Paylater which at the moment only available in Tokopedia. Bareksa on the other was used to power OVO Invest feature which can be accessed after user do advanced KYC by submitting their E-KTP.

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Seeking information in OVO customer service booth. Pic credit from Metropolitan.id

As a country with massive unbanked population and asymmetric banking industry , Indonesia is a lucrative ground for fintech. These recent developments is a clear attempt to expand into wider financial services and having Lippo and Grab as their backer, OVO have ample warchest to start landgrab in multiple fronts.

In this essay, i will share my analysis on rationale, challenge and predictions on OVO next step in Indonesia financial industry.

Continue reading “Second Act : OVO Strategy to Expand Beyond Wallet”

Mengapa saat ini di Indonesia, startup fintech lebih banyak dibanding startup lain

Ini sebenarnya adalah thread Quora yang saya jawab beberapa waktu lalu Karena responsnya cukup bagus, saya menambahkan beberapa materi dan memposting ulang disini.

Platform Quora ini cukup menyenangkan dan saya aktif disana. Cek kesini 
untuk melihat semua jawaban yang saya tulis.

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Lanskap fintech di Indonesia. Gambar dari Convergence Ventures
Continue reading “Mengapa saat ini di Indonesia, startup fintech lebih banyak dibanding startup lain”

Three Challenges Startup Faced in Serving Indonesia’s Unbanked Population

In Indonesia, access to basic financial service such as saving and lending is a priviledge. The country with more than 250 million people has only less than 40 million recorded bank account according to World Bank. The country stands at the top of  Asia Pacific in terms of unbanked population with three quarter of total population are still outside of conventional financial system.

At glance, these statistics looks bleak. But for entrepreneurs and startups, it means massive opportunity fintech. Indonesia is currently a fintech hotbed with more than 150 startups and record-high investment of USD 57 million in 42 deals by last year alone. Half of that deals went to lending and payment startups.

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Picture of shallot sellers in Jogja, one of the many millions unbanked population in Indonesia. Photo by Andy Al Mesura on Unsplash

I work as a product and business development guy in a peer-to-peer lending startup. Our startup focus is to provide microlending to millions of unbanked and underbanked women entrepreneurs in Indonesia. In this post, i will share three challenges that i have to deal on a daily basis. The challenges will slightly skewed to lending business model but i try to make it relevant for other fintech as well.

Lets start!. Continue reading “Three Challenges Startup Faced in Serving Indonesia’s Unbanked Population”