Indonesian insurance industry keys on growing middle class

Indonesia’s life insurance industry is set to grow up to 30 percent this year as the nation’s middle class grows and expectations of returns on investment in capital markets stay bullish, an industry chief said.

“The expected economic growth of 6.4 percent to 6.5 percent will boost household consumption. This will create a potential market for the life insurance industry,” Evelina F. Pietruschka, chairwoman of the Indonesian Life Insurance Association (AAJI) said this week in Jakarta.

She said a larger middle class would boost the ranks of insurance policy holders, which stood at 16.75 million last year.

Total assets within the life insurance industry were Rp 174.77 trillion (US$20.3 billion) in 2010, up 24.4 percent from the previous year. While its growth outpaced the 6.1 percent increase in the Indonesian economy, the industry remained a small fraction of the nation’s financial sector.

In comparison, Indonesia’s banking sector had total assets of Rp 3,008.9 trillion last year.

Evelina, who has chaired the association since 2005, said the challenges facing the industry included educating people about the need for insurance, a stumbling block that sees many people’s money stay in banks.

“In the past, insurance was just about protection. Now, with unit-link products, insurance can also be a means to invest. Insurance agents now must be able to become financial planners for customers,” she said.