Insurace is for everyone

By Peter Phelan*



Most analyst of the insurance market in Indonesia would agree that insurance penetration rates are very low. This is especially true of general insurance, life insurers having made more deep inroads into the general market. Given the size of the population of Indonesia and the developing complexities of the consumer and business markets (as they increase their already growing position of importance on the world stage) it is a concern that insurance is so infrequently purchased.
Of course, no-one wants to spend too much money on insurance, and I am including my self in this category. You can not touch insurance, smell it or see it – it’s an intangible. In return for your money you get simply a document which offers a promise. It is not at all as interesting as the other things you can spend money on – cars, mobile phones and computers. However, the key service which the insurer offers – the payment of claims in circumstance of distress to the policyholder – is always appreciated if a claim has to be made. I never met anyone who regretted buying insurance when they have to make a claim!
Large corporations always have detailed insurance plans in place. They work closely with insurance brokers and advisers to ensure that the risks they face in their business activities are adequately covered. Most of the risks their cover are the ones which leave the company open to financial loss, through damage to plant and property or through an inability to trade due to a catastrophic market event. It’s clear that they know something important – that risks are worth managing.
But in the corporate world the risks are often large, and therefore very obvious to see, plan for and ultimately manage. In the consumer markets, where the day to day risks are not clear to the ‘risk takers’ it may not be so simple. But those risks can quickly become apparent.
Here is story from my weekend which makes the point. One of the waitresses at my golf club owns a motorbike but had not insured either her health or the bike. She was involved in a accident with that bike recently and was left with a large financial loss in repair cost to the bike. In addition, she has an injury to her right foot which (after being left untreated for a week, no money to pay for effective medical treatment) brought about the onset of infection and the potential amputation of her toes.
My company offers insurance products to people like her – there are two plans we call ACE Ultima Proteksi and ACE Prima Proteksi – which would provide personal accident cover for her current situation, with premiums from under 200,000 Rupiah per year (which is around one third of what my waitress friend pays for the bike repayments each month!). in her case some good Samaritans (golf club members) stepped in with financial assistance – others like her may not be so lucky!
Does this story show the value of insurance to ‘ordinary people’? I think so because if she had an insurance plan in place her outcome would have been very much more certain.
In other parts of the world insurance purchases have grown in line with wealth. When you have something worth protecting then insurance is purchased if (a) the item or person you want to protect has some value, and (b) you cannot easily afford to replace that the item or person. But that does not tell the whole story, as there are some other requirements which must be met before insurance product become the ‘answer’ to the typical risks faced by ordinary people.
Insurance products have to be affordable – it is not an answer if it too expensive for must purchases. They should be accessible – distribution channels and sales people have to be communicating with the customer. They should provide a complete and permanent solution to the problem or risk – meaning also that they should not be easily cancelable. The products must also be understandable (clear language and concepts) and be relevant to the consumer needs.
Let me comment lastly on that very key aspect of accessibility. On the distribution side, in my experience, the most sales people stop trying to simply sell their products and start talking to their customers about their lives, lifestyle and choices. All people have dreams, ambitions, fears, hopes, and expectations which they wish to fulfill whatever their financial luck. Insurance helps smooth out any rough areas, providing financial assistance to ensure the maintenance of lifestyle and life plans, a form of financial continuity which most people would prefer. If they had a choice!
As sales people, we in the industry can achieve more by focusing on what matters to the client and constructing our solutions around that. To understand what the client wants, and we should repeat this until we do it, we have to listen to the client! We will all sell more policies that way than if we just talk at the client, something which still happens too frequently with disappointing results.


Peter Phelan is the Chief Executive Officer of PT. ACE INA Insurance
Media Asuransi. Januari 2009. No.216. Tahun XXX