Asia urged to develop insurance for the poor

Desy Nurhayati, The Jakarta Post, Nusa Dua, Bali | Wed, 10/20/2010

Finance Minister Agus Martowardojo has called on Asian countries to develop micro insurance in the region as a way to empower the poor with insurance services.

Addressing the 25th East Asian Insurance Congress, the Indonesian finance minister said that as most insurance companies in the region were still focused on middle-class customers, the market for the low-income bracket remained mostly untapped.

Agus said the micro insurance market had significant potential in most Asian countries, in part because many of them had large populations.

“Two characteristics of developing countries are the high proportion of low income and low financial literacy families compared with developed countries, so I strongly encourage East Asian countries to develop micro insurance in order to give the poor access to insurance services,” he said.

“A few Asian countries are pioneering the development of micro insurance and have been showing promising results,” he added. The region is also a great market for sharia-based insurance products. “Takaful and re-Takaful insurance products have tremendous potential as an alternative to conventional products, particularly in Southeast Asia,” the minister said.

More than 1,300 participants from 40 countries across the world, mostly representatives of insurance industries and brokers, attended the four-day congress themed “Going Back to Basics with a Dynamic New Mind-set in Insurance”. They discussed current issues that brought new challenges and opportunities to the industry.

Participants at the congress also addressed the issue of developing insurance schemes to cover damage caused by natural disasters, citing an increase in the frequency and severity of natural disasters in East Asia.

Many believe the insurance sector plays a pivotal role in accelerating the speed of an economy’s recovery from a financial crisis. Asia is seen as an attractive market for global investors and private equity market.

While much of the rest of the world saw a dip in insurance premiums, many of Asia’s emerging markets saw insurance premiums increase last year, albeit at a slower rate, the Asia Insurance Review reported.

Total revenue from insurance premiums in Asia was US$989.4 million in 2009, up 2.8 percent from 2008, representing a 24.3 percent share of the world’s market.

Ranking globally at number two was Japan with a total premium volume of life and non-life insurance of $505.9 million, representing 12.4 percent of the world’s market share. South Korea ranked 10 with a total premium volume of $91.9 million.

Five Asian countries, including Japan, South Korea and Taiwan, are top markets for life insurance, booking a total volume of $732.3 million, or 31.4 percent of the global market share. Asia’s non-life insurance business saw a 5.6 percent growth in premiums to $257 million, with Japan and China as the top markets. Taiwan, meanwhile, has the highest insurance penetration rate in the world at 16.8 percent.

Among East Asian countries, Indonesia ranked eight in total value of premiums, booking $7.29 million last year, a 5.52 percent increase from $6.9 million in the previous year. The country holds only 0.18 percent of the world’s market share.

The Indonesian insurance market has great potential as current market penetration is still below 20 percent of the total market potential, said Kornelius Simanjuntak, chairman of the Insurance Council of Indonesia and the country’s chief delegate at the congress.

“Considering the country’s total population of 240 million and the ongoing development in various fields such as industries, infrastructures and financial services, the insurance market will continue to grow substantially, providing there are good opportunities for both domestic and foreign investors,” he said.