Bridging the distrust in Indonesia’s insurance system through technology

Fireside chat with Victor Roy, Founder, and CEO of Bindcover

What is the potential for Insurance in Indonesia in the next 5 years? 

The potential for insurance in Indonesia in the next 5 years is huge. At the moment, Indonesia insurance literacy index is very low at 15.8% and the insurance penetration is only 3%. However, even at this rate, the total premium collected in 2018 was around USD 30 billion, and we are expecting double-digit growth annually until 2021. This is a huge growth.

This is justifiable – the Indonesian economy has grown more than 5% annually for the past 5 years, and our population is close to 270 million. In the next 5 years, we expect the GDP (nominal) per capita to exceed USD5k – the same trend that we saw from China and Brazil 5-10 years ago. 

Today, most insuretech companies focus on the distribution as aggregator/market place and few players do innovative product such as delay insurance and handphone screen protection.

For an insurance aggregator, the most popular policies sold are car and travel insurances. Travel insurance is mostly connected as compulsory or voluntarily to OTA or airlines sales. Penetration for direct online transactions is still less than 1% from premium contribution unless it is B2B2C connected to other services.

Regulators thoughts on Insuretech

To add that landscape, Indonesia has less than 10 licensed insuretech companies to date.

Indonesia’s Financial Service Authority (OJK) has started to clamp down on insuretech companies acting as Insurance brokers or Insurance companies without a license. In the eyes of the OJK, all aggregators should have broker license and insuretech selling their innovative products should have an insurance license.

One of the unique regulations is any new insurance product has to be approved by OJK first before it is launched in the market; I believe this is very hard to comply for any insurtech company in Indonesia.

What will the insuretech industry look like in 5 years time?

In the next 5 years, the digital ecosystem would become more mature. We should see many new fintech startups. Likewise, insurance growth normally will follow the Financial market growth such as Banks, finance companies, and P2P lending. Many online marketplaces will also support the growth of insurance or insuretech.

People may buy travel or car insurance online because the products are rather easy for the layman to understand. These products are also affordable, and the process for retail insurance purchase has been optimized in the last 5 years.

However, companies that are paying more than USD 100k per year for insurance will not go online to buy their cover. For the larger amount of premium, financial intermediaries are still important, and there will still be a demand for them.

The aggregators may give big discounts and reduce the remuneration of the intermediaries but from the customers’ perspective, trust is more than the small discount they will save.

At the end of the day, insurance is still a “people” business because it is a matter of trust.

Tell us more about Bindcover – who do you work with and what is the value provided?

Because of the low insurance literacy index in Indonesia, we see many disputes by customers who bought the wrong insurance, did not know how to claim or did not get the fair amount of compensation they deserved.

This knowledge gap creates a huge distrust to the insurance companies. On the other hand, honest financial intermediaries find it harder and harder to get leads and close sales because of the distrust.

Bindcover is a platform that provides a convenient and simplified way to deal with these matters. We are not an aggregator (so we do not need an OJK license), but rather our platform improves claim processing and simplifies the buying process.

Our strategy is to work together with the insurance ecosystem – from insurance companies, financial intermediaries, aggregator and loss adjusters. The key to success in this market is regulatory, relationships as well as technical know-how.

partnership with existing network

Bindcover developed a system called “Advisor Anywhere” so when the customers are looking for advisors, they can choose the advisors who are available based on location, time schedule and also the advisors’ experience.

Another important aspect is at the claim stage. In our experience, when a claim occurs, the customer will prefer to talk to a person who can provide advice on how to make the claim instead of a machine. Human touch is still important for fintech in Indonesia.

What is next for Bindcover-where will you go into next? What is the plan?

We are developing a new type of underwriting methodology call Crowd Underwriting, our aim to be the “Lloyds market in the digital world”.

This will allow commercial insurance brokers or even direct insurance customers to market their “risks” on our platform for insurance companies to bid and underwrite part or all of the risks.

Bindcover would provide all the required information such as slips, survey report, and loss history to the insurer(s) to underwrite. The underwriter still can interact with their clients but most of the paper works are done within this platform. At the end of the day, we are disrupting the process, but definitely still obeying the law.

We are going into the blue ocean of fintech – and it will require specialist experience to thrive in this space. So we welcome competitors to raise the bar and be part of the ecosystem with us.

My team and I will be present at MWC Shanghai on 26-28 June as part of the Momentum Works delegation. Join us!