Indonesia is undoubtedly one of the most enticing markets in the world and the most attractive insurance market in Asia with a high potential in profitability and growth. With more than 250 million people, the country is enthroned as one of the largest economic zones in the world. But there is no guarantee that every digital business is able to conquer Indonesia’s market easily. Generally, Indonesians have been skeptical about buying insurance. In 2016, according to Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or “OJK”), merely 12% of Indonesians are using insurance products, which is considered low compared to its neighbour, Singapore, who has 90% of the citizen being insurance customers. Not only that, insurance penetration in Indonesia also remains low, being at only 1.5 percent, which is much lower than other emerging Asian markets, such as India, where penetration is three percent.
Indonesians also have little to no intentions of setting aside part of their monthly budget for insurance. Expenses for Indonesians catered for insurance is just about Rp 1.29 million per year. The lack of interest in insurance in Indonesia cannot be separated from the negative stigma towards insurers. Getting insurance is easy but people assume that it will become more difficult when it comes to making claims. According to Yayasan Lembaga Konsumen Indonesia (YLKI), or the Indonesian consumers’ foundation, 53% of registered disputes in the courts is due to claims that have been rejected without any clear explanation from the insurers. This has added negativity surrounding insurance companies.
The Digital Revolution for More Service Transparency
The current condition of the insurance industry in Indonesia is frustrating and outdated. Conventional insurance often comes with the hassle of neverending phone calls and confusing policies with hidden clauses that the client needs to pay for. It leaves people wondering how much they should pay for a particular insurance product or service.
As noted in the EY Global Insurance digital survey, the insurance industry is lagging behind among others in developing innovative and customer-friendly digital experiences. Such as transparency, customer engagement, analytics usage, and adoption of the Internet and social media. Only 14% of consumers are very satisfied with the communications they receive from insurers — and 44% have had no interaction with their insurers in the last 18 months. The communication gap signals serious relationship issues and low trust but also provides opportunities to take action and expand. Still, customer expectations are pretty high in terms of wanting a smooth and simplified experience from their insurance providers.
Based on these facts, insurance companies should amplify their services to become more customer-oriented. The way to this might be in moving towards providing digital services. Based on the Accenture Consumer Driven Innovation Survey in 2014, survey results showed that digital transformation can increase insurance sales by 10 to 15%.
Building Momentum for Digital Transformation
The digital revolution has changed the way businesses interact with customers. As the Internet and social media increase in popularity. Consumers are relying more on their smartphones to research, compare prices and purchase insurance and financial products. Customers are becoming more independent in finding information. And making decisions about services and products they want to purchase. Even before they reach the salespeople.
With the adoption of technology, the insurance industry will be able to make their products and services become more relevant to their customers’ needs. Insurers can offer more transparent services to customers that can be implemented in the insurance distribution, data assessment, claims, and payments.
For example, the banking industry, which shares many similarities with the insurance industry, has shown great accomplishments in digital adaptation and transformation. Which has developed into the latest trend known as financial technology (fintech). According to the 2016 data from the Central Statistics Agency (BPS), over 60 million Indonesians have bank accounts. With 34 percent of them already using mobile banking services. Moreover, 40 percent of Internet users have harnessed the power of digital platforms to make better decisions about financial solutions. This is an indicator of how fast digital insurance solutions can expand.
The implementation of digital technology is already becoming a main concern for several providers in many countries. In Singapore, DeltaDigital.sg, an insurance company, sees insurance brokers and advisors generate a quote instantly for clients, such as small and medium enterprises, so that they no longer have to go through the slow and complicated process of completing a physical proposal form. While the process conventionally takes up to several weeks. DeltaDigital.sg is able to generate a quote within a matter of minutes. In USA, Lemonade, an insurance startup, had successfully approved a claim in just three seconds, a process that would have taken a traditional property and casualty insurer days, if not weeks.
Indonesia has also a potential to shift their insurance industry to become more customer-centric. Today, the integration of fintech allows many startups in Indonesia to provide one-tap payment services. So that people can make instant insurance payments through their smartphones. However, making payments is just one small piece of the insurance pie itself. Providers should become more innovative and creative by providing a more streamlined insurance process by adapting digital technology in their businesses.
Takeaways and Possible Plans for the Future
Engaging customers beyond conventional insurance services would need to be implemented in order to position insurance companies in the consumer’s preference. The Internet and social media have had an intense impact on the lives of the consumers globally. Many companies are already transforming their business practices by adopting digital technology to accommodate to changing consumer behavior.
Companies who have been agile and have been able to transform the earliest are the ones who are occupying the major portion of the market share. Thus, it is the agility and speed of companies that are helping businesses address. The new market needs through innovative technology and business models. Companies need to focus on leveraging digital technology to offer greater customer experience. Not only by fostering operational efficiency and providence.
Much of the potential value and opportunities for making digitization a competitive advantage still remain untapped. To unlock this potential, insurers should improve their approach to become more customer-centric. And begin with the systematic process of how digital technology can improve the customer experience at each step in their decision-making journeys. Whether the customer is submitting an insurance application. Are newlyweds seeking their first insurance policies? Or an insurance policyholder filing a claim for car damage.
The main issue for implementing this trend is about technology. We need a sophisticated technology to adopt this trend in our current system. Here at Qiscus, we have an End-to-End Solution for your company. With our End-to-End Solution, we can help your business to adapt to these trends. Qiscus can help you to transform your conventional business digitally through our chat engine technology. Drop us a note at www.qiscus.com or e-mail [email protected] and see what help we can offer you!