Indonesia enters era of digital insurance distribution

Industry executives at Insurance Asia Forum 2024 push the digital mindset in developing an efficient ecosystem.

INSURANCE companies in Indonesia are increasingly leveraging digital distribution channels to engage with a digitally savvy and broader customer base. This digitalisation presents both opportunities and challenges.

The adoption of digital distribution channels brings significant benefits, including extensive reach and improved communication with customers. However, challenges such as dealing with legacy systems and the complexities of digital transformation remain.

Senior executives addressed these issues in the Panel Session 1 at the Insurance Asia Forum 2024 in Jakarta, moderated by Bernadeth Saoria L. Gultom, partner on Consulting and Financial Services at EY Indonesia.

The panellists included Sukma Darman, head of Digital at Zurich Indonesia, and Erickson Mangunsong, technical director at PT Asuransi Etiqa Internasional and chairman of International Relations at the General Insurance Association of Indonesia (AAUI).

Leveraging digital distribution channels

Kicking things off, Erickson established that digitalisation in Indonesia’s insurance sector is still in progress.

“One crucial aspect is the integration of data and technology to offer hyper-personalised services. Unfortunately, insurance companies often lack sufficient customer information, so collaboration with other institutions, such as banks or other financial services, is essential for maximising data utilisation,” he said.

For his part, Sukma highlighted two important aspects of leveraging digital distribution channels. The first is learning and enhancing products and propositions through digital channels. “Secondly, leveraging digital practices improves customer engagement and satisfaction, which is expected to result in a seamless customer experience,” he said.

Sukma noted that the adoption of digital distribution channels allows for better communication and understanding of customers. However, he acknowledged the challenges, including dealing with legacy systems and the complexity of digital transformation, which the industry is actively addressing.

Erickson pointed out that the challenges in digitalisation include upselling and scaling products, particularly through embedded insurance products in banks and financial services.

“While digital solutions promise efficiency, they sometimes reveal higher acquisition costs. Collaborating with other financial institutions can help overcome these challenges. Focusing on customer journeys and solving specific customer problems are key strategies to balance acquisition costs and customer value,” he said.

Optimising strategies

Zurich Indonesia’s Sukma suggested three key actions for insurance companies to optimise these strategies and stay competitive in the Indonesian market: invest in the right people and upskill the workforce; start small, learn from the experience, and then scale up; and nurture a digital leadership mindset throughout the organisation.

Erickson agreed with the importance of having a digital mindset. He said this mindset helps in carefully choosing the right segments to target and utilising digitalisation for better risk management and customer reach.

“For example, crop insurance and catastrophic event insurance can significantly benefit from digital solutions. If we refer back to the earthquake in Yogyakarta in 2006, the most damage was actually to people living nearby. Those examples can significantly benefit from digital solutions,” he said.

Future trends and regulations

Looking ahead, Sukma envisions the continuous growth of embedded insurance, improving customer experience and market penetration.

“Developing ecosystems by leveraging different companies’ strengths will create sustainable competitive advantages. Listening to customers and partners to address their pain points remains crucial,” he said.

Erickson, on the other hand, stressed that collaboration and developing comprehensive ecosystems are essential. “When we talk about going digital, we have to ensure all the ecosystem, all the producers, and the customers are established to support this digital system,” he said.

Whilst going digital is challenging, Erickson noted that focusing on creating supportive ecosystems will help overcome these obstacles and drive industry growth.

Both panellists agreed that companies need to ensure regulatory compliance. “Close communication and collaboration with regulators are vital. Understanding data sensitivity and adhering to regulations while pursuing hyper-personalisation is essential,” said Sukma.

In addition, Erickson said: “Digitalisation aids in regulatory compliance, particularly in transparency and KYC requirements, ensuring that technology supports regulatory aspects is key to successful digital transformation.”