JAKARTA -- COVID-19 has decimated many industries, but the insurance sector could be one of the few silver linings to come out of the pandemic, one Indonesian startup believes.
"Awareness of insurance has increased quite substantially," Cleosent Randing, founder and CEO of PasarPolis, an insurtech -- technology related to insurance -- startup based in Jakarta, said. Via platforms such as Gojek, the five-year-old company provides small ticket, affordable insurance products, which are underwritten by the larger insurance companies. One example of a PasarPolis product is the insurance consumers get when sending parcels via GoSend, Gojek's logistics service.
As a result of the increase in goods being bought online, Randing said that the company's business had been helped by a significant increase in the logistics required to deliver these items.
The CEO expects that the pandemic will help to boost sales of other types of insurance, be that health or life, in a country that has one of the lowest insurance penetration rates in the region.
Insurance penetration tends to rise in tandem with a country's economic development, but while Indonesia has recently been classified as an upper middle-income country by the World Bank, its insurance penetration rate was only 1.99% in 2019, well below Thailand's 4.99% and Malaysia's 4.72%, according to data from SwissRe Group.
But Randing believes Indonesia can follow a trend seen in China, which appears to be seeing higher insurance take-up since the pandemic. A survey in May by Morgan Stanley found that 16% of respondents had increased their medical coverage over the previous three months, and a third were considering taking on more insurance.
There is a caveat, however: insurance policies need to be affordable and easy to sign up to.
Insurance in Indonesia is still primarily sold through traditional channels like agents and banks, and requires extensive paperwork to be filled in. The associated costs of this are added to the premiums, leading to higher prices. While PasarPolis still deploys agents, their primary distribution channel is through digital platformers like Gojek, Tokopedia and Traveloka -- which are all investors in the company -- allowing them to reduce costs and slash premiums. Purchasing insurance is also done online.
Reducing cost "is very important to democratize access to insurance in Indonesia," the CEO said, adding that this would help reduce financial stress among citizens and help Indonesia's economy to grow. "We want to make sure we make [insurance] affordable, as well as extremely seamless and frictionless to buy."
PasarPolis says it issued more than 650 million policies to first-time insurance purchasing consumers, including ride-hailing drivers, delivery couriers and merchants of small and medium online enterprises last year.
The company is also working to deploy a "dynamic pricing" model, whereby premiums change based on a person's habits and tendencies -- for example, a health insurance premium will be reduced for those who exercise daily.
Randing said Chinese smartphone maker Xiaomi was a key component of this approach. The company was one of the investors which participated in the Indonesian startup's recent $54 million series B funding round.
"Xiaomi has all these Internet of Things [capabilities]... The insurance of the future is connected to IoT," the CEO said. "Buying insurance [will become] so frictionless, like buying apps, [and it will say] you walked this much this month, so you will get a discount on your insurance. We want to make that mobile first, internet-enabled insurance."