JAKARTA, 26 October, 2011 – The World Bank, in collaboration with Dewan Asuransi Indonesia (Indonesian Insurance Council) and International Finance Corporation, is hosting the first Microinsurance Marketplace in Indonesia, which is expected to stimulate new and innovative ideas on microinsurance. In Indonesia today, about one third of the population, or about 77 million people have no financial protection or savings cushion. Microinsurance is one potential way protecting the poor and bringing Indonesia closer to achieving financial inclusion.
“Unexpected life events like illness, accidents, job loss, failed harvest, or death have a major impact on everybody, but the impact is much more severe for lower-income households. It thus becomes important for poor families to be able to support themselves and mitigate these risks, without added financial strain,” says Stefan Koeberle, the World Bank’s Country Director for Indonesia. “The microinsurance marketplace is an opportunity for Indonesian stakeholders to learn from global experiences in providing financial protection to the poor. And since it is important that microinsurance solutions for Indonesia are homegrown, this marketplace also gives grassroots players a space to showcase their innovations.”
Microinsurance is a key component of Indonesia’s National Financial Inclusion Strategy. It provides low-cost insurance products to an extremely large market segment that has until now gone largely underserved. Given the size of the potential market, private sector insurance companies are now seeing the attractions of developing products to serve this market. However, several factors have so far prevented microinsurance from flourishing in Indonesia.
On the demand side there is a lack of awareness; a lack of insurance products addressing the needs of the poor; the perception that insurance is strictly for the rich; and finally a lack of trust between the insurers and the insured. On the supply side, financial contracts are overly complicated; claim settlements are too time-consuming and riddled with red tape; and high transaction costs make existing insurance products ultimately too expensive for the poor.
“It becomes important for the Indonesian government to play a greater role in educating the poor on the benefits of insurance, as it feeds into the broader national strategy of making financial services more affordable and accessible,” says Kornelius Simanjuntak, the Chairman of Dewan Asuransi Indonesia. “Microinsurance for lower income families could potentially stimulate the insurance industry to come up with more innovative and competitive products. It would also allow the government to make conditional cash transfer payments for the poor more efficient.”
“The World Bank has been supporting the Indonesian government to enhance financial inclusion. We believe microinsurance is one of the key components for financial inclusion and the World Bank will assist its development to share the global knowledge and experience to Indonesia,” says P.S. Srinivas, the World Bank’s Lead Financial Economist in Indonesia.
The Microinsurance Marketplace runs from October 26-27 and is also supported by Bapepam LK (Capital Market and Financial Institution Supervisory Board) and STIMRA (Institute of Risk Management and Insurance).