MICROCAPITAL STORY: Microinsurance Client Base of Allianz Life Indonesia Grows Four-fold in 2008

Microinsurance provider Allianz Life Indonesia has announced that its microinsurance client base grew 417 percent in 2008, from 42 thousand policyholders at the end of 2007 to 183.8 thousand at the end of the year. Its line of microinsurance products, dubbed “Payung Keluarga” (meaning “Family Umbrella”), generated a modest premium income of USD 82.5 thousand for the year, up 350 percent from USD 19.6 thousand in 2007. The significance is not the profit, but rather the increase in business volume. Payung Keluarga offers a range of life insurance products from basic credit life protection, which prevents microcredit borrowers from leaving debt to their family, to products that offer additional payouts to family upon the death of a breadwinner. Allianz Life Indonesia settled 76 microinsurance claims in 2008.

MicroCapital has been following the activities of Allianz Life Indonesia, a subsidiary of Germany-based global insurance giant Allianz Global Investors, since August 2006 when Payung Keluarga began as a pilot project offering a life insurance product charging premiums of only USD 0.66 annually. The project, outlined by this MicroCapital article, was initiated after a market study commissioned by Allianz, German Technical Corporation, and the United Nations Development Program indicated that there was a large unfulfilled demand for microinsurance products among low-income Indonesians. To reach a wide number of low-income clients, Allianz collaborated with MFIs that were assigned the task of collecting premiums and administering insurance claims.

MicroCapital published an Allianz Press Release in January 2008, when the company announced that its Payung Keluarga microinsurance products would become a permanent product line in the Allianz portfolio. By then, in response to feedback from its partner MFIs, Payung Keluarga products had diversified to include Islamic law compliant policies and co-insurance for spouses. Allianz also allowed partner MFIs to tailor insurance policies to meet their clients’ needs. However, to keep administration costs and premiums down, it required policies for each MFI’s respective portfolio to have uniform conditions. Average premiums had risen to USD 0.73, the most recent price offered.

In January 2008, with the product line firmly established, Allianz Life Indonesia had its eye on expansion. “We are currently collaborating with seven partners, but are confident that with our improved product offering we will be able to expand this network considerably,” said Jens Reisch, CEO of Allianz Life Indonesia. “Of some 56 thousand [MFIs] in Indonesia, around 600 are large and modern enough to be viable partners. And then we have the large commercial banks, more and more of which are entering the microfinance sector, so there is significant potential.” In order to reach a wider client base Allianz added a third tear to its distribution model, allowing less established microfinance service providers and representatives to begin brokering policies for its partner MFIs. The press release stated that Allianz aimed to increase its 42 thousand microinsurance policyholders in January 2008 to 100 thousand by the end of the year – a goal, which as we report today, it would go on to shatter.

In January 2008 Reisch stated, “The next thing we want to do is expand our product portfolio. Health insurance and their children’s education are important considerations for low-income families, so these will be our next steps. In addition, we are considering offering property insurance policies, which, for example, protect against the risk of natural disasters.” It is unclear what progress Allianz Life Indonesia has made along these lines.

To achieve its growth Allianz Life Indonesia tripled the number of its partner MFIs to 21. Broken down, the partner MFIs include four cooperatives, 11 social foundations, four rural banks and two commercial banks that penetrate six main Indonesian areas, including Sumatra, Jakarta, West and Central Java, Bali, Sulawesi and Sumba Island in East Indonesia. Allianz Life Indonesia stated that it expects to serve at least 200 thousand new microinsurance customers in 2009, and generate premium income of over USD 250 thousand.

Allianz Global Investors also offers microinsurance in India, Egypt, Colombia, Senegal, Cameroon, Ivory Coast and Madagascar. MicroCapital released two stories, on March 17 and April 17, 2008, regarding Allianz’s operations in India in partnership with charity CARE International and MFI SKS Microfinance respectively. Allianz aims to reach 2 million microinsurance customers around the world by the end of 2009.

By Ryan Hogarth, Research Assistant

Additional Resources:

Allianz: Home

Allianz Life Indonesia: Home

Allianz Life Indonesia: “Allianz Serves 230,000 Microinsurance Customers”

MicroCapital article, September 1, 2006: “Allianz Creates Microinsurance Project in Indonesia”

MicroCapital article, February 6, 2008: “PRESS RELEASE: Allianz Life Indonesia Offers Islamic Microinsurance On Permanent Basis After Successful Pilot Phase”

MicroCapital article, March 17, 2008: “CARE International and Allianz Pioneering Microinsurance Against Disaster for India’s Poor”

MicroCapital article, April 17, 2008: “SKS Microfinance Looks to Offer Microinsurance Products with Bajaj Allianz Life”

TMCnet.com: “Allianz Indonesia Sees Threefold Growth for Microinsurance in 2008”, by Rebecca Ng