Improving Indonesia’s insurance literacy is an urgent call to increase the low insurance penetration market, East Ventures Digital Competitiveness Index (EV-DCI) 2022 showed
Although many insurance firms exist in Indonesia, and efforts to increase insurance access and literacy have been on the rise, the penetration is still shallow. This became the underline for Andy Yeung to bring technology to transform the insurance sector.
Andy used to be a serial technology entrepreneur in Hong Kong, China, and Southeast Asia (SEA). He had experienced the exponential growth of technology in China and deeply believed Indonesia and SEA would be the next China. Andy then founded Fuse in 2017.
Initially, the Fuse mobile application platform was offered as a Software as a Service (SaaS) for insurance companies but unfortunately, the adoption rate was much lower, only 1.5% than expected.
Andy started pivoting the SaaS platform to an agent/broker partner business. After a few attempts to find the right local venture partner but failed, he decided to explore any M&A possibilities.
He came across Ivan Sunandar in mid-2017, who founded Cekpremi.com in 2015, a leading insurance aggregator website. With the same vision that technology can redefine the way insurance works, Ivan decided to join Fuse as the co-founder & COO, and Cekpremi.com completed the M&A with Fuse in early 2018.
Since then, Fuse has become a technology platform that enables agents and partners to offer multiple insurance products from different insurance companies. East Ventures has invested in Fuse since mid-2019 as we believe in Fuse’s capacity for elevating the insurance market in Indonesia and other Southeast Asian countries.
Reasons behind Indonesia’s low insurance penetration
The low penetration of the insurance market has been an unresolved old-school problem for the industry. With an over 270 million population, Indonesia’s insurance penetration was only 3.18%, or never surpassed 4% during a decade. Several reasons contributed to this condition.
First, agents generally offer products from a single insurance company because they get their license from that company. This potentially gives rise to agents pushing the insurance brands they are working for rather than finding the best product to suit the customer’s needs. Agents that push their own agenda, an overly complex application process, and some default cases have further diminished public trust in the insurance industry.
Another factor, most insurance products are designed with relatively high premium installment, which not everyone can afford. Meanwhile, the insurance density, a measure of the average income of the people for insurance products in one year, was IDR 1.73 million (US$D 110.16) per year in 2021.
Moreover, the insurance literacy is still shallow compared to the whole financial literacy. According to Indonesia’s regulator (OJK) survey in 2019, the insurance literacy was only 19.4%, compared to the financial literacy index was 38.03%. People also don’t have any obligation to own insurance products, as they still rely on informal insurance, such as family networks, and are less aware of the potential risks in the future.
Broadening the market through non-disruptive creation
According to East Ventures-Digital Competitiveness Index (EV-DCI) 2022, there are some elements to improve the adoption and penetration of financial products through digital, such as digital financial literacy, upscaling digital talents, ICT infrastructure, and government support.
Digital financial literacy plays the key role for financial inclusion and services, improving the adoption of digital financial products. Furthermore, the EV-DCI survey from the companies’ perception showed that the number of financial access points are still narrow. To increase financial literacy, the report states that stakeholders need to facilitate access to products, information, and advice through multi-channel delivery.
Instead of using conventional methods to educate the market, Fuse leverages multi-channel distribution and digital ecosystems to offer products and help insurance companies penetrate the market and increase insurance literacy.
In the B2B2C model, Fuse offers micro-insurance products in the e-commerce platform, with affordable prices, such as crack screen protection, gadget & electronic protection, cargo liability, product liability, quality merchandise insurance, etc. The micro-insurance products and affordable prices are expected to educate customers about insurance indirectly.
Considering the low insurance literacy, insurance agents are still crucial in educating customers. Therefore, Fuse also enhances agents’ capabilities in promoting insurance products to customers, so that they can advise and provide better recommendations for suiting the customers’ needs and hence gain more trust from the customers. Moreover, the platform can increase the agents’ skills to digital. Currently, Fuse has more than 80,000 agents in 24 cities in Indonesia.
Fuse Users Distribution Map
By utilizing technology, Fuse also improves the dealing process, making it more efficient. The process may take two weeks with the conventional method, but Fuse can process it in a couple of hours as it connects via API. Thus, Fuse improves both agents and customers’ experience in the insurance ecosystem. The strategy is to develop and optimize Fuse’s digital systems, processes, and distribution channel.
From the three solutions above, we can see how Fuse utilizes some aspects to improve some pillars in improving the digital competitiveness index across the country. Fuse utilizes the technology infrastructure to ease the dealing and closing process between the agents and customers. Based on the East Ventures – Digital Competitiveness Index (EV-DCI) 2022, ICT infrastructure serves as the foundation that will facilitate the equitable growth of our digital economy.
Compared to the previous two years, the score distribution on the ICT sub-index is more even, which shows improved access to digital infrastructure across Indonesia’s 34 provinces. It becomes the opportunity for Fuse to leverage their platform and agents to reach wider insurance penetration in the country.
In terms of access to the financial sector, the EV-DCI 2022 survey of digital companies shows that financial access points in Indonesia are still lacking. To increase financial literacy, the report states that stakeholders need to facilitate access to products, information, and advice through multi-channel delivery. By integrating insurance products directly into seller platforms like Tokopedia and other digital channels, Fuse helps to open financial access to customers and bring benefits for all stakeholders.
Collectively, Fuse’s solutions will build customers’ trust in the insurance ecosystem. As more customers experience the benefits of insurance protection from Fuse’s products and agents, insurance literacy and penetration will follow.
“One reason for the massively low penetration is the education level, another is the product complexity. So if we can distribute products that are easily understandable, very beneficial, and affordable as well, then we will be able to increase insurance penetration and literacy, while also making the process more efficient for agents in Indonesia,” said Andy.
Download the full EV-DCI 2022 report here.