Reisch: Microinsurance is insurance for low-income households. It protects people against specific risks such as the death of the family's main wage earner, floods or illness.
Premiums can cost as little as a few cents per year. Payouts are moderate, generally only a few hundred dollars.
Family Umbrella – Microinsurance in Indonesia
Allianz has launched its first microinsurance product for the Indonesian market. As a pilot project, the product provides basic life insurance to low-income families in the country. Allianz.com News talks to Jens Reisch, CEO of Allianz Life Indonesia, about the new product introduction.
Reisch: "Combine corporate responsibility with a business opportunity"
Allianz.com News: Mr. Reisch, everybody knows about basic insurances, but what exactly is microinsurance ?
? What is the microinsurance pilot project in Indonesia about?
Reisch: On August 1, Allianz Life Indonesia started a one-year microinsurance pilot project to examine the market for this new business field. We offer a single microinsurance product called "Payung Keluarga," which literally means "Family Umbrella". This is essentially a credit life product that also provides additional payments to the customer's family and is specifically tailored to the needs of low-income households.
Firstly, "Payung Keluarga" covers the outstanding balance of a loan in the event of death of the loan taker. Secondly, the loan taker's family receives twice the original loan amount as an additional payout, which helps the family overcome subsequent loss of income following the loan taker's death. This additional benefit sets our product apart from conventional credit life products.
Another unique feature is that the distribution partner will settle claims on Allianz' behalf to speed up claims payment. Allianz's role will be limited to ex-post checking.
Firstly, "Payung Keluarga" covers the outstanding balance of a loan in the event of death of the loan taker. Secondly, the loan taker's family receives twice the original loan amount as an additional payout, which helps the family overcome subsequent loss of income following the loan taker's death. This additional benefit sets our product apart from conventional credit life products.
Another unique feature is that the distribution partner will settle claims on Allianz' behalf to speed up claims payment. Allianz's role will be limited to ex-post checking.
? You are working with microfinance institutions as distribution partners. Do they have the necessary expertise?
Reisch: Our partners will be top-quality and established players in the microfinance industry, such as microbanks, savings & credit cooperatives and NGOs. These partners will be trained by Allianz in the first place, but then will handle most of the distribution, single premium collection, underwriting and claim settlement process.
GTZ, the German Technical Cooperation owned by the German Government, supports the project and has endorsed our distribution partners.
GTZ, the German Technical Cooperation owned by the German Government, supports the project and has endorsed our distribution partners.
? Who pays the premium? Is it subsidized?
Reisch: The customers themselves will pay the premium. It is a single premium product where the premium is deducted from the loan. The premium is not subsidized by Allianz, the government or any donor.
By paying directly for the insurance, customers become aware of the cost-benefit relationship of insurance. Next to our education and training efforts, this is one way to raise insurance awareness in Indonesia which currently is still very low.
Besides, our market research has shown that the premium rates for "Payung Keluarga" are affordable even for very low-income households. The average annual premium is 20,000 Indonesian rupiahs (2.40 US dollars). The average loans covered with this premium are about 2,000,000 rupiahs (240 US dollars). However, for very small loans of 500,000 rupiahs (55 US dollars), the premium can be as low as 6,000 rupiahs (0.66 US dollars) per year.
By paying directly for the insurance, customers become aware of the cost-benefit relationship of insurance. Next to our education and training efforts, this is one way to raise insurance awareness in Indonesia which currently is still very low.
Besides, our market research has shown that the premium rates for "Payung Keluarga" are affordable even for very low-income households. The average annual premium is 20,000 Indonesian rupiahs (2.40 US dollars). The average loans covered with this premium are about 2,000,000 rupiahs (240 US dollars). However, for very small loans of 500,000 rupiahs (55 US dollars), the premium can be as low as 6,000 rupiahs (0.66 US dollars) per year.
Jens Reisch with "Family Umbrella" customers Evi Kristianingsih and Erna Catur
? Why is Allianz Life carrying out the project?
Reisch: The pilot project will enable us to test a potential new market segment that can greatly enlarge our customer base. It will also combine corporate responsibility with a business opportunity. Moreover, the project will support the government's drive to provide access to insurance for a wider range of people in Indonesia.
? What are your short-term goals?
Reisch: Within the next year, we plan to cover 50,000 customers.
? Where else does Allianz offer Microinsurance?
Reisch: India is the only other country where Allianz offers microinsurance. Bajaj Allianz, our Indian joint venture, launched its first microinsurance product in 2003. Today, it covers more than 100,000 customers. Following this successful start, Bajaj Allianz is currently developing additional microinsurance products.
As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer, provided on the right.
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