Insurtech, short for insurance technology, is the amalgamation of the insurance industry with digital technology, currently experiencing rapid growth in Indonesia. This concept brings innovation to the way insurance business operates, utilizing advanced technology to provide easier, faster, and more efficient access for consumers.
This article will delve deeper into what insurtech is and how its development impacts the insurance market in Indonesia.
What is Insurtech?
Insurtech is a term used to describe insurance technology services, a collaboration between insurance products and advanced technology involving the financial components of fintech companies in Indonesia. Insurtech also relies on support from the financial technology ecosystem.
Currently, insurtech has become a trend, evident from the multitude of insurtech products available on e-commerce platforms. In other words, insurtech is a collaboration between insurance and technology. In practice, all processes from transactions to claims are carried out using technology.
The Financial Services Authority (OJK) revealed that insurtech has brought drastic and positive changes to the insurance industry through technological innovation. According to the OJK, insurtech providers are financial institutions or other entities actively involved in the financial services sector, whether in the form of limited companies or cooperatives.
Insurtech is considered capable of promoting insurance literacy and inclusion. This is because the sector offers simple microinsurance products integrated with the e-commerce sector, making it easier for consumers to access insurance products.
Regulations Regarding Insurtech Products in Indonesia
In terms of regulations, the insurance industry in Indonesia seems to be awaiting clear provisions regarding insurtech services. These regulations are related to the implementation of insurtech that has not been established yet due to involving various parties in the rule-making process.
The Financial Services Authority (OJK) will continue to formulate guidelines and provisions related to this digital insurance process. Additionally, the Indonesian Life Insurance Association (AAJI) states that at least three government agencies must be involved in the formation of these regulations, including the Supreme Court, the Directorate of Population and Civil Registration of the Ministry of Home Affairs, and the Directorate General of Tax of the Ministry of Finance. The Ministry of Communication and Information Technology will also be involved in discussions on drafting insurtech regulations with the OJK.
In its implementation, the use of digital stamps or e-stamps, under the authority of the Directorate General of Tax, is required. Additionally, information about population data is stored in the e-ID system. This makes the process of creating these regulations challenging and involves various stakeholders.
The absence of these regulations creates barriers to the development of insurtech businesses. Furthermore, significant capital and investment, including educating the public about these services, are required.
However, considering the demographic aspect, the development of these services is crucial. Despite challenges such as numerous islands and population size, insurance services can still be accessible to people from various backgrounds thanks to the widespread distribution of digital-based insurance products.
Benefits Offered by Insurtech Services
In general, here are some benefits and advantages of insurtech:
- Easier Access to Insurance: Consumers can easily access insurance products through applications provided by insurtech companies. This differs from conventional insurance, which is generally offered through agents or marketers.
- Relatively Affordable Insurance Premiums: Customers have flexibility in choosing insurance packages offered by insurtech platforms at affordable prices.
- Easy Claim Process: Insurtech has the ability to assist customers in the insurance claim process. If there are missing documents, customers only need to complete those, and experienced teams will assist with the rest.
- Improvement in Financial Literacy: Insurtech can contribute to the improvement of financial understanding and inclusion. Insurtech products are easily accessible and competitively priced, encouraging increased awareness and understanding of insurance products among the public.
Types of Insurtech
Here are three types of insurtech according to OJK:
- Insurtech Aggregator/Marketplace: This type offers insurance products and services directly to consumers. Consumers can compare prices, terms, and policies of various available insurance products. However, this type does not engage in underwriting processes, issuing insurance policies, or creating insurance contracts; its function is solely as a transaction platform.
- Insurtech Intermediaries – Brokers/Agents: These are insurtech aggregators with licenses as brokers or agents. They enter agreements with insurance companies regarding their authority, responsibilities, rights, and obligations. These insurtech entities are active in providing advice to consumers on insurance selection and managing insurance transactions.
- The Full-Stack Insurtech: These are insurance companies with licenses to provide insurance and build their own digital platforms. They offer comprehensive services, from product promotion, sales, risk analysis, to premium payment and claims transaction services.
How Insurtech Works
Fundamentally, the operation of insurtech is not significantly different from conventional insurance products. Insurtech provides various types of insurance products that can be tailored to the needs of customers, such as health, property, life, vehicle, travel insurance, and more. This allows customers to obtain maximum protection benefits.
The registration process to become an insurtech customer involves providing personal information and selecting digital insurance products according to needs. Customers can also compare many products at once to obtain the most suitable and best protection.
All these processes can be done online, making it more practical and less time-consuming. After successful submission and payment, the insurance policy will be sent via email.
In certain types of insurance, customers are required to pay monthly premiums regularly according to policy terms. It is essential to always pay these premiums to keep the insurance protection benefits active.
Therefore, the chosen insurance premium costs need to be adjusted to personal financial conditions to optimize their benefits.
The Development of Insurtech in Indonesia
The development of insurtech in Indonesia has had a significant impact on the insurance industry. With technological innovation, people can access insurance products more easily and affordably.
Insurtech also provides opportunities for insurance companies to improve operational efficiency and provide a better customer experience. With the continuous development of insurtech, it is hoped that it will drive an increase in insurance literacy and inclusion in Indonesia, providing greater financial protection for the population.
