PAPER OF GENERAL BUSINESS ENVIRONMENT

EXTERNAL ENVIRONMENT ANALYSIS OF PT ASURANSI JIWA ADISARANA WANAARTHA

Lecturer: Prof. Dr. Basu Swastha Dharmmesta, MBA

Yodhi Kharismanto12/341305/PEK/17394International Class Batch 60

Master of ManagementUniversitas Gadjah MadaYogyakarta2011

Table of ContentsCHAPTER I: INTRODUCTION71.1.Background71.2.Problem Statement71.3.Research Objective71.4.Research Methods7CHAPTER II: COMPANY PROFILE92.1.About the Company92.2.Vision and Mission102.3.Companys Value102.4.Awards11CHAPTER III: BUSINESS ENVIRONMENT133.1.Demographic133.1.1.Opportunity183.1.2.Threats193.1.3.Business Implications193.2.Social203.2.1.Opportunity233.2.2.Threats233.2.3.Business Implications243.3.Cultural243.3.1.Opportunity273.3.2.Threats273.3.3.Business Implications283.4.Domestic Political283.4.1.Opportunity313.4.2.Threats313.4.3.Business Implications323.5.International Political323.5.1.Opportunity373.5.2.Threats373.5.3.Business Implications383.6.Natural383.6.1.Opportunity433.6.2.Threats443.6.3.Business Implications443.7.Information Technology453.7.1.Opportunity503.7.2.Threats513.7.3.Business Implications513.8.Process Technology523.8.1.Opportunity543.8.2.Threats543.8.3.Business Implications553.9.Governmental553.9.1.Opportunity573.9.2.Threats573.9.3.Business Implications573.10.Economic Development583.10.1.Opportunity613.10.2.Threats613.10.3.Business Implications613.11.Regional Economy623.11.1.Opportunity633.11.2.Threats633.11.3.Business Implications643.12.Industry & Sectoral Policies643.12.1.Opportunity653.12.2.Threats663.12.3.Business Implications663.13.Monetary & Fiscal Policies673.13.1.Opportunity693.13.2.Threats703.13.3.Business Implications70CHAPTER IV: CONCLUSION AND RECOMMENDATION714.1.Conclusion714.1.Recommendation734.2.Future Condition of the Industry74REFERENCES76

List of TablesTable 3.1. World Population13Table 3.2. Land Area of Indonesian Region14Table 3.3. Population and Population Density of Indonesian Provinces 16Table 3.4. Human Development Index Indonesia18Table 3.5. What the generation Y thinks21Tabel 3.6. Gross Regional Domestic Product DI Yogyakarta in million rupiah62Table 3.7. BI rate in Indonesia from January 2011 May 201368Table 4.1. Research Summary71

List of FiguresFigure 3.1. Growth of new PRI vs FDI flows in developing countries35Figure 3.2. Demand of Political Risk Insurance36Figure 3.3. Spread of disasters from 1815 2013 in Indonesia39Figure 3.4. Spread of disasters from 1815 2013 by each Province in Indonesia39Figure 3.5. Spread of disasters from 1815 2013 by the Type of Disasters Province in Indonesia40Figure 3.6 Web 1.0 and Web 2.0 46Figure 3.7. WanaArtha Life Website47Figure 3.8. Software Risk Management Steps53Figure 3.9. World Corruption Perception Index 201256Figure 3.10. Disposable Income of Housholds in Indonesia59

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CHAPTER I: INTRODUCTION

1.1. BackgroundInsurance is a part of everyday life. Insurance provides protection for people and companies with protection against large financial losses due to damage or loss of property. In exchange for periodic payments or premiums, individuals and companies that are guaranteed to be compensated or replaced under the terms of the insurance policy. Insurance industry is one of the emerging industries in Indonesia. There are several insurance well-known insurance companies in Indonesia. People in Indonesia are now more aware about the usefulness of subscribing on particular insurance. There so many insurance products in Indonesia, for example life insurance, car insurance, and so on.WanaArtha Life insurance is one of the insurance companies in Indonesia. There are two types of WanaArtha Life insurance, common insurance and sharia insurance. Under the name PT Asuransi Jiwa Adisarana Wanaartha, WanaArtha Life insurance company has spread in various regions in Indonesia. In running the business activities, WanaArtha Life insurance faces several external business environments. This paper will talk about the several external factors that may impacts the company and identify the threats and opportunities behind that factors. Furthermore, it will also talk about the implication for the business itself that impact the PT Asuransi Jiwa Adisarana Wanaarthas business activities.1.2. Problem StatementWhat are threats and opportunities generated by external factors to PT Asuransi Jiwa Adisarana Wanaartha and their implications to company business?1.3. Research ObjectiveThe objectives of this research are to identify threats and opportunities generated by external factors related to PT Asuransi Jiwa Adisarana Wanaartha and to identify their implications to company business. 1.4. Research MethodsTo answer above research question, the researcher conducts literature study which analyses secondary data gathered from the company data, governmental statistical data, and other data. To ease the analysis companys external factors, the researcher limits the discussion on these topics below: demographical, social, cultural, domestic political, international political, natural, information technology, processing technology, governmental, economic development, regional economy, industrial and sector policies, and monetary and fiscal policies. From each topic, the researcher will analyze companys external factors to identify threat and opportunity and then will discuss their implication to the company. Besides that, for the simplification of the writing, furthermore the company name will be simplified as WanaArtha Life which is also the brand name of the company.

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CHAPTER II: COMPANY PROFILE

2.1. About the CompanyPT Asuransi Jiwa Adisarana Wanaartha or more commonly known as WanaArtha Life has been serving Indonesia for more than 38 years since it was first established in 1974. It offers indonesian market with a range of life and health insurance products both as a captive product as well as an individual product. Traditional life insurance product and insurance with an investment linked product are also offered to cater the unique needs of every individual.Owned by a reputable business group, Faden Consolidated Companies and also the foundation of Department of Indonesian Foresty, Sarana Wanajaya and managed by experienced profesionals within life insurance industry, WanaArtha Life is keen to be a partner of Indonesian communitys future financial planning. In order to achieve that, since early 2010, WanaArtha Life has been continuously enhancing the level of services towards its customers by refurbishing its standard operational procedure based on international best practice and applying the web based technology for life insurance daily operational system.Besides that it is well understood that the exposure towards our products is another importan role, therefore WanaArtha Life is expanding its distribution channels into three types of distribution channels: namely the distribution line agency, bancassurance and corporate.WanaArtha itself has two party who own the shareholder of the company. The majority of the shareholder is from PT Faden Consolidated Companies who own 97.2 % and the rest by Yayasan Sarana Wanajaya. Below is the proportion of the companys shareholder.Shareholder proportion :PT Fadent Consolidated Companies 97.2%Yayasan Sarana Wanajaya 2.8%

2.2. Vision and MissionVisionBeing a well-respected life insurance company providing products that are flexible and affordable to targeted individual and business community.Mission Providing competitive life insurance products and services which are attractive to our target segments; Consistently meeting the service requirements of our customers and partners; Achieve corporate sustainability by balancing interests of policy holders, shareholders, employee and the community; Maintain corporate social responsibility for financial planning and education and environmental awareness;

2.3. Companys ValueMoral IntegrityComply to all norms and rules regulated within the company and society where honesty, discipline and responsible are required.Team WorkWork together to accomplish company's goal with the best quality.OptimisticAlways have a positive thinking and spirit for everyone success.KnowledgeableHighly knowledgeable and constantly expanding the skills and abilities to the next level.CareCompromise and understand others and surrounding's interest.Open Mind and DedicationWilling to accept new changes and professionally committed to undergo every task.2.4. AwardsMedia Asuransi Magazine

2012The BestLife Insurance CompanyEquity Rp 250 Billion Rp 750 Billion2011The BestLife Insurance CompanyEquity Rp 100 Billion Rp 250 Billion

Investor Magazine

2012The BestLife Insurance CompanyAsset Rp. 1 Trilion Rp 3 Trilion

2012Special AwardLife Insurance CompanyBased on Investment GrowthPerformance over 5 years

InfoBank Magazine

2012Very GoodLife Insurance CompanyFinancial Performance of 2011

2011Very GoodLife Insurance CompanyFinancial Performance of 2010

Business Review Magazine

2012Life Insurance CompanyAsset Rp 2 triliun Rp 5 triliunFinancial Performance of 2012

CHAPTER III: BUSINESS ENVIRONMENT

3.1. Demographic Population and Population DensityAccording to the data from World Bank, Indonesia is the world's fourth most populous nation. Table 3.1 shows the number of population in terms of the amount rank. As seen, the position number 1 is China, and the following are India, United States, Indonesia and Brazil. Census population in 2010 held by Badan Pusat Statistik Indonesia also showed us that Indonesia had 237.6 million people (Badan Pusat Statistik, 2010)

Table 3.1. World Population (World Bank, 2013)

Table 3.2. Land Area of Indonesian Region (Badan Pusat Statistik, 2013)

Beside its huge of population, Indonesia also has a very large region. Table 3.2 shows that the country has more than 1.9 million km2 of land area and divided by lot of islands. The table 3.2 above shows us about land area comparison among 33 provinces in Indonesia in percentage form. It can be seen from the table 3.2 above that the largest province is Papua which has 16 percent of all Indonesian land area. From the information above, it can be concluded that provinces located in Papua (Papua and Papua Barat), Kalimantan (West Kalimantan, Central Kalimantan, East Kalimantan, South Kalimantan), and Sumatra (Aceh, North Sumatera, West Sumatera, Riau, Riau Islands, Jambi, South Sumatera, Bangka Belitung Islands, Bengkulu, Lampung) region have wider land area compared to those located in Java (DKI Jakarta, West Java, Banten, Central Java, DI Yogyakarta, East Java). In contrast, the land area comparison among provinces in Indonesia is not directly proportional with the population comparison among Indonesian provinces. It seems Java Island that approximately has less than 8 percent of total Indonesian land area is the most populous region in the country (57.48% of total Indonesian people). However on the other hand, Papua and Maluku region which has more than 25 percent of all Indonesian land area has only few people (2.6% of total Indonesian people). Table 3.3 shows the population and population density among provinces in Indonesia. It can be concluded that the most populous provinces in Indonesia are West Java, East Java, and Central Java. It also can be concluded that the population in Indonesia isnt spread evenly. From the density point of view, it can be seen from the table 3 that the population density mostly focus on Java Islands, especially DKI Jakarta. As we know, Java Island proportion to the the Indonesian land area is small (6.77%) compared to the other islands. The huge Island, such as Kalimantan (28.48% of Indonesian land area) only contribute few number of population density. From this perspective, it can be seen that Java has the huge proportion of population denstiy even though it has small portion of the Indonesian land area. In brief, it can be concluded that the population density in Indonesia isnt spread evenly.

Table 3.3. Population and Population Density of Indonesian Provinces (Badan Pusat Statistik, 2013)

Human Development IndexOn the other aspect, according to the UNDP, in the Human Development Report 2011, Indonesia had medium human development with the score 0.617 which made Indonesia was at position number 124 from 187 countries. It is little bit differ from the Badan Pusat Statistik calculation who calculate that Human Development Index of Indonesia in 2011 was 0.7237 (Badan Pusat Statistik, 2013). The different calculation doesnt make the meaning is different. Human Development Index (HDI) itself is a composite index of four indicators: life expectancy rate, literacy rate, average length of school participation, and per capita expenditures (Badan Pusat Statistik, 2013)From the data of Indonesian HDI, it means that Indonesia has the medium human development Index. Although Indonesian HDI is on the medium level but it gives advantages to the business. The medium of Indonesian HDI shows the condition of Human development in Indonesia. Compare to the previous year, the HDI of Indonesia increases year by year. Table 3.4 shows the increasing HDI of Indonesia and its provinces. The increasing of Indonesian HDI indicates that Indonesia has the incremental of HDI. One thing that should be emphasized is that indicates that the education and the income in Indonesia are getting better year by year, by assumming that the increasing of Indonesian HDI because of the contribution of all indicators increase. This condition is a good sign for WanaArtha Life to do the business in Indonesia.Relate to the increasing of Indonesia HDI and education, it is good sign for WanaArtha Life to run their business. As we know in todays era that insurance is important to hedge our risk in life, but not everybody aware about that. According to Andy Timo, penetration of insurance in Indonesia itself to society is still 4 per cent (Dewan Perwakilan Rakyat Republik Indonesia, 2013). It means that there are still few people in Indonesia who are aware about insurance. So that the increasing of Indonesian HDI is a good sign because the education of Indonesian people will also increasing and there is a possibility that the better the education the better knowledge of Indonesian people about the importance of insurance for their life and the better chance for WanaArtha Life to penetrate more.On the one hand, the number of Indonesian HDI is also a good sign because it indicates that the standard of living of Indonesian people is getting better. There is a possibility that this condition will giving a positive complications for WanaArtha Life to offer and sell their insurance product to the customer. It is targeted that the better the standard of living of Indonesian people, the more importance or urgency of Indonesian people to have insurance for their life.

Table 3.4. Human Development Index Indonesia (Badan Pusat Statistik, 2011)

3.1.1. Opportunity More penetrationSince the penetration of insurance in Indonesia is still low (4%), it is beneficial for WanaArtha Life to penetrate more. The HDI index shows the increasing number year by year, so that it is targeted that the education and the knowledge of Indonesian people is getting better. The better that indicator, the easier or better chance for WanaArtha Life to penetrate and socialize about the importance of insurance.On the one hand, the standard of living in Indonesia increased from year to year. It is targeted to give positive complication for the penetration of insurance. The better the standard of living, the greater possibility of Indonesian people to have insurance because they aware about the importance of the urgency of having insurance for their life. Easiness to explore the market in the huge population and huge population density areaThere are so many regions or provinces in Indonesia that have huge population number or huge population density number. This condition gives positive impact for the WanaArtha Life because it is easy for them to explore the market. This is because its huge population number and it gives huge potential target customer. It is also located in particular area (like Java Island), so that it easy for WanaArtha Life to penetrate and explore the market.3.1.2. Threats Hard to sell the product in rural areaThe population and the population density in Indonesia isnt not spread evenly across country. This is hard for WanaArtha Life to penetrate and explore the market, especially in rural area. WanaArtha Life needs to conduct extra effort to explore the rural area. More cost to penetrate or explore the market more in particular areaThe population and the population density in Indonesia isnt not spread evenly across country. In particular area who only have small portion of population will have negative impact for WanaArtha Life. It will additional cost for the company because the effort is greater to explore the market. Its hard for the company to achieve economics of scale because the number of potential target customer is smaller since the population is smaller too. 3.1.3. Business ImplicationsWanaArtha Life should focus on the area that relatively has high population, population density and high HDI number. It will give positive impact for WanaArtha Life because it easy for them to explore or exploit the market since the customer or potential customer is greater in that particular area. So that, it is easy for WanaArtha Life to achieve economics of scale. Therefore, it is recommended for WanaArtha Life to open branch offices to help the company in exploring or exploiting the market in that particular area.3.2. Social Work Environment of WanaArtha Life Insurance Company WanaArtha Life was established since 1974. Because of this condition, the work environment of the company was set for the Generation X before. Generation Xs characteristics are different from the generation Ys characteristics. They usually more loyal than the generation X. Over the time, after more than 30 years of running the business, of course WanaArtha Life insurance had employee from the generation Y era. They have to hire people that originally come from the generation Y in order to help them in running the business activities. On the other hand, several generations X people that worked for the company had retired. As a company that had been set as the generation X work environment, of course this is one of the problem for the company. They are different. The ways the company has to treat are also different. The work environment of WanaArtha Life insurance company is also has to be changed as a reaction to face this phenomenon. Generation YWhat is generation Y? Generation Y is a group of more than 70 million, comprised of teens and young adults born between 1981 and 2000. They are the children of the Baby Boomers and, at a young age, members of Generation Y are already causing the world to take them seriously. These so called Millennials are privileged in a way different from any generation before them (Goldgehn, 2004)Generation Y is one of the phenomenon in the world. They are group of people that born between 1981 and 2000. This phenomenon is affecting the business activity. Todays, lot of companys employees consists of people from the Generation Y. From the companys perspective, especially the company that has been run for a long time since the previous generation had established, they have to ready to react differently in order to treat the generation Y properly in the business work environment.Generation Y have their own characteristic that differs them with the previous generation. Because of this characteristic, the organization (firm, institution, etc) have to take into account how to treat them in the right way. The organization have to form the right strategy to make the business environment work is as proper as possible for them to work with. The generation Y is different from the previous generation. That is why the organization also has to react and treat differently in order to gain advantage from their involvement in the business activity. In this condition, WanaArtha Life insurance company has to change their business environment to fit this condition. WanaArtha Life insurance has to give what the most of generation Y wants, so that the WanaArtha Life could gain the advantages from their involvement in the business activity.Basically, Generation Y wants to know why! Todays youth are curious, they want the facts, they want the hard data, and most of all they want the truth (Goldgehn, 2004). This generation is very creative and very flexible. They were raised during a period when the world has welcomed and protected. Their parents was relatively rich to cover their daily life need. It means that meaningful of work is more important rather than the salary itself for the generation Y.Table 3.5 shows us the most common of generation Y thinks about the certain category in working. From this table, we can say that they want the meaningful of job tasks. They want fair work environment for one of another employee. They want flexibility of time to do their other activities besides working. At last, it can be concluded that the meaningful of work is very important for them. They dont care to much about the salary. What they do care is the benefit of what they got from that salary. Table 3.5. What the generation Y thinks (Meier & Crocker, 2010)Category Description

atmosphere work environment attitudes or culture

autonomy freedom to make decisions

feedback job-related communications

growth opportunities to learn, training & development

interesting work work-related issues that are task-oriented

leadership issues relating to management style or effectiveness

location geographical site

mobility travel opportunities/obligations

policy rules & regulations

promotion opportunities to advance, career development

relationships issues that target co-worker relationships

respect feelings of being valued

responsibility obligations to perform

salary any issues regarding pay or benefits

schedule work hour issues, flexibility of hours

stability long-term career, continuity of work & earnings

support help & encouragement from company, manager, or co-workers

This idea also coherent with the idea from a research titled Generation Y: Comparison between Asia and the rest of the World by Justine James, Sally Bibb, Simon Walker in 2008. They believe that there are similar characteristic between generation Y in Asia and the rest of the world are looking for from the employer, which are (James, Bibb, & Walker, 2008) Having the chance to learn and develop. The opportunity to do work that excites them. Having a job aligned to their talents. Having a mentor at work.It is essential for the generation Y to have meaningful work. They dont care too much about how big the salary is. If they are think that their job is not that meaningful enough and they dont see so much benefit, it is more likely for them to quit from that job. So that, it is essential for the manager to understand them and trust them because that is the one of the main reasons why generation Y leave organizations where-ever they are in the world (James, Bibb, & Walker, 2008).James, Bibb, and Walker also argue that being trusted is the key to keeping this generation motivated and engaged at work. This is undoubtedly more important during times of economic downturn as people become more insecure about their jobs and concerned about changes that may happen in their organizations.After those elaborations, it is essential for the WanaArtha Life insurance company, especially for the manager to know about the characteristic of Generation Y. The manager should oversea how to treat them well to gain win-win solution both for the sake of the company and the generation Y itself. Because, if the company or the manager can treat them well, it will bring advantages that the company never had before. It is basically because the generation Y is relatively more creative than the generation X. They have more ideas for the companys sake. They are a generation that is motivated, educated, and have higher expectations than ever before (Meier & Crocker, 2010). Therefore, it is beneficial for the companys innovation processes. Since WanaArtha Life insurance still changing the work environment from the generation X era to the generation Y era, it is important for the manager to implement the proper work environment to answer what the generation Y wants. The manager should form the proper work environment in order to gain the advantage of having the generation Y employees. Or besides, they will quit and look for another job that suit them.3.2.1. Opportunity More capable employees from generation YWanaArtha Life insurance could get more capable employee from the generation Y if the company could establish the proper work environment for them. The generation Y is more motivated, educated, and has higher expectations. It is beneficial for the companys growth. Advantages from Generation Y employeesThey are more creative, flexible and have more ideas. It is good for the companys asset because they are more active and aggressive to do the work. It is support the companys innovation processes since the todays era, value innovation is very important to compete with one another business.3.2.2. Threats Possibility to lose the Generation Y employeeThe is a possibility of the company that they will losing their generation Y because they will pursuing the job that fit them more. Fight with the other company to get the capable employeeTodays era, the searching of the capable employee is become tighten. WanaArtha Life will fighting against the other companies who look for the capable employee to be their valuable assets. The other companies may bigger or stronger than the WanaArtha Life insurance company. The implication is that the WanaArtha Life should has strong bargaining power to get and to keep the employee as their valuable assets for the company. Besides, the company will lose them and that means an additional cost. Tradeoff between Generation X and Generation YIt is undeniable that the generation X still exists in WanaArtha Life insurance company. So that, the creation of proper work environment would be more confusing. There will be a trade-off between the generation X and the generation Y in forming the chosen work environment.3.2.3. Business ImplicationsAccording to the data above, the business implication for WanaArtha Life insurance company to face the opportunities and the threats are: 1) Change the managers or the leaders that situasionally fit the generation Ys phenomenon.2) It is time for the WanaArtha Life to change the paradigm from the generation X to the generation Y paradigm.3) Creating the proper generation Y work environment.

3.3. Cultural System of Insurance Agent What is the system of insurance agent? It is simply one of the system that used by the insurance company in promoting, selling their insurance product to the customers. They use the system agent in order to promote and sell their insurance product. Just like the salesman or saleswoman that we are commonly met in the certain time or place, the insurance agent is almost just the same. They offer the insurance company product to the customer. They do it by several medias, such as by phone, by email, or directly meet the potential customers.The system of insurance agent is commonly used by most of the insurance company in Indonesia even in the world. The agent will be in charge to search the potential customer and convince them to buy the companys insurance products. The agent furthermore will gain benefit from the commission if successfully convince and attract that particular customer to buy the companys insurance products and the company will gain benefit from the customers who buy the companys insurance product. Today, this system is not only being used by the insurance company but also by the other company such as automotive company.Todays era, the successful insurance agent could gain millions of rupiah from convincing and attracting the customers to buy the insurance product from his/her representative insurance company. The Problems of Insurance Agents in Indonesia In todays era, the competition of insurance company in Indonesia is more tighten. Many insurance companies compete one another to attract more customers. Indonesia who has the emerging of middle class phenomenon is become one of the prospect market. Furthermore, this competition may induce the unhealthy or unfair competition emerges. The insurance agent as the person who directly meet with the customer become more aggressive to attract more people for his/her sake and also for the sake of his/her company. As a result, many of insurance agent will do whatever it takes to attract customers.As the customer point of view, many of them are disappointed with the insurance agent. Many of them argue that the insurance agent only said the beautiful point at the beginning but didnt say about the consequences that the customer may face. Frans, Chief of BMAI (Badan Mediasi Asuransi Indonesia) said that many peoples point of view claimed that insurance is consisted with lot of lies. They (the insurance agent or insurance company) were not honest and did what they had promised before (Kompas, 2012).On the one hand, many people also comment that the ways of insurance agent in attracts or contacts with the potential customers are not polite. Even if they use the proper media, such as by phone, email, direct visit, or so on, sometime they violence the independent right of the particular customer. Sometime, some people dont want to be distracted with the bunch of unimportant message such as the insurance offering. They argue that if they need, they will directly go to the insurance office, so that the insurance agents dont have to bother them with bunch of offering of the insurance products.The Culture in Indonesia Indonesia is a various country. Indonesia consists of many regions, tribe, language, and so on. The people in Indonesia are so diverse. That is what makes the market penetration in Indonesia can diverse from one another area. Indonesia is also adapting the east culture that well known has personal trait such as friendly, not individualistic, helping each other, high tolerance, and so on. Even, Indonesia used to has a gotong royong term in Soeharto era, which means a conception of sociality familiar to large parts of Indonesia and Malaysia (Wikipedia, 2013).Indonesia itself has several key concepts and values in the social life. According to the Communicaid, in their article entitled Doing Business in Indonesia said about the key concepts and values of Indonesian culture, which are (Communicaid, 2009):1. Communication Style - Indonesians tend to communicate in a subdued and indirect manner. They do not always say exactly what they mean. Indonesians speak in a subtle tone and therefore it is up to the listener to pick up on communication subtleties by paying attention to body language and gestures. Indonesians are polite and diplomatic in their speech and will make great efforts not to offend others. Indonesians will do anything to save face even if it means avoiding confrontation or telling others what they want to hear rather than dealing with immediate issues.2. Time - Time in Indonesia is approached in a very relaxed and flexible manner. Indonesians do not rush through business negotiations and often do not take the time to plan everything in great detail. Punctuality is not always observed, as Indonesians do not like to feel hurried and do not have the western sense of urgency. The Indonesian attitude towards time is reflected in that, to them, time is not money. They may show less interest in profit or material success but rather building relationships.3. Conformity - Indonesia is a collectivist society that places higher importance on the group than the individual. Your Indonesian counterparts will always place family and community concerns over that of the business or individuals.4. Religion - Indonesia currently is the worlds largest Islamic nation Muslims pray five times a day and in some workplaces in Indonesia there are separate rooms for daily prayers. There are however varying degrees to which Islam influences Indonesian business culture, but it is essential to remember its influence when working with Indonesian counterparts. Ramadan is a major Islamic tradition that includes fasting for an entire month. Although foreigners are not required to fast, it is considered impolite to eat or drink in front of others during this time. That is why some people in Indonesia sometime dont like salesman/saleswoman including the insurance agent. Some insurance agents forget to approach them in respect with the Indonesian culture. Some insurance agents may opportunist. They only think about their benefits rather than both benefit the agents and the customers.Indonesian people are upholding respect and honesty. They dont want to be hurried to make a decision. They want the insurance agent have a respect in promising or selling their product. Most Indonesian people are also religious. They are mostly Moslem. They usually move away the negative think when the agent starts to promote a particular product for them. But, they will abandon it if they had the experience of being tricked before by the other particular agent or salesman/saleswoman.From this perspective, the insurance agent should adapt with the Indonesian culture. How the Indonesian culture need and want. Hopefully, WanaArtha Life Insurance is originally from Indonesia, so it is easy for them to adapt with the Indonesian culture. However, the culture in each area/region in Indonesia may different one another. So that, the other issue that WanaArtha Life insurance should adapt is each unique culture area/region.3.3.1. Opportunity The insurance agent systemThe insurance agent system is still superior in gaining more customers and expand market share for the insurance company like WanaArtha Life. The WanaArtha Life could give new value innovation to the system of insurance agent. Of course this innovation should give value added to the customer. Skepticism of Insurance agent could be seen as the opportunity to re-seize the potential customerThe skepticism or disappointed from Indonesian people of insurance agents for the particular insurance company because of bad experience could be taken into account as a possibility of WanaArtha Life to re-seize that potential customer.3.3.2. Threats Skepticism of insurance agent systemThe skepticism of insurance agents by Indonesian people will drawback the company and affects its performance. Insurance agent system is very competitiveThere is a probability that other well-known insurance agent in Indonesia will take place the role of this industry because this system is very competitive.3.3.3. Business ImplicationsAfter those elaborations, it is clear that if the company should aware about the Indonesian culture, especially WanaArtha Life plays in the Indonesian culture. The system of insurance agent is very superior for the insurance company in order to gain more customer and expand market share. However, the company should aware about the approach of that particular agent in promoting or selling the insurance product. Over time, this culture will bring the opportunities and threats for the WanaArtha Life. Furthermore, the business implication for WanaArtha Life insurance company to face the opportunities and the threats are: 1) Creating the rule of insurance agency in order to meet the companys, industries and cultures standard.2) Give new value for the customer. The value innovation could be reach by innovate in 3 platforms, which are product, service and delivery (Kim & Mauborgne, 1995).

3.4. Domestic Political Insurance CompanyThe commons sense of the establishment of insurance is because there are uncertainties of life. Insurance plays in the role of life uncertainty. Because of uncertainty, people tend to be afraid of what would be coming next. People are afraid that something bad will happen in the future. No one will know what would happen in the future. Is it good? Or is it bad? This thinking, that usually people tend to think about what if bad things happen in the future and affect our one particular aspect, is the common paradigm of business opportunity to cover the uncertainty of life.Because of this issue, there is come up a business model that will cover the uncertainty that would happen in the future. Furthermore, insurance will answer all those problems. The basic business of insurance company is to cover the uncertainty of people or business that would happen in the future. For example is life insurance for people, or the fire insurance for the business. Insurance LawInsurance is governed in the law number 22 of 1992 about Insurance Business. This law is governed all about business insurance activities and all elements of insurance business activities. This law hasnt been changed until present.However, recently the house of representative of Indonesia (DPR) has a bill about insurance business. After years of using the old law, they feel that the law about insurance business has to be changed because lot of articles stated on the laws need to be revised. According to Vice Chairman of Commission XI of DPR, Andy Timo, said that Commission XI of the House of Representatives will soon discuss the draft revision of the business of Insurance Law number 2 of 1992 on Insurance Business. The bill aims to harmonize the positions and institutional Otoritas Jasa Keuangan (OJK) by January first 2013, because of that, Bapepam LK and all insurance businesses will be in one setting which is from OJK (Dewan Perwakilan Rakyat Republik Indonesia, 2013).One of the issues in promoting bill about insurance business is about the ownership of insurance company in Indonesia. According to Andy Timo, general insurance reached 80 companies, 47 life insurance companies, 5 Sharia life insurance companies. Unfortunately is that almost 80 percent owned by foreign investors. He also said that capital issue is still an obstacle for local insurance businessman, therefore, the government want to issue a useful and comprehensive law and required by the insurance industry (Dewan Perwakilan Rakyat Republik Indonesia, 2013).It indicates that many players in insurance company in Indonesia are basically from foreigners, and the people who enjoy the benefit are mostly from foreign investors. That is why government needs to revised the law. One of them is because of this reason.On the one hand, insurance industry is one of promising industry. Andy Timo said that, growth of insurance in Indonesia reached 20 percent annually. It indicates that the Indonesian insurance market potential is very large, as the penetration of insurance to society is still 4 per cent were aware of insurance. Furthermore, the potential market in Indonesia is still big and lot of opportunity for insurance company or new company to enter this business (Dewan Perwakilan Rakyat Republik Indonesia, 2013). Beside the focus of ownership issue, the other issues of promoting new law are how to educate the society to be more aware about insurance. Like Ive mentioned before, the penetration of insurance business in Indonesia is still low, only 4%. It means there are lots of big opportunities to maximize the profit in insurance industry. The other issue is about how to deal with the customer protection. Furthermore, this bill will include the protection of consumers in which insurance companies are obliged to guarantee the participants of the Lembaga Penjamin Simpanan (Deposit Insurance Agency).

The Ownership of Insurance CompanyThe previous law, law number 2 of 1992 about Insurance Business, stated that in chapter VII about the Ownership of Insurance Company, article 1, that insurance company is only be established by:a. Indonesian citizen or Indonesian legal entity that fully owned by Indonesian citizen and or Indonesian legal entityb. Insurance company who the ownership as referred to in letter a, by insurance company who subject to foreign lawFrom this article, it can be said that there are no particular restriction for the foreign investors or companies to invest in the insurance company. From this perspective the foreign investors can invest in the insurance company as long as the insurance company is established by Indonesian company. It isnt matter how much the portion of the foreign investors, as long as it is established by Indonesian citizen or Indonesian legal entity, and it is already formed as an insurance company subject to its foreign law, the foreign investors can play in the insurance industry in Indonesia. That is why most of insurance industry is owned by foreigner. It indicates that at that time there were capital scarcities to establish new or to play in the insurance industry; therefore they need capital injections that one of them came from foreign investors.On the bill of Insurance Business, they change the content for the Ownership of Insurance Company. It is stated in article 1, chapter III about Legal Entity And OwnershipInsurance Company that Insurance companies can only be owned by:a. Indonesian citizen or Indonesian legal entity that fully owned by Indonesian citizen and or Indonesian legal entityb. Indonesian citizens or Indonesian legal entity as referred to in letter a, along with foreign citizens or foreign legal entity shall be the Insurance Company that has a similar business or parent company that one of its subsidiaries is engaged in similar Insurance Business.From this new perspective, it can be seen that government try to hold the foreign investor part here but they dont close the opportunity of foreign investor to play in the insurance industry. Government tries to hold the foreign investors part and give the opportunity for the local investors to more involve in this industry.The foreign investor can also involve in this business only if they have insurance company or parent company that one of its subsidiaries is engaged in similar Insurance Business and along with Indonesian citizens or Indonesian legal entity. It indicates that government want to more involving the local player in this industry. They dont stop the foreign investment but they try to hold on the part of foreign investors.On the next part of the bill article also have said that foreign nationals can be the owner of the Insurance Company only through transactions on the stock exchange. It means that government wants to add transparency in the process of owning the Indonesian insurance company from foreign investor. From the previous law, the foreign investors have no obligation through the stock exchange. From this perspective, it indicates also that government also tries to minimize the foreign workers in the insurance company since mostly insurance companies are owned by foreign investors. Government wants to involve more the local worker for this industry and limit the number of foreign workers.

3.4.1. Opportunity The decreasing of foreign investors that play in the insurance business in IndonesiaThere will be a possibility that the foreign investors that play in insurance business in Indonesia decreases. This is because the draft bill that has been explained before. This is a good condition because there is a limitation of foreign investors to play in insurance industry in Indonesia so that WanaArtha Life has the greater chance to compete and explore the market.3.4.2. Threats Capital scarcityCapital scarcity since the part of foreign investors is going to be limited. It will be hard for the company to get lot of capital from the foreign investors if their part is limited. The other resource is would be from the local resource, such as debt from the national bank, or IPO.3.4.3. Business ImplicationsThe portion of WanaArtha Life insurance itself mostly comes from PT Fadent Consolidated Companies. The portion of WanaArtha Life insurance can be derived as follows (Wanaartha Life, 2012):a. Yayasan Sarana Wanajaya 97.2% b. PT Fadent Consolidated Companies 2.8% Related to the issue of the ownership of insurance company, it means that WanaArtha Life dont have so much impact about the ownership issue since most of ownership are owned by the national citizens. However, the big question come up about the owner of PT Fadent Consolidated Companies who almost own all the shares of WanaArtha Life. It is still a question about the data of that company, since there is not to many information regarding that company. If it is found that, PT Fadent Consolidated Companies own the part or even all the shares, there is a possibility that it will be affected with the regulation of the limitation of foreign investors.Besides that, it would be hard for WanaArtha Life to get lot of funding from the foreign investors if the bill passes. The part of the foreign investors would be limited. So that, the other way to get more funds or capitals come from the national bank debt, IPO, or basically from internal resource.

3.5. International Political The commons sense of the establishment of insurance is because there are uncertainties of life. Insurance plays in the role of life uncertainty. Because of uncertainty, people tend to be afraid of what would be coming next. People are afraid that something bad will happen in the future. No one will know what would happen in the future. Is it good? Or is it bad? This thinking, that usually people tend to think about what if bad things happen in the future and affect our one particular aspect, is the common paradigm of business opportunity to cover the uncertainty of life.Because of this issue, there is come up a business model that will cover the uncertainty that would happen in the future. Furthermore, insurance will answer all those problems. The basic business of insurance company is to cover the uncertainty of people or business that would happen in the future. For example is life insurance for people, or the fire insurance for the business. Talking about uncertainty, politic is also about uncertainty of life. Politic always goes up and goes down unpredicted. Its hard to predict what would be coming next in the political side. Politic makes many companies have to aware of the possibility that would happen next because of politic. There are many things that would happen because of politics, for example labor riot because of the policy of the minimum rate of labor wage who was happened in the middle of 2012. This kind of thing of course hurt the company especially manufacture company that operated in that area because most of the labor participate or forced to participate in that action.Political environments are not only from domestic side, but politic also comes from the international side. Many things had happened in 2012 and it affected directly or indirectly the company activities. According to MIGAs journal, World Investment and Political Risk 2012 that global economic growth estimates for 2012 indicate a continuing fragile recovery. The ongoing sovereign debt crisis and recession in the euro zone, curtailed bank lending and domestic deleveraging, fluctuating but elevated commodity prices, and the ongoing political turmoil in the Middle East and North Africa have slowed the initial rebound that followed the 2008 global financial crisis. This slow progress has had an impact on developing countries, which initially fared well in terms of rebounding growth rates, private capital flows, and foreign direct investment (FDI). From this perspective, it indicates that international political turnover not only affects the country itself but also the company itself and the potential of foreign direct investment. It clears that political turn around affects the existence of business activities of the particular company in the particular country.Because of the possibilities of political risk that would happen, nowadays comes up a paradigm of new business opportunity of insurance called political risk insurance. Political risk insurance basically comes up to cover all the possibilities that would happen because of the political environment from both nationally or/and internationally. According to MIGA, (Multirateral Investment Gurantee Agency), 2013, Multinational enterprises and banks face a number of risks when conducting business overseas. Some of these risks can be removed or mitigated by conducting due diligence on the parties involved and on the economic viability of the proposed business. Other risks are harder for investors or lenders to predict. These include some commercial risks and, non-commercialor politicalrisks. At the end, they said that political risk insurance (PRI) is a tool for businesses to mitigate and manage risks arising from the adverse actionsor inactionsof governments. As a risk-mitigation tool, PRI helps provide a more stable environment for investments into developing countries, and to unlock better access to finance (MIGA, 2013).From those explanations, it indicates that Politic Risk Insurance helps business to overcome the risk possibilities that comes from the political issue. PRI helps business a lot to run their activities because PRI will relatively cover the uncertainty of political risk. PRI also helps country because by providing PRI will help the country to easier get the foreign direct investment because PRI will relatively guarantee the stability of political issue. It is superior for Indonesia who is a developing country who needs lot of foreign direct investments to help Indonesia develop lot of things. It is also superior for Indonesia, since the stability of political issue in Indonesia still questionable. Because of this issue, the Political Risk Insurance industry has grown year by year. Between 2008 and 2011, issuance of political risk insurance (PRI) has increased by 29 percent for Berne Union members, an increase that has exceeded that of foreign direct investment (FDI) flows into developing countries over the same time period (MIGA, 2012). Berne Union members itself was founded in 1934 in order to promote international acceptance of sound principles in export credit and investment insurance and to exchange information relating to these activities. Today, the Berne Union has 86 members, including Prague Club members, comprising mainly export credit agencies, multilateral organizations, and private insurers. The PRI industry expanded in 2011 and evidence from the first half of 2012 indicates that this trend is continuing. The PRI industry, as a specialized line of insurance, is affected by the demand for PRI itself, as well as by changes in capital availability in the broader insurance market. Figure 3.1 shows about PRI by Berne Union Members and FDI Flows into developing countries.

Figure 3.1. Growth of new PRI vs FDI flows in developing countries (MIGA, 2012)From the figure 3.1 above, it clears that there are increasing growth of PRI. It can be seen from the gap and the growth between the PRI and the FDI of developing country. It indicates that the increasing of PRI can be assumed as, first the increasing of global political risk perception, because lot of business think that the political risk is increasing and more unstable so that they need more PRI to cover the losses possibility. Second, there is more capital scarcity in the financial sector because in some cases PRI may relieve capital charges in financial institutions.The demand of PRI year by year is also relatively increasing. According to MIGA, with trends largely pointing to growth in investment into developing countries and heightening awareness and perceptions of political risk among investors, demand for PRI has increased sharply since 2005. The year 2011 showed the strongest increase in absolute terms since the onset of the financial crisis, with new investment insurance issued by members of the Berne Union reaching a new record (Figure 3.2). By the first half of 2012, the Berne Union issuance level was still growing strongly and is expected to reach an even higher level than in 2011. Issuance for the first half of 2012 alone was near the level for the full year in 2009 and higher than the level of each year prior to 2007.

Figure 3.2. Demand of Political Risk Insurance (MIGA, 2012)

In brief, according to figure 3.2, it indicates that year by year the demand of PRI has increased. It indicates also that many businesses or companies now are aware to cover their business from the uncertainty of political risks. They know more aware that PRI is tool to mitigate the risk, especially political risks.In Indonesia itself, there are no many insurance companies play in PRI field. According to Budi P, insurance companies who play in this field in Indonesia are PT Asuransi himalaya Pelindung, PT Bintang General Insurance and Pool TS. He also said that the growth of PRI that offered by Indonesian insurance companies in the last 3 years are still low. In 2008-2009 the growth was about 10%, little bit increased than the previous year, 2007-2008, who was about -7%, and the previous year, 2006-2007, was about 18% (Budi, 2013). According to Viva news, the use of insurance-related political risk is relatively low. This condition is caused by the domestic reinsurance capacity is limited and the cost of premium in risk management. In addition to the limited capacity of domestic, international reinsurance capacity is also very selective. While insurance companies in the country that has the capacity to meet the demand is still very limited (Kalsum & Ahniar, 2009).From those 2 perspective, it indicates that, first the demand of PRI internationally are increasing. More businesses or companies are more aware to protect and cover their business from the political risk. Second, Indonesian political risk insurance players are few. There are no many players in this field. It indicates that there are still emerge a question mark about this business opportunity. It can be assumed that many insurance company are still afraid to grab this opportunity. They dont have the capabilities and the resources to catch up this opportunity and they dont prepare enough to compete with foreign insurance company who already offer the PRI.Many insurance company in Indonesia, including WanaArtha Life insurance are prefer to play in the profitable side of insurance, such as life insurance. If we look deep about the insurance product that they offer and relate to the political risk, they tend to offer the insurance product as the possibility result of political risk and affects the business activity. For example fire insurance. Fire can be happened as the result of politic instability, like what happened in 1998 in Indonesia. Many companies were burned because of the protests and riots.

3.5.1. Opportunity The increasing demand of political risk insuranceFrom the explanation above, the demand of political risk insurance increases from year to year. This is a good opportunity for WanaArtha Life if want to enter and offer this product. The condition of Indonesian political environment which still in huge uncertainty will be an attractive aspect to get the potential customer.

3.5.2. Threats The political condition in Indonesia is on the very high uncertaintyAs explained before, the political environment which still in huge uncertainty. Of course this is a huge threat for the company if they want to play in this area. Thi political environment in Indonesia is very unstable, and this is very risky for the insurance company like WanaArtha Life to play in this area.

3.5.3. Business ImplicationsFrom the explanation above it clears that the demand of PRI is increasing year by year. But on the other hand the Indonesian insurance companies who offer the PRI are still few. This is because they still look that offering PRI, especially for the Indonesian political condition is still unprofitable. Statistically shows that politic in Indonesia is still unstable and this would makes the PRI also risky to be applied, although there are so many markets if insurance company offers PRI.For WanaArtha Life itself, they should avoid to offer the Political Risk Insurance product. There are two main reasons. First, it will be risky for the company because the political condition in Indonesia is very uncertainty. Seconds, the resources and the capabilities of the company hasnt good enough to play in this area. It needs high investment of capital to build the resources and also the capabilities needed.

3.6. Natural Disasters in IndonesiaIndonesia is one of most populous country in the world. According to the data from World Bank, Indonesia is the world's fourth most populous nation (World Bank, 2013). Not only the population, Indonesia is also the country who also has so many natural disasters that may emerge, such as flood, earthquake, tsunami, etc. Figure 3.3 shows the bar chart of each year in Indonesia from 1815 - 2013 about the incidents and the victims. From figure 3.3, it can be concluded that from each era, the incidents and the victims of disasters in Indonesia had increased. It means that the disasters that happen in Indonesia were more often each era. From the figure 3.3 also, there is a possibility that the trend about disasters in Indonesia will increasing year by year. The uncertainty of the natural conditions, global warming, economic and social condition, and the increasing of Indonesian population are some factors from so many factors that may increase the incidents and the victims of natural disasters in Indonesia.

Figure 3.3. Spread of disasters from 1815 2013 in Indonesia (Badan National Penanggulangan Bencana, 2013)On the one hand, if we are looking from the spread of the disasters in each region or province in Indonesia, Central Java was the province who has the most incidents since 1815 2013, followed by West Java and East Java. Figure 3.4 bellow shows us the table of the spread of the disaster in Indonesia based on each province. From the tables it can be concluded that Java Island was the the region that has the most disasters incident compare to other islands in Indonesia.

Figure 3.4. Spread of disasters from 1815 2013 by each Province in Indonesia (Badan National Penanggulangan Bencana, 2013)

From the type of disasters, flood is the most incident that happened in Indonesia. Figure 3.5 shows the type of disaster incidents and the victims of that particular incident in Indonesia. From the figure 3.5, it can be concluded that the most frequent disaster was flood and the disaster that took the most victims was an earthquake. From the figure 3.5, we can see also that most of the disaster happened was natural disasters, such as earthquake, tsunami, and so on. From the figure 3.5 also shows that natural disasters took the most victims in Indonesia.

Figure 3.5. Spread of disasters from 1815 2013 by the Type of Disasters Province in Indonesia (Badan National Penanggulangan Bencana, 2013)

From the data above, it clears that disasters in Indonesia are increasing year by year. The victims are also increasing year by year. The incidents that happened in Indonesia are mostly because of natural disaster such as flood and also the disaster that took the most victims are natural disasters, such as earthquake and tsunami. From this issue, it can be expressed that there are still so many uncertainty in Indonesia because of the incident of disaster in Indonesia. Sometime it is hard to predict disaster especially natural disaster such as earthquake. The number, the power and the time of the disaster is also hard to predict. It means we have to be prepared as well as possible to face the disaster.Furthermore, not only as personal that have to be prepare to face the disaster that might happen, but also from the other bigger elements such as a company, organization or even country itself has to be prepare for the disaster that might happen. From the other word, disaster may equal to the risk. The disaster that may emerge equal to the risk that may emerge also. Because of the possibility of the risk that may arise, it means that the preventive actions are needed in order to be prepared to face the disaster even for the worst. One of the preventive actions that may suitable for this issue is by hedging the risk. The way to hedge the risk for this issue is through insurance. Insurance Product for Natural DisasterAs mentioned before that disaster that may emerge is equal to the risk that may emerge and affect particular person, business or other elements. From this issue, it sounds that there is uncertainty that may arise. This uncertainty emerges because the uncertainty also of the disaster that may happen since it is hard to predict disaster that may affect us. That is why, in todays era, insurance is very popular to cover all of those uncertainty. Insurance will hedge the risk of the possibility of the disaster that may happen and affect us as a person, a business man, and any other that may be affected because of this possibility. Insurance is a way to cover the uncertainty that may happen and natural disaster is one of it. Insurance company usually has a product to cover the natural disaster that may affect personal person or a business activity. Like, other insurance company, WanaArtha Life also has a insurance product take care about the tragedy that may happen because of natural disaster. WanaArtha Life products at this present time are about the life and health insurance for personal person or group and the derivative product that may correlate with the life or health of that particular person or particular person in the group. For example the main insurance is life insurance of a person and the derivative insurance is the education insurance of the kid of that particular person that may affected because of that particular person pass away and cannot fulfill his/her job to pay the regular tuition fee of their kid.Trend of Natural Disaster Insurance in IndonesiaThe trend of natural disaster insurance in Indonesia is increasing year by year. We can see that from the occurrence of natural disasters in Indonesia. Because of the occurrence of natural disasters in Indonesia are increasing, it means the trend of natural disaster insurance is also increasing. According to PT Sentana Mitra Kualita, an insurance broker and consultant, The number of natural disaster risk insurance applicants increased significantly, since the magnitude of potential natural disasters in Indonesia. They cited from Suwanto Somawidjaya, Regional Manager Sinar Mas Insurance Region III Jabar dan Jateng, that there was a significant increase in the number of applicants or natural disaster insurance membership in the category of all risk although the numbers are still below the fire insurance and motorcycle insurance ownership. He said that the awareness of the people to provide protection to their property to be one of the growth drivers of all risk insurance for natural disasters such as flood, earthquakes, and landslides (PT Sentana Mitra Kualita, 2013).Not only that, even the government argues that they need insurance of natural disaster. Cited from tempo.co, that The government plans to include hedging natural disaster insurance in the Act the State Budget 2014. This effort is a solution to avoid the uncertainty of funding from the disaster that cannot be predicted. Head of Fiscal Policy Agency, Bambang Brodjonegoro, said that this action is the easiest way by paying the insurance rather than only rely on the state disaster reserve fund (Tempo, 2013).From those perspectives, it clears that the trend of natural disaster insurance is increasing. People are more aware about the uncertainty of natural disasters and the possibility that they will be affected, not only life but also their property of life. It means this is one of the business opportunity for the insurance company. Insurance company, like WanaArtha Life insurance, could see this as a big opportunity to expand and increase their profit and market share.The growth of insurance in Indonesia is very promising. The market is still huge in Indonesia. According to Andy Timo, Vice Chairman of Commission XI of DPR, said that, growth of insurance in Indonesia reached 20 percent annually. However the penetration of insurance to society is still 4 per cent were aware of insurance (Dewan Perwakilan Rakyat Republik Indonesia, 2013). It indicates that the awareness of insurance in Indonesia is still low but there are people who more aware to the prospect of having insurance. There are big opportunities for insurance company to maximize theirs profit in Indonesian market. On the one hand, another issue is the trend of natural disaster insurance in Indonesia. As I mentioned above that the trend of natural disaster insurance in Indonesia is increasing. Even, the Indonesian government plans to use natural disaster insurance to hedge the risk of natural disasters in Indonesia that occur unpredictably. From those issues, WanaArtha Life insurance has lot of opportunities to enlarge their business since the penetration of insurance company in Indonesia still 4% but the market grows year by year. It is also can be combined by the phenomenon of the increasing trend of natural disaster insurance in Indonesia. At last, it can be concluded that WanaArtha Life insurance could see this as a big opportunity for their business.However, not only the opportunity that WanaArtha Life may face, but also threat may also emerge. Since there are so many companies play in the insurance industry, it indicates also that there is a possibility that other competitor might see this as an opportunity also. Furthermore, WanaArtha Life isurance may prepare to compete to that particular competitor.3.6.1. Opportunity More penetrationBy looking for the fact that the penetration of insurance in Indonesia until 2013 is still 4%, it means that there is a chance to penetrate more about the awareness for Indonesian people about insurance. WanaArtha Life can see this as an opportunity to market their product and also share knowledge about the importance of insurance. This action is taken in order to gaining more potential market in Indonesia and also to market their product itself The trend of natural disaster in Indonesia increasedThe trend of natural disaster insurance in Indonesia is also good opportunity for WanaArtha Life insurance to expand their business. According to the data above, tells that trend of natural disaster insurance in Indonesia has increased year by year, it also means that there is an opportunity for WanaArtha Life to offer product insurance related to this issue. Cooperation with the governmentThere is an opportunity for WanaArtha Life insurance also in the insurance for group or large institution such as business or even governemnt. As mentioned above that government planned to have insurance of natural disaster to hedge the risk that may emerge. Of course this is big opportunity for WanaArtha Life insurance. WanaArtha Life insurance could enter business to business market which hasnt been entered by WanaArtha Life insurance. To cover the lack of resource in order to play in this market, I would like to recommend for WanaArtha Life insurance to joint venture or strategic partnership with other insurance company, especially from outside who have strong financial capital because it needs lot of financial capital. By having cooperation with outside insurance company, it will beneficial for WanaArtha Life insurance to increase their productivity and to compete with other competitors. It also beneficial for outside partner to enter the indonesian market which is promising market.3.6.2. Threats Tight competition from competitorThe threats may come from the other competitor. Since Indonesian market is still promising, it means that many insurance companies will maximize this condition to gain more profit. Potential huge claimSince the trend of natural disaster in Indonesa increases year to year, there will be a probability that the huge claim because of natural disaster emerge. 3.6.3. Business ImplicationsAccording to the Investor.co.id, in 2012 the best insurance for life insurance with asset above Rp 15 trillions was PT Prudential Life Assurance, asset between Rp 5 15 trillion was PT AXA Mandiri Financial Services, asset between Rp 3 5 trillions was PT Panin Life and asset between Rp 1 3 trillion was PT Asuransi Jiwa Adisarana Wanaartha (Investor, 2012). From that data above, it indicates that the performance of WanaArtha Life relatively good. They got the best insurance business from the life insurance category with the asset between Rp 1 3 trillion. It means the performance of the WanaArtha Life was relatively good but they only have a few assets compare to the other company such as AXA or prudential. This condition doesnt make the WanaArtha Life in bad or good condition. By assuming that the assets are the supportive assets, it means that there is a chance of other company to be more superior than WanaArtha Life since they have more resources (assets). The other implication is that WanaArtha Life should keep explore the market since the natural disaster in Indonesia (uncertainty) is increasing every year. It means the market is very huge. Furthermore, it is a must for Wanaartha to re-insurance the company in order to hedge the risk.

3.7. Information Technology Web 2.0In this century, Web 2.0 is commonly used by most of websites in the world. Web 2.0 itself is a term that is used to denote several different concepts: Web sites based on a particular set of technologies such as AJAX; Web sites which incorporate a strong social component, involving user profiles, friend links; Web sites which encourage usergenerated content in the form of text, video, and photo postings along with comments, tags, and ratings; or just Web sites that have gained popularity in recent years and are subject to fevered speculations about valuations and IPO prospects (Cormode & Krishnamurthy, 2008). However, Web 2.0 wasnt basically a social network. It was different between Web 2.0 and social network. Web 2.0 is both a platform on which innovative technologies have been built and a space where users are treated as first class objects. The platform sense consist of various new technologies (mashups, AJAX, user comments) on which a variety of popular social networks such as Facebook, MySpace etc (Cormode & Krishnamurthy, 2008). Other definition of Web 2.0 was come from OReilly in 2005. He emphasized Web 2,0 as viewing the Web as a platform (O'Reilly, 2007).Before Web 2.0 was emerge, there was Web 1.0 who commonly used by web site at that time. Web 2.0 was basically the modification from the Web 1.0. The essential difference between Web 1.0 and Web 2.0 is that content creators were few in Web 1.0 with the vast majority of users simply acting as consumers of content, while any participant can be a content creator inWeb 2.0 and numerous technological aids have been created to maximize the potential for content creation (Cormode & Krishnamurthy, 2008). The transformation or differences of Web 1.0 and Web 2.0 can be described as follows (O'Reilly, 2007). Figure 3.6 shows the basic change of Web 1.0 and Web 2.0

Figure 3.6 Web 1.0 and Web 2.0From that perspective, it means that the contents of Web 1.0 is created by the author of the website and the visitor can only enjoy the provided contents, but in contrast in Web 2.0 there were participants influence in the creation of the contents of the website. The emerging of social media gives a huge impact in rolling the Web 2.0 website.To differ between Web 1.0 and Web 2.0, Web 2.0 has several characteristics and distinguishes it from Web 1.0. Through the application of Web 2.0 services and technologies basic model of interaction between companies and customers has changed from sending to sharing. This model is characterized by (Kiryakova, Yordanova, & Angelova, 2011): Increasing visibility and influence of companies; Changing the way customers interact with each other; Communities that are created around a brand, product or service; New opportunities for rendering an account the customers views and recommendations; Improving interaction between employees.In practice, even there is a study about the differences between Web 1.0 and Web 2.0, it is hard to recognize whether the particular website consider strictly as Web 1.0 or Web 2.0. For example, Amazon.com launched in the mid-1990s and has gradually added features over time. The principal content (product descriptions) is curated rather than user-created, but much of the value is added by reviews and ratings submitted by users. Profiles of users do exist, but social features such as friend links, although present, are not widely adopted. Each product has a wiki page associated with it, but these are little used. Other sites also contain a mixture of the old and the new (Cormode & Krishnamurthy, 2008). Another heuristic to aid distinguishing Web 2.0 and Web 1.0 can be based on time: the term Web 2.0 was coined around 2004, and many of the first truly Web 2.0 sites began emerging in late 2003 and early 2004 (Cormode & Krishnamurthy, 2008).WanaArtha Life itself has its own website that can accessed on www.wanaarthalife.com/. Figure 3.7 below shows the home preview of the website. If go deeply through the website, it can be seen that the website provide lot of information about the company and about their product and their offering. The information can be classified as a rich information because it is provide information that needed by the visitors/customers.

Figure 3.7. WanaArtha Life Website (Wanaartha Life, 2013)However, if talking about the type of the web, it is hard to say whether WanaArtha Life website is consider as Web 1.0 or Web 2.0. If based on time, WanaArtha Life website is a Web 1.0. As checked in who.is which provides domain data, WanaArtha Life website (www.wanaarthalife.com) was created in July, 15th 2000. So that, based on time it is consider as Web 1.0 because it is created before 2003. However, if relate to the characteristic of the website, Web 2.0 can be classified into two aspects: social/business and technology (Kiryakova, Yordanova, & Angelova, 2011) as follows. Architecture of participationWeb 2.0 provides a Web architecture that encourages user participation in the process of creating and sharing content and collaboration between users. Personalization of Web resourcesIn the Web 2.0 model users play an active role in managing Web resources. They have the tools to manage resources that are relevant to their needs; personalize content and resources according to their preferences; choose a way of navigating among them; choose the means for notification when there are changes and etc. The power of Long tailIn Web 2.0, each user can create its own products information, music, and video, designed for both personal and business goals. These products are in digital form, thanks to technologies used to create them and are available anytime and anywhere. This reduces the expenses associated with them. Deployment of Rich applicationsThe definition of rich in this case is associated with the deployment of applications, providing a rich set of features and capabilities for interactivity directly in Web browsers. These applications and technologies provide opportunities for reducing the number of queries from client machines to servers and therefore reduce the traffic between them. On the other hand complicated Web applications can be deployed and complex business services can be delivered. Constant beta releaseNew features can be added to each Web application in the process of its use. The users themselves contribute to the development of applications because they test each new feature and can help to analyze various errors and bugs. There is a rapid and continuous feedback. This model avoids the creation of different versions of software; the need to update to new versions and related problems of different nature. Syndication of information and servicesWeb 2.0 provides opportunities for reuse of information resources. It is possible thanks to the use of Web applications that make syndication of different applications and services (offered by different suppliers) possible. Web 2.0 technologies create information and resources not only for consumers but also for reuse by other software applications.From those perspectives of the Web 2.0 characteristics, it can be concluded that WanaArtha Life website is classified as Web 1.0. The main reason is that the user creation in this website is very low. There is no particular or special space for user creation or interaction in this website. All of the contents are provided by the author, in this case is provided by the company. The information inside is provided as an information needed for the visitors/customers. All the contents can only creatively be changed by the author only.One segment where the user can participate with is only on the contact part. The visitors/users can participate by filling the information in order to contact to the company for the particular purposes.From this elaboration, it can be concluded that WanaArtha Life website is a Web 1.0. There is nothing wrong with this classification. By using Web 1.0 doesnt mean that the website is bad or obsolete. This action basically based on the company point of view. From this example, the option whether chooses Web 1.0 and Web 2.0 can be grouped from the paradigm of the importance and the control (customer/user point of view). So that, it can be grouped as (1) degree of importance and (2) degree of control.Relate to the WanaArtha Life website, the degree of control of users is relatively low. They want to control all the website activity themself. It seems because the characteristic of the website is content only that makes the user participation is low. On the one hand, the culture of Indonesian people is sometime unusual with the Web 2.0 unique style. From the target customer point of view, most of them are adult that already have their own personal funding and born before 1990s. It means, there is a huge possibility that they commonly used to deal with the Web 1.0 rather than Web 2.0 From the degree of importance, the importance of using Web 2.0 is also relatively low. They consider that by implementing or not implementing Web 2.0 doesnt give to many negative impacts for the company. By implementing Web 1.0, the company can still run their business well. However, by implementing the Web 2.0 will give advantages to the company. The main advantage is can increase the customer participation. The customer can share their ideas about insurance or about the company. Such ideas are like testimonials, discussion, etc. By transforming the website, the customers can interact as if directly to the company and to the other customers.But, of course the disadvantage is about the control. The company should have controls to the website so that the degree of the cutomers participation can be limited. Because the users participation can also be a boomerang for the company. Any negative comment or participation from the customer may affect the activity of the company, such as brand image.

3.7.1. Opportunity Customers participationBy participating the customer into the activity, it will give positive impact for the company. Customer may feel that they are contributing or involving to the part of the company activity (in this case is through companys website). Furthermore, it impact the positive brand image of the company. Enlarge the brand awareness of the companyBy participating the customer, there is a possibility that the brand awareness of the company will enlarge. It is like word of mouth process. Participating the customer means that participating the other relation of that particular customer. The network will become bigger as the participation is bigger. Enhance the website usefulnessThe website will not only as a website that provide a content that provided by the author. The usefulness of the web will increase if the company implements the Web 2.0. The more people will use the website as the participation increases.3.7.2. Threats Degree of controlThe problem of implementing Web 2.0 is about the control. The degree of control should be limited so that the participation is on the boundary of the companys regulation. The lack of control will give bad impacts to the company, for instance bad comments or testimonials that will affect the companys brand image Monotone web If the company keep pursuing to use Web 1.0, the web will become monotone. It only provides the contents that needed by the customer. The customer only access it only if they need the information inside.3.7.3. Business ImplicationsSometime, not all the website need to be revised to the Web 2.0. It depends on the importance of the company point of view. For example, like the corporate website, usually it is content based. It only provides the needed content for the users or visitors of the website. But, on the other hand, the company who offers a particular product, some of them use the Web 2.0 in order to enhance the customer participation. For instance, Starbucks (http://mystarbucksidea.force.com/apex/ideaHome). Through its blog, the company enables its customers to offer and share ideas for new drinks, food, even the design of cafes. Other users have the opportunity to discuss and evaluate the ideas. Each user feels personally involved in developing new products and the company has a generator of ideas and suggestions.In this case, WanaArtha Life website, there are no particular special participation from the customer through their website. The only participation is come from the contact us part. From this phenomenon point of view, it is recommended that WanaArtha Life implement a few of Web 2.0 style. The appropriate participation that the user can interact in this case is like the discussion part. The user can feel free to discuss anything about insurance and their experience about risk in relation of life insurance and their life. From this point of view, the purpose is that allowing the customer to personally involve in the certain part of companys business activity. It will enhance the engagement of the company and the customer. However, WanaArtha Life should remember about the degree of control if they want to to implement the Web 2.0 and create the regulation or the appropriate boundary.

3.8. Process Technology Risk Management SoftwareInsurance business is a business that always deals with a risk. They play with the risk. They play with the uncertainty in this life and offer their product, called insurance. They insure the uncertainty in our life, one of them is life. We dont know when we are going to pass away and some people are worry if they are pass away they will left behind unfinished business in the world, such as pay the education payment for their children, financing the needs of his/her family, etc.So that, insurane business is a very risky business. They need to know the degree of the risk before they play. They have to play with statistic in order to play safe in this business. Wrong decision will lead them to huge lost. That is why lot of the insurance business usually have the proper risk management, and it is a must. They need to know whether their investment to insure something is bad or good decision. The good tools to help the company in order help them to decide the right decision is by using the risk management service. Risk management service isnt only offerd for insurance business or industry, but also for other industries such as banking, government, and etc. For insurance company like WanaArtha Life, it is a must to have risk management software. It helps them in making the decision so that they minimize the action of wrong decision by playing with historical and present data on the field.One pattern that emerged very strongly was that the successful project managers were good risk managers. Although they generally didn't use such terms as risk identification, risk assessment, risk management planning, or risk monitoring, that's what they were doing. And their projects tended to avoid pitfalls and produce good products (Boehm, 1991). It means that, in the past the good manager usually avoid risk in order to be succeeded in their project or their business. However this is contrast with todays era especially in insurance business that plays with risk. The manager has to good enough and have proper planning to play with the risk and gain advantage.The practice of risk management itself involves two primary steps, Risk Assessment and Risk Control, each with three subsidiary steps (Figure 3.8). Risk Assessment involves risk identification, risk analysis, and risk prioritization. Risk Control involves risk management planning, risk resolution, and risk monitoring (Boehm, 1991).

Figure 3.8. Software Risk Management Steps (Boehm, 1991)From that point of view, the company can determine that two important things of risk management is to assess and to control those risks. By using the risk management software that following those steps and containt that two important thigs, the company like WanaArtha Life can exploit all the opportunity behind those risks and gain advantages.One of the risk management software that available in the market is offerd by SAS company. Its risk management software is constructed to deal with the risk and SAS provide also the specific risk management software for insurance industry. Reduce risk, optimize capital, maximize investment performance and increase competitive advantage is their goal (SAS, 2013). By implementing risk management software whether it is from SAS or from other vendor, the purpose is to gain advantage from those risk and reduce the risk as much as possible.WanaArtha Life itself isnt stated publicly that they implement risk management software or not, but in this case, it is assumed that they implemented the risk management software. The risk management software in todays era is like a must software for a big company especially for the insurance industry because they play with risks. The framework from Boehm is a framework from the point of view as a software engineer in order to make a risk management software. However, it can be used for the company point of view to choose the right risk management software by determining the factors from those two important things, assessment and control of the risks.

3.8.1. Opportunity Gain advantage from the possible risksBy implementing the risk management software, the company could gain advantage as many as possible from those risks for the sake of the company and of course gain as many profits as possible Reduce riskBy implementing the risk management software, WanaArtha Life could minimize the risk especially when decide a particular decision. This software could be helper for the manager in deciding a particular decision so that will minimize the risk and choose the right decision. Efficient and effective decision makingBy implementing risk management software, it is purposed to get the decision as good as possible for the sake of the company. This software will help the manager to work effectively and efficiently.3.8.2. Threats Cost of maintenanceImplementing risk management software need a huge initial cost. The maintenance of this software is also not cheap. WanaArtha Life needs to be ready to finance the maintenance cost of this software in order to be as update as possible Possibility of choosing the wrong risk management software or the wrong vendorThe key point in determining the risk management software is about the software itself. it needs to be as exact as the requirements that the company wants. On the one hand, the right vendor is one of the considerations. WanaArtha Life should check the track record and the history of the vendor before deal the agreements because it will determine the further actions in the future.3.8.3. Business ImplicationsImplementing risk management software is a must for a company like WanaArtha Life. This company plays with risks since they are insurance company. By implementing the right risk management software, it is purposed to gain the advantage from those risk as many as possible and reduce the risk as many as possible.After implementing the risk management software, the second thing that most important is about the maintanance of the software. Of course to buy this kind of software is not cheap. It needs huge of investment, such as to hire the consultant. On the one hand, the maintenance of this software is also huge. The software need to be maintain in order to be as update as possible. The company also have to watch out about the possibility of obsolete software. Sometime the requirement of the company doesnt match with the what the software offering. The company should be careful about modifying the software in order to meet the companys demand because to many in-house application will make the maintenance cost increases. It is basically happen because the company needs to work double, maintain the in-house application and maintain the