big paper gbe yodhi

PAPER OF GENERAL BUSINESS ENVIRONMENT

EXTERNAL ENVIRONMENT ANALYSIS OF PT ASURANSI JIWA ADISARANA WANAARTHA

Lecturer: Prof. Dr. Basu Swastha Dharmmesta, MBA

Yodhi Kharismanto

12/341305/PEK/17394

International Class – Batch 60

Master of Management

Universitas Gadjah Mada

Yogyakarta

2011

Table of ContentsCHAPTER I: INTRODUCTION...........................................................................................................7

1.1. Background............................................................................................................................7

1.2. Problem Statement.................................................................................................................7

1.3. Research Objective................................................................................................................7

1.4. Research Methods..................................................................................................................7

CHAPTER II: COMPANY PROFILE..................................................................................................9

2.1. About the Company...............................................................................................................9

2.2. Vision and Mission..............................................................................................................10

2.3. Company’s Value................................................................................................................10

2.4. Awards.................................................................................................................................11

CHAPTER III: BUSINESS ENVIRONMENT...................................................................................13

3.1. Demographic.......................................................................................................................13

3.1.1. Opportunity..................................................................................................................18

3.1.2. Threats.........................................................................................................................19

3.1.3. Business Implications..................................................................................................19

3.2. Social...................................................................................................................................20

3.2.1. Opportunity..................................................................................................................23

3.2.2. Threats.........................................................................................................................23


3.3. Cultural................................................................................................................................24

3.3.1. Opportunity..................................................................................................................27

3.3.2. Threats.........................................................................................................................27


3.4. Domestic Political................................................................................................................28

3.4.1. Opportunity..................................................................................................................31

3.4.2. Threats.........................................................................................................................31


3.5. International Political...........................................................................................................32

3.5.1. Opportunity..................................................................................................................37

3.5.2. Threats.........................................................................................................................37


3.6. Natural.................................................................................................................................38

ii

3.6.1. Opportunity..................................................................................................................43

3.6.2. Threats.........................................................................................................................44


3.7. Information Technology......................................................................................................45

3.7.1. Opportunity..................................................................................................................50

3.7.2. Threats.........................................................................................................................51


3.8. Process Technology.............................................................................................................52

3.8.1. Opportunity..................................................................................................................54

3.8.2. Threats.........................................................................................................................54


3.9. Governmental......................................................................................................................55

3.9.1. Opportunity..................................................................................................................57

3.9.2. Threats.........................................................................................................................57


3.10. Economic Development...................................................................................................58

3.10.1. Opportunity..................................................................................................................61

3.10.2. Threats.........................................................................................................................61


3.11. Regional Economy...........................................................................................................62

3.11.1. Opportunity..................................................................................................................63

3.11.2. Threats.........................................................................................................................63


3.12. Industry & Sectoral Policies............................................................................................64

3.12.1. Opportunity..................................................................................................................65

3.12.2. Threats.........................................................................................................................66


3.13. Monetary & Fiscal Policies..............................................................................................67

3.13.1. Opportunity..................................................................................................................69

3.13.2. Threats.........................................................................................................................70


CHAPTER IV: CONCLUSION AND RECOMMENDATION..........................................................71

4.1. Conclusion...........................................................................................................................71

4.1. Recommendation.................................................................................................................73

iii

4.2. Future Condition of the Industry..........................................................................................74

REFERENCES........................................................................................................................................76

iv

List of TablesTable 3.1. World Population 13

Table 3.2. Land Area of Indonesian Region 14

Table 3.3. Population and Population Density of Indonesian Provinces 16

Table 3.4. Human Development Index Indonesia 18

Table 3.5. What the generation Y thinks 21

Tabel 3.6. Gross Regional Domestic Product DI Yogyakarta in million rupiah 62

Table 3.7. BI rate in Indonesia from January 2011 – May 2013 68

Table 4.1. Research Summary 71

v

List of FiguresFigure 3.1. Growth of new PRI vs FDI flows in developing countries 35

Figure 3.2. Demand of Political Risk Insurance 36

Figure 3.3. Spread of disasters from 1815 – 2013 in Indonesia 39

Figure 3.4. Spread of disasters from 1815 – 2013 by each Province in Indonesia 39

Figure 3.5. Spread of disasters from 1815 – 2013 by the Type of Disasters Province in Indonesia 40

Figure 3.6 Web 1.0 and Web 2.0 46

Figure 3.7. WanaArtha Life Website 47

Figure 3.8. Software Risk Management Steps 53

Figure 3.9. World Corruption Perception Index 2012 56

Figure 3.10. Disposable Income of Housholds in Indonesia 59

vi

CHAPTER I: INTRODUCTION

1.1. Background

Insurance 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 Wanaartha’s business activities.

1.2. Problem Statement

What are threats and opportunities generated by external factors to PT Asuransi Jiwa

Adisarana Wanaartha and their implications to company business?

1.3. Research Objective

The 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 Methods

To 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 company’s external factors, the researcher limits the

7

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 company’s 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.

8

CHAPTER II: COMPANY PROFILE

2.1. About the Company

PT 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 community’s 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 company’s shareholder.

Shareholder proportion :

PT Fadent Consolidated Companies 97.2%

Yayasan Sarana Wanajaya 2.8%

9

2.2. Vision and Mission

Vision

Being 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. Company’s Value

Moral Integrity

Comply to all norms and rules regulated within the company and society where honesty,

discipline and responsible are required.

Team Work

Work together to accomplish company's goal with the best quality.

Optimistic

Always have a positive thinking and spirit for everyone success.

Knowledgeable

Highly knowledgeable and constantly expanding the skills and abilities to the next level.

Care

Compromise and understand others and surrounding's interest.

Open Mind and Dedication

Willing to accept new changes and professionally committed to undergo every task.

10

2.4. Awards

Media Asuransi Magazine

2012The Best

Life Insurance CompanyEquity Rp 250 Billion – Rp 750 Billion

2011The Best

Life Insurance CompanyEquity Rp 100 Billion – Rp 250 Billion

Investor Magazine

2012The Best

Life Insurance CompanyAsset Rp. 1 Trilion – Rp 3 Trilion

2012Special Award

Life Insurance CompanyBased on Investment Growth

Performance over 5 years

11

InfoBank Magazine

2012Very Good

Life Insurance CompanyFinancial Performance of 2011

2011Very Good

Life Insurance CompanyFinancial Performance of 2010

Business Review Magazine

2012Life Insurance Company

Asset Rp 2 triliun – Rp 5 triliunFinancial Performance of 2012

CHAPTER III: BUSINESS ENVIRONMENT

12

3.1. Demographic

Population and Population Density

According 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)

13

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

14

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 isn’t 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 isn’t spread evenly.

15

Table 3.3. Population and Population Density of Indonesian Provinces (Badan Pusat

Statistik, 2013)

Human Development Index

On 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

16

Statistik calculation who calculate that Human Development Index of Indonesia in 2011 was

0.7237 (Badan Pusat Statistik, 2013). The different calculation doesn’t 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 today’s 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.

17

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

3.1.1. Opportunity

More penetration

Since 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

18

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

area

There 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 area

The population and the population density in Indonesia isn’t 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 area

The population and the population density in Indonesia isn’t 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. It’s 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 Implications

WanaArtha Life should focus on the area that relatively has high population,

population density and high HDI number. It will give positive impact for WanaArtha

19

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 X’s

characteristics are different from the generation Y’s 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 Y

What 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 company’s employees consists of people from the Generation Y. From the company’s

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.

20

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! Today’s 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 don’t 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 Descriptionatmosphere work environment attitudes or cultureautonomy freedom to make decisionsfeedback job-related communicationsgrowth opportunities to learn, training & developmentinteresting work work-related issues that are task-orientedleadership issues relating to management style or effectivenesslocation geographical sitemobility travel opportunities/obligationspolicy rules & regulations

21

promotion opportunities to advance, career developmentrelationships issues that target co-worker relationshipsrespect feelings of being valuedresponsibility obligations to performsalary any issues regarding pay or benefitsschedule work hour issues, flexibility of hoursstability long-term career, continuity of work & earningssupport 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 don’t care too

much about how big the salary is. If they are think that their job is not that meaningful

enough and they don’t 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

22

company’s 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

company’s 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 Y

WanaArtha 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 company’s

growth.

Advantages from Generation Y employees

They are more creative, flexible and have more ideas. It is good for the company’s asset

because they are more active and aggressive to do the work. It is support the company’s

innovation processes since the today’s era, value innovation is very important to compete

with one another business.

3.2.2. Threats

Possibility to lose the Generation Y employee

The 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 employee

Today’s 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 Y

23

It 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.


According 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 Y’s 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 company’s insurance products. The agent furthermore will gain

benefit from the commission if successfully convince and attract that particular customer to

buy the company’s insurance products and the company will gain benefit from the customers

who buy the company’s insurance product. Today, this system is not only being used by the

insurance company but also by the other company such as automotive company.

Today’s 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.

24

The Problems of Insurance Agents in Indonesia

In today’s 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 didn’t say about the consequences that the customer may face. Frans, Chief of

BMAI (Badan Mediasi Asuransi Indonesia) said that many people’s 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 don’t 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 don’t 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).

25

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 world’s 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 don’t 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 don’t want to be hurried

to make a decision. They want the insurance agent have a respect in promising or selling their

26

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 system

The 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

customer

The 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 system

The skepticism of insurance agents by Indonesian people will drawback the company and

affects its performance.

Insurance agent system is very competitive

There 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.


After 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

27

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 company’s, industries and

culture’s 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 Company

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.

Insurance Law

Insurance 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 hasn’t been changed until present.

28

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 I’ve 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).

29

The Ownership of Insurance Company

The 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 entity

b. Insurance company who the ownership as referred to in letter a, by insurance

company who subject to foreign law

From 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 isn’t 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 Ownership

Insurance 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 entity

b. 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 don’t close the opportunity of foreign investor to play in the

30

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 don’t 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 Indonesia

There 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 scarcity

Capital 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.

31


The 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 don’t 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

32

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. It’s 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 MIGA’s 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

33

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-commercial—or political—

risks. At the end, they said that political risk insurance (PRI) is a tool for businesses to

mitigate and manage risks arising from the adverse actions—or inactions—of 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.

34

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.

35

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).

36

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 don’t have the capabilities and the resources to catch up this

opportunity and they don’t 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 insurance

From 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 uncertainty

As 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.

37


From 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 hasn’t 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 Indonesia

Indonesia 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.

38

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)

39

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,

40

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 Disaster

As 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 today’s 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 Indonesia

The 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.

41

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.

42

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 penetration

By 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 increased

The 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 government

There 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 hasn’t 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

43

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 competitor

The 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 claim

Since 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.


According 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 doesn’t 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.

44

3.7. Information Technology

Web 2.0

In 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 user–generated

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 wasn’t 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 O’Reilly 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

45

Figure 3.6 Web 1.0 and Web 2.0

From 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

46

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

47

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 participation

Web 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 resources

In 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 tail

In 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 applications

The 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 release

New 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

48

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 services

Web 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 doesn’t 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 1990’s. It means, there is a huge possibility that they commonly

used to deal with the Web 1.0 rather than Web 2.0

49

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 doesn’t 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 cutomer’s 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

Customer’s participation

By 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 company’s website). Furthermore, it impact the

positive brand image of the company.

Enlarge the brand awareness of the company

By 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 usefulness

The 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.

50

3.7.2. Threats

Degree of control

The 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 company’s regulation. The

lack of control will give bad impacts to the company, for instance bad comments or

testimonials that will affect the company’s 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.


Sometime, 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

company’s 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.

51

3.8. Process Technology

Risk Management Software

Insurance 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 don’t 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 isn’t 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 today’s 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

52

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

53

(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 isn’t 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 today’s 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 risks

By 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 risk

By 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 making

By 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 maintenance

Implementing 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

54

Possibility of choosing the wrong risk management software or the wrong vendor

The 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.


Implementing 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 doesn’t match with the what the

software offering. The company should be careful about modifying the software in order to

meet the company’s 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 original software of the product

that come from the vendor. So that, for WanaArtha Life, to implement the risk management

software has to emphasize the two things, (1) the company’s requirements in compare with

the potential product offering (2) the vendor reputation and track record.

3.9. Governmental

The corruption issue with the government in Indonesia is one of the biggest issues in

doing the business. According to the Transparency International organization who focuses on

the global coalition against corruption said that Indonesia corruption perception index (CPI)

in 2012 was in rank 118. This rank was below from several neighbor countries such as

55

Malaysia (54) and Thailand (88) but above from several neighbor countries such as Vietnam

(123) and Cambodia (157). Figure 3.9 shows us about the level of world country CPI 2012.

Figure 3.9. World Corruption Perception Index 2012 (Transparency International

Organization, 2012)

There are several ways that company could implement to deal with the company. In

Unilever for example, Unilever top level person always say no for everything that could

consider into bribe such as gift, parcel or etc.

In brief, for the insurance company, one of the ways to prevent corruption or KKN in

Indonesia is by implementing Good Corporate Governance. Corporate governance involves

regulatory and market mechanisms, and the roles and relationships between a company’s

management, its board, its shareholders and other stakeholders, and the goals for which the

corporation is governed (OECD, 2004). On the one hand, according to National Committee

of Governance Policy Indonesia that the implementing of GCG influences to make a healthy

competition and also the investment environment (Komite Nasional Kebijakan Governance,

2006). Therefore the implementation GCG of companies in Indonesia is very important to

increase the growth and the stability of the economy.

The corporate governance furthermore would help the company to deal with the

corruption. By forming the good corporate governance, the company could make the

regulation about what the company and the stakeholder should behave. In this issue, the

56

problem is how to behave against corruption, collusion and nepotism. The purpose is to deal

with the corruption. By forming the good corporate governance, the company can establish

some particular important rule to bound the stakeholder behavior beyond the unexpected

negative action such as corruption.

3.9.1. Opportunity

Maximize profitability

Acording to the data of insurance industry in Indonesia, WanaArtha Life can

maximize their profitability since the market is still emerging since the Indonesia

insurance penetration in 2011 was far behind than Thailand, in compare with the

Product Domestic Bruto, Indonesian insurance penetration only 1.2% rather than

Thailand (above 3%) (Kompas, 2012).

Implementing the corporate governance

By implementing good corporate governance, hopefully will decrease the tendency to

do negative actions such as corruption. From the portion WanaArtha Life insurance

itself mostly comes from PT Consolidated Companies (97.2%) and the rest are owned

by Yayasan Sarana Wanajaya. From this point of view, the majority of the

shareholder is from PT Fadent Consolidated Companies. By implementing the good

corporate governance, it is expected to decrease the tendency of negative actions

conducted by the majority shareholder.

3.9.2. Threats

Corruption, collusion and nepotism

Corruption, collusion and nepotism would be the biggest threat for the company.

Company should have the way to fight against this negative action. One of way that

the company could implement is by forming and implementing the good corporate

governance.


It is obvious that the WanaArtha Life should implement good corporate governance.

WanaArtha Life itself is not a public company, so that implementing good corporate

governance is a good and superior way to avoid negative actions such as corruption,

collusion, nepotism, agency conflict, and so forth.

57

3.10. Economic Development

The Growth of Insurance industry in Indonesia.

Insurance industry is one of the promising industries in Indonesia. According to

Kompas.com, in 2011 the investment of Life Insurance Company was about Rp 200.39

trillion or has raised about 20% compare with the same period last year, while the common

insurance investment has raised 18% to Rp 39.47 trillion. The assets of life insurance also

have raised 20% to Rp 225.54 trillion and common insurance assets have raised 17% to Rp

53.76 trillion (Kompas, 2012). Those data shows that the profitability of insurance company

has increased. On the one hand, it can be concluded also that people in Indonesia are more

aware about the importance of insurance.

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).

From the issue above, it indicates that the Indonesian insurance market potential is

very large. Furthermore, the potential market in Indonesia is still big and lot of opportunity

for insurance company or new company to enter this business.

The rise of Middle Class

Indonesia is experiencing a rapid expansion in the middle class, which change or help

to transform the country's consumer market. Many businesses have seen this as the

opportunity to offer their product in Indonesia. Businesses have seen this as the strong

purchasing power and the high labor skills of the middle class.

This phenomenon can be seen as the opportunity through the disposable income in

Indonesia. Figure 3.10 shows the disposable income of Indonesian people. As we can see that

the disposable income of Indonesian people are increasing every time and the future

projection also shows that the disposable income of Indonesian people are increasing also.

Disposable income is the amount of money that households have available for spending and

saving after income taxes have been accounted for (Investopedia, 2013). Disposable income

usually use for entertainment or other tertiary needs such a travel, gadget, and so on.

58

Figure 3.10. Disposable Income of Housholds in Indonesia (Euromonitor International,

2012)

Cited from Euromonitor International, there are several facts about the disposable

income in Indonesia, which are:

In 2011, per household annual disposable income stood at Rp 60.6 million (US$6,901),

representing an average growth rate of 5.0% per year in real terms during 2006-2011.

Consumer expenditure is also growing fast, at an average rate of 4.7% per year in real

terms during 2006-2011 to reach Rp57.7 million (US$6,569) per household;

Underpinning the rise in consumer expenditure is the rise of the middle class. In 2006,

there were 6.6 million households with an annual disposable income of over US$10,000

(in constant terms), but by 2011 this number had risen to 13.7 million households.

According to the data, there are several implications of the emerging of middle class

in Indonesia. The implication effect the characteristic of buying of Indonesian people in

Indonesia. Of course the entire business owners have to consider this phenomenon in order to

face this challenge. According to Euromonitor International, there are several implications

that we have to consider, which are:

Companies in a range of industries including tourism, education, healthcare and

entertainment can expect greater business opportunities, as middle-class Indonesians are

spending increasingly on discretionary goods. Although the bulk of consumer spending in

Indonesia is still on essentials (i.e. food, non-alcoholic beverages and housing), the

proportion of discretionary spending in total consumer expenditure has been gradually

rising, from 49.1% in 2006 to 54.2% in 2011;

59

Indonesia has a relatively young demographic profile with 60.8% of the population aged

below 35 years as of 2011. People aged 30-34 had the highest average gross income in

Indonesia, at Rp38.7 million (US$4,199) in 2011, compared to the national average gross

income of Rp31.5 million (US$3,422). High earners in this age group will likely buy their

first cars as well as having a strong demand for luxury goods;

Like many other Asian countries, the middle class in Indonesia is characterized not only

by their purchasing power, but also their generally higher levels of skills and education.

Many members of the Indonesian middle class are educated at universities in the West.

As a result, multi-national consumer goods companies entering the Indonesian market can

capitalize on both the rising wealth and the high skills of the middle-class labor pool.

The growth of insurance in Indonesia is very promising. The market is still huge in

Indonesia. From the data above tells that the penetration of insurance in Indonesia is still 4%,

but on the other hand insurance industry grows year by year. 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. Therefore, it is chance for insurance company like WanaArtha

Life insurance to enlarge their market share and theirs profit.

On the one hand, the phenomenon above about the rise of middle class in Indonesia is

a chance for business to gain more opportunities to increase theirs profit. Many Indonesian

people are categorized as a middle class who have the big role in the driving of Indonesian

economic. Furthermore, insurance company like WanaArtha Life insurance who play in the

insurance industry has also the chance to gain more profit by learning from this phenomenon.

From this perspective, 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 in Indonesia that

Indonesia has the phenomenon of emerging of the middle class. At last, it can be concluded

that based on the low penetration of insurance industry and the emerging of middle class in

Indonesia, WanaArtha Life could see this as a big opportunity for their business.

60

3.10.1. Opportunity

Market penetration

By 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

Profitability of insurance industry is good – source of capital

The growth of insurance industry increases year by year. In 2011 the investment in

insurance industry increased 20% compare to the same period in previous year (Dewan

Perwakilan Rakyat Republik Indonesia, 2013). It indicates that the profitability of

insurance industry has increased. Many investors are willing to play in this industry.

From this condition, WanaArtha Life can take the advantage in order to gain more capital.

WanaArtha Life could proposing some capital injection needed in order to expand their

business and to help them to run the opportunity.

Emerging middle class in Indonesia

The rise of middle class in Indonesia is also good opportunity for WanaArtha Life

insurance to expand their business. According to the data above, tells that emerging

middle class in Indonesia has increased year by year, it also means that the disposable

income of the middle class has increased. From this issue, WanaArtha Life can see the

opportunity to offer an insurance product that fit to their needs. For this present time,

WanaArtha Life offers the life and health insurance

3.10.2. Threats

Competitor

The 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.


According to the data above, my recommendation for WanaArtha Life insurance

company to face the opportunities and the threats is (1) building up the resources and the

61

capabilities, and (2) market penetration. As follows are the recommendation of the business

strategy that WanaArtha Life insurance may implement in order to face the opportunities and

threats.

1) To answer the opportunity, it clears that WanaArtha Life should look inside first are they

have the right resource to answer the opportunity or to compete with other. There are

many way to increase the resource and the capability. For this moment, I would like to

recommend strategic alliance with the other insurance or related party. This action aims to

increase the resource and capabilities of the company.

2) Penetrate more about the WanaArtha Life insurance product. The penetration of the

insurance product and also the awareness of insurance is still low. It means that

WanaArtha Life still has the possibility to expand their market share. From this point, the

company should do some business strategies in order to expand their market share and

penetrate more. I recommend for the WanaArtha Life insurance company to do more

campaigns and product offering to the customers. Because, compare to the other

competitor, such as Prudential, WanaArtha Life still steps behind that company and any

other competitors.

3.11. Regional Economy

Yogyakarta is one of the provinces in Indonesia. According to BPS in 2010 Yogyakarta’s

population was 3,457,491. In the region economic side, Yogyakarta’s product domestic bruto

in 2010 and 2011 are Rp 45,625,589.50 million and Rp 51,782,092.43 million (Badan Pusat

Statistik, 2010). This huge number can be an opportunity for the insurance company to take

advantage in Yogyakarta region.

Table 3.6 shows the gross regional domestic product of DI Yogyakarta in Finance, Real

Estate and Company Service section. According to the table, the GRDP of Finance, Real

Estate and Company Service section in Yogyakarta was increasing year by year.

Table 3.6. Gross Regional Domestic Product DI Yogyakarta in million rupiah (BPS

Yogyakarta, 2010)

2007 2008 2009 2010

Finance, Real Estate 3,188,428 3,724,285 4,090,675 4,552,667

62

and Company Service

From this data, it can be used as a trend of financial services, such as insurance. It

indicates that the financial services trend in Yogyakarta is increasing. So that from the data

above, it can be used as an opportunity for WanaArtha Life insurance company to keep

pursuing profit.

Not only that, to support that number, according to Kompas.com, in 2011 the investment

of Life Insurance Company was about Rp 200.39 trillion or has raised about 20% compare

with the same period last year, while the common insurance investment has raised 18% to Rp

39.47 trillion. The assets of life insurance also have raised 20% to Rp 225.54 trillion and

common insurance assets have raised 17% to Rp 53.76 trillion (Kompas, 2012).

From those data shows that the profitability of insurance company has increased. On the

one hand, it can be concluded also that people in Indonesia are more aware about the

importance of insurance. At the end, it reflects into the number on the table 1 who shows the

increasing amount of number in financial service. At last, there is an opportunity for

WanaArtha Life Company to keep pursuing more profit. Since Indonesian people are more

aware right knows about having insurance, WanaArtha Life insurance company can offer

their insurance product more intense.

Diversifying insurance products are also a good step in order to gain more profit. There

are several problems of life that needs insurance. So by diversifying insurance product would

help WanaArtha Life to enter several segments of market and gain more profit.

3.11.1. Opportunity

Penetrate more Yogyakarta’s market

Since the penetration of insurance in Indonesia is still low (4%), it is beneficial for

WanaArtha Life to penetrate more. On the one hand, the historical data of gross

regional domestic product shows that the trend in the financial service increases every

year.

3.11.2. Threats

Tight competition

Yogyakarta is one of very promising market in Indonesia. Beside WanaArtha Life,

there are so many insurance business also play in this region, such as Axa, Prudential,

63

WanaArtha Life Life, and so on. It needs extra effort for WanaArtha Life to compete

in this region and explore more the market.


Because its tight competition in Yogyakarta’s market, WanaArtha Life could

collaborate to increase their resource and capability and ready to compete in the

market. WanaArtha Life could collaborate with other financial institution to distribute

and market more their product through their channels.

3.12. Industry & Sectoral Policies

In Indonesia today’s era, the insurance industry is ruled under the Otoritas Jasa

Keuangan (OJK). OJK has the authority to control in overseeing financial institutions in

Indonesia. One of the financial institutions is all insurance businesses.

The establishment of OJK in the early of 2013 gives many changes especially in the

rule or regulation in the financial industry. One of them is the rule ore regulation to play in

the insurance business. This condition will affect the activity of the insurance business in

Indonesia because they have to obey the regulations that later are signed and officially

established.

But on the other hand, the establishment of OJK gives a good impact for financial

industry in Indonesia. The establishment of OJK shows the transformation of financial

industry in Indonesia into a better environment. It is targeted to create a fair and healthy

environment for all financial institution and all the elements that are involved in the activity.

OJK’s vision is to be the trusted supervisory institution financial services industry,

protect the interests of consumers and the community, and is able to realize the financial

services industry, a pillar of the national economy that is globally competitive and to promote

the general welfare. Whereas the missions of OJK in Indonesia are (Otoritas Jasa Keuangan,

2013):

• To ensure that the overall activities within the financial services sector are implemented in

an organized fair transparent and accountable manner

• Promotes a financial system that grows in a sustainable and stable manner; and

• Protect the interest of Consumer in the Financial Market

64

OJK itself has two kind of mandates in Indonesia, regulatory mandate and supervisory

mandate. The more detail is as follows (OECD, 2013):

Regulatory Mandate

• Implement OJK Law and harmonize 3 sub sector laws

• Establish rules and regulation

• Supervision

• Institutional

• Enforcement and Sanctions

Supervisory Mandate

• Institutional and Market Oversight Policy and Supervisory Activities

• Governance and Oversight of CEO’s from Banking, Capital Market and NBFIs (refer OJK

Commissioners Function)

• Conduct supervision, inspection, investigation, Consumer protection, and other actions

• Impose administrative sanctions on any party violating the laws and regulations in the

financial services sector

• To issue and / or revoke business licenses; individual licenses; effective registration

statement; registered‐license statement; approval of business activities; and validation.

3.12.1. Opportunity

More independent and effective control from the authority party

The establishment of OJK in Indonesia gives a good signal for all the financial industry

and all the related elements, included insurance industry. It shows the transformation of

the all financial environment, into a good, fair, and healthy environment in Indonesia. It is

beneficial for WanaArtha Life as an insurance company because there is a authority party

that more independent and effective control.

Increase efficiency because of the new regulation about to combine the permit of life

insurance and common insurance business

This regulation can make the insurance company to have permission of both life

insurance business and common insurance business. It used to have the specific

permission of life insurance business and common insurance business of the company.

Because of this new regulation, the company that has two permission, can be merged into

one legal entity and it increases the efficiency of the company.

65

3.12.2. Threats

The change of regulation

Because there is a change of authority party, there is a huge possibility about the change

of the rule or regulation in order to meet their mission. This condition of course will

impact the company’s business like WanaArtha Life. The change of the rule or regulation

will impact the WanaArtha Life do the business and run their activity.

Increase competition because of the new regulation about to combine the permit of life

insurance and common insurance business

Because of this regulation, it is predicted that the insurance company will be reduced by

20%. All the insurance company that used to have two legal entity with two permission of

insurance (life and common insurance) can merge after this regulation is officially

establish. It means that particular company will seek efficiency and combine resource and

capability to compete. This is will make the competition become tighter and fiercer.


Because of the establishment of OJK, it will give the impact either good or bad impact

for WanaArtha Life. The most of important thing here is about the regulation that probably

will change during the time. The legal department of WanaArtha Life should prepare about

the possibility of the change of rule or regulation. The department should prepare and adapt

as fast as possible to the change and communicate with the company and the other division.

In the company point of view, WanaArtha Life should prepare also about this issue.

Because of there is a new authority party (OJK), it means that there is a possibility about the

change of the rule of the game to play in this industry. One of the example is the possibility

of merge company of life and common insurance company under the same umbrella

company because there is a new bill about the combine permission of life and common

insurance. This condition will make the competition tighter because lot of the same company

on that condition will merge into one single entity and the purpose is efficiency, join resource

and capability, and collaborate to compete in the market.

3.13. Monetary & Fiscal Policies

In economics and political science, fiscal policy is the use of government revenue

collection (taxation) and expenditure (spending) to influence the economy (O'Sullivan &

66

Sheffrin, 2003). The two main instruments of fiscal policy are changes in the level and

composition of taxation and government spending in various sectors.

Monetary policy is the process by which the monetary authority of a country controls

the supply of money, often targeting a rate of interest for the purpose of promoting economic

growth and stability (Yeyati & Sturzenegger, 2010). The official goals usually include

relatively stable prices and low unemployment. Monetary theory provides insight into how to

craft optimal monetary policy. It is referred to as either being expansionary or contractionary,

where an expansionary policy increases the total supply of money in the economy more

rapidly than usual, and contractionary policy expands the money supply more slowly than

usual or even shrinks it.

One of the fiscal policy who is still hot in the relation of insurance industry is about

the planning of the government to put insurance hedging in the Constitution of the State

Budget in 2014. This action was taken in order to hedge the risk of the possibility of the

disaster that might happen in Indonesia. As we know, Indonesia has so many possibility of

natural disaster, such as earthquake, flood, etc. Each of the natural disaster sometime

unpredictable in term of cost. Because of thi uncertainty condition, will affect the insurance

business in term of claim process from the client because of the impact of natural disaster.

The amount of the claim may vary according to the particular agreement of the claimer and

the insurance company. 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.co, 2013).

This news is of course a good sign for the insurance company like WanaArtha Life.

There is an open opportunity to work with the government to hedge the government risk in

handling the disaster impacts. However, on the other hand, insurance company should ber

careful if think to cooperate with the government. They should consider their resources and

capabilities and assess whether they competent enough to cooperate with the government

because the value of this possibility is very huge. We are talking about the country. But of

course the risk is also enormous. High risk high return. The particular company should

accomplish the cost and benefit analysis to determine the net present value of this project.

On the other hand, the monetary policy that may impact the insurance business is

about the BI rate. As shows in Table 3.7, that the BI rate from year to year is decreasing.

67

There are 2 main implications of this monetary policy, first tt indicates that the predicted

inflation in the future in Indonesia is at least below 5.75%. The central bank want to control

the inflations. The purpose is if the bank interest rate high, hopefully the people would like to

save their money in the bank so that the buying demand will be decrease and the price of the

product will stay on the normal level. The second, if the BI rate relatively low, so hopefully

lot of people dare to borrow money from the bank because the interest rate of the bank is also

low in order ti expand their business. The expectation is that the expand the business, the

more employee needed and the better economic condition of the country.

From those points of views and assumption, the low BI rate will impact the insurance

business in a good impact. First, because the economics of Indonesia will be better, it is

expected that people in Indonesia will use their disposable income to insure their life in

insurance business like WanaArtha Life. Second, because the buying demand is expected to

decrease, it is expected that their disposable/unused money will be used for investment option

and insurance will be selected as their investment option.

From the company point of view, the lower the BI rate, the good chance for the

company to borrow debt in order to business purposes. Because the BI rate low, so that the

bank interest rate will also relatively low. So that, debt will be a good choice for WanaArtha

Life if they want to expand their business.

However, on the other hand, there are also some issues that may be a disadvantage for

the company in relation of fiscal and monetary policies. One of them is about the election of

the President and Vice President Republic Indonesia in 2014. This condition will make the

government; especially they who are involved in particular party, try to play save until the

Election Day over. On the one hand, there is also a transformation of bureaucracy after

Election Day. This transformation might impact the company run their business activity. This

condition will lead to uncertainty and drawback the company in taking a decision.

Table 3.7. BI rate in Indonesia from January 2011 – May 2013 (Bank Indonesia,

2013)

PeriodBI

RatePeriod

BI Rate

14-May-13 5.75% 9-Feb-12 5.75%11-Apr-13 5.75% 12-Jan-12 6.00%7-Mar-13 5.75% 8-Dec-11 6.00%12-Feb-13 5.75% 10-Nov-11 6.00%10-Jan-13 5.75% 11-Oct-11 6.50%

68

11-Dec-12 5.75% 8-Sep-11 6.75%8-Nov-12 5.75% 9-Aug-11 6.75%11-Oct-12 5.75% 12-Jul-11 6.75%13-Sep-12 5.75% 9-Jun-11 6.75%9-Aug-12 5.75% 12-May-11 6.75%12-Jul-12 5.75% 12-Apr-11 6.75%12-Jun-12 5.75% 4-Mar-11 6.75%10-May-12 5.75% 4-Feb-11 6.75%12-Apr-12 5.75% 5-Jan-11 6.50%8-Mar-12 5.75%

3.13.1. Opportunity

Hedge insurance in natural disaster

There is an open opportunity to work with the government to hedge the government risk

in handling the disaster impacts.

Decreasing BI rate

The low BI rate will impact the insurance business in a good impact. First because the

economics of Indonesia will be better, it is expected that people in Indonesia will use their

disposable income to insure their life in insurance business like WanaArtha Life. Second,

because the buying demand is expected to decrease, it is expected that their

disposable/unused money will be used for investment option and insurance will be

selected as their investment option. Increase efficiency because of the new regulation

about to combine the permit of life insurance and common insurance business.

From the company point of view, the lower the BI rate, the good chance for the company

to borrow debt in order to business purposes. Because the BI rate low, so that the bank

interest rate will also relatively low. So that, debt will be a good choice for WanaArtha

Life if they want to expand their business.

3.13.2. Threats

Transformation of bureaucracy

This condition may happen after the election of President and Vice President Republic

Indonesia. This transformation might impact the company run their business activity. This

condition will lead to uncertainty and drawback the company in taking a decision.

Furthermore, the corruption also still high in Indonesia who also lead to uncertainty.

69


WanaArtha Life need to prepare about the transformation of bureaucracy that may

happen because of the election of President and Vice President Republic Indonesia. There is a

possibility that the way that bureaucracy works are differ. However on the other hand, the

decreasing of BI rate indicates that the economics of Indonesia is getting stable. The

economics of the people itself is better and better. This is a good condition for WanaArtha

Life to offer their product and explore the market more. WanaArtha Life should shows that

their product is the best choice for them to as the people have excess money and life

insurance is the best option as investment option for them. The decreasing of BI rate also

gives a good sign for WanaArtha Life in order to expand their business by using debt. Since

the BI rate tend to significantly decrease, so that the bank interest rate will also decrease as

the impact of that condition.

70

CHAPTER IV: CONCLUSION AND RECOMMENDATION

4.1. Conclusion

After those elaborations about the external factors that influence WanaArtha Life, in

this part is about the conclusion that cover the opportunities and the threats faced by the

company toward all the business environments factors and the business implication that

should be taken by the company. Table below is summarized the opportunity and threats

faced by the company and its business implication.

Table 4.1 Research Summary

No

Business Environment

Topic Opportunities ThreatsBusiness

Implication

1 Demographic

Demographic factors

(population, population

density, and HDI)

Easiness to explore the

market in the huge population

and huge population

density area

Hard to sell the product in rural area. More cost to penetrate or

explore the market more in particular area

Focus on the high population,

population density, and high

HDI area

2 SocialGeneration X

and Generation Y

Get more capable

employee from the generation Y

The creation of proper work environment

would be more confusing.. trade-off

between the generation X

and the generation Y

Change the managers or the

leaders that situasionally fit

the generation Y’s phenomenon. Creating the

proper generation Y work

environment.

3 CulturalInsurance agent

system

The insurance agent system is still superior in gaining more customers and expand market share for the

insurance company.

The skepticism of insurance

agents by Indonesian people will

drawback the company and

affects its performance.

Creating the rule of insurance

agency in order to meet the

company’s, industries and

culture’s standard.

4 Domestic Political

Insurance draft bill

The limitation of foreign investors

to play in

Capital scarcity since the part of foreign investors

71

insurance industry in Indonesia

is going to be limited

5International

PoliticalPolitical Risk

Insurance

The demand of Political Risk Insurance is increasing

The political condition in

Indonesia is on the very high uncertainty

Avoid to offer the Political Risk

Insurance product. It will be

risky for the company because

the political condition in

Indonesia is very uncertainty and it

needs high investment of

capital

6 NaturalNatural disaster

in Indonesia

Trend of natural disaster is

increasing. The trend of natural

disaster insurance in Indonesia

The bigger the natural disaster

that might happen, the bigger the

potential claim from the customer

Keep explore the market since the

natural disaster in Indonesia

(uncertainty) is increasing every

year. Re-insurance the

company

7Information Technology

Web 2.0

Customer’s participation. Enlarge the

brand awareness of the company.

Enhance the website

usefulness

Degree of control.

Monotone web

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

8Process

Technology

Risk management

software

Gain advantage from the

possible risks. Efficient and

effective decision

making. Reduce risk

Cost of maintenance. Possibility of choosing the wrong risk

management software or the wrong vendor

To implement the risk management software has to

emphasize the two things, (1) the

company’s requirements in

compare with the potential product offering (2) the

vendor reputation and track record

9 Government Good corporate governance

Good corporate governance will

Corruption, collusion and

Implement Good Corporate

72

enhancing the company’s

ethical conduct

nepotism would be the biggest threat for the

company.Governance

10Economic

DevelopmentEmerging of middle class

Penetration of insurance in

Indonesia until 2013 is still 4%.

the investment in insurance

industry increased 20% compare to the same period in previous year

many insurance companies will maximize this advantage to

gain more profit

building up the resources and the capabilities and

do market penetration and

exploration

11Regional Economy

Regional economy in Yogyakarta

Financial services trend in Yogyakarta is increasing

The differences of the economic condition of the particular area/region. Tight competition

Focus on the region with the relatively high economic of growth. Collaboration

12Industry and Sector Policy

Insurance and OJK

More independent and effective control from the authority party

Rule or regulation that might be changed in order to meet the proper condition by the OJK and it might impact the way WanaArtha Life run their business activity

The legal departement should prepare the posibillity of the regulation transformation

13Fiscal and Monetary Policy

Fiscal and monetary policy factor (risk hedging of natural disaster and BI rate)

Hedge insurance in natural disaster. BI rate is decreasing

Floating exchange rate. It means uncertainty condition. Transformation of bureaucracy

The company could using debt for the capital requirement. Hedging and reinsurance the company

73

4.1. Recommendation

After discussed all external business environment related to WanaArtha Life, this part

is about several recommendation that can be considered by the company in running their

business in the future. The recommendations are:

1. Business expansion and exploration. The potential market in Indonesia is still huge.

There is still huge potential market available. WanaArtha should do the business

expansion and exploration in order to increase their market share and gain profit as many

as possible.

2. System Adaptation. As the business expands, WanaArtha Life should adapt with local

demand, especially in dealing with the agency system. Since the company is operated in

Indonesia, the system adaptation of agency system would be beneficial for the company

to avoid the skeptic of agency system.

3. Focus on the high population, population density, and high HDI area. This action is

taken in order to make operation efficiency. WanaArtha Life should operate in the high

population, high population density, and high HDI area because the market is huge there.

Besides that, it is expected that the market there are ready and very potential to be

offered for insurance products.

4. Market Penetration. Since the penetration of insurance in Indonesia is still low (4%), it

is superior for WanaArtha Life to still more penetrate the market. There is a huge

potential target customer in Indonesia. It is targeted by penetrate the market; WanaArtha

Life could also expand their market.

5. Collaboration. The competition in this industry is very tight and fierce. There are many

insurance companies play in this industry in Indonesia. By implementing collaboration

may help WanaArtha Life to compete in this industry. It is expected to increase the

resources and capabilities of WanaArtha Life to play in this industry and gain

competitive advantage.

4.2. Future Condition of the Industry

After come up with those elaborations, in this section is about the prediction 3 to 5

years in the future of the insurance industry relate to the condition of external business

environment factors that have been explained before.

The player in insurance industry in Indonesia is predicted would be smaller than

before. This is happen because there is a draft bill that would limit the role of foreign investor

74

in insurance industry in Indonesia. Besides that, there is a plan from the government to give a

single permission for the both life and common insurance. It used to have a specific

permission from the government whether life or common insurance. So that, it is predicted

that there are several company which are under the same corporation that used to have two

permissions, life and common insurance permission, will merge become one single legal

entity. This action is basically to achieve the efficiency of the operational and join resources

and capabilities of the company to compete in this industry.

That condition is predicted to make the competition of insurance industry in Indonesia

will be tighter and fiercer since there would be merge company become one if that

government’s plan implemented. It means that the merged company will become more

superior because they would join resources and capabilities and also try to achieve efficiency

in their day to day operational.

On the other condition, the competition and the player of insurance company is

predicted mostly comes from the local player (Indonesia). There is a draft bill that would

limit the role of the foreign investors in Indonesian insurance industry. This plan would make

the player of insurance industry is dominated by the local player. This condition also forces

the insurance company to hardly get the source of funding or capital needed from the foreign

investors because their part would be limited. Furthermore, to fund the company’s needs,

either for business expansion, projects, or so forth, it would come from the national resources

such as national bank debt, or comes from the IPO or basically comes from the internal

resources.

Besides that, the condition of the insurance industry is predicted to be more fair,

healthy environment since there is a new authority party that supervise the financial activity

in Indonesia, including insurance, called OJK.

75

REFERENCESBadan National Penanggulangan Bencana. (2013). Data & Informasi Bencana Indonesia.

Retrieved March 8, 2013, dari BNPB: http://dibi.bnpb.go.id

Badan Pusat Statistik. (2010). Sensus Penduduk 2010. Retrieved February 25, 2013, from Badan Pusat Statistik: http://sp2010.bps.go.id/

Badan Pusat Statistik. (2013, February). Trend of Selected Socio-Economic Indicators of Indonesia. Jakarta: Badan Pusat Statistik.

Bank Indonesia. (2013). BI Rate. Retrieved April 30, 2013, from Bank Indonesia: http://www.bi.go.id/web/en/Moneter/BI+Rate/Data+BI+Rate/

Boehm, B. W. (1991, January). Software Risk Management: Principles and Practices. Software, IEEE, Vol.8(no.1), hal. 32-41.

BPS Yogyakarta. (2010). Gross Regional Domestic Product. Retrieved March 11, 2013, dari BPS Yogyakarta: http://yogyakarta.bps.go.id/

Budi, A. (2013, February 25). Asuransi Politik atau Political Risk Insurance. Retrieved March 14, 2013, dari http://www.akademiasuransi.org/2013/02/asuransi-politik-atau-political-risk.html

Communicaid. (2009). Doing Business in Indonesia. Retrieved March 18, 2013, dari http://www.communicaid.com/ access/pdf/library/culture/doing-business-in/Doing%20Business%20in%20Indonesia.pdf

Cormode, G., & Krishnamurthy, B. (2008, April). Key Differences between Web 1.0 dan Web 2.0. First Monday, Volume 13 Number 6. Retrieved May 1, 2013, from firstmonday.org/ojs/index.php/fm/article/view/2125

Dewan Perwakilan Rakyat Republik Indonesia. (2013, January 2013). Komisi XI DPR Segera Bahas RUU Usaha Perasuransian. Retrieved March 14, 2013, from DPR RI: http://www.dpr.go.id/id/berita/komisi11/2013/jan/09/4849/Komisi-XI-DPR-Segera-Bahas-RUU-Usaha-Perasuransian-,

Euromonitor International. (2012, July 3). Indonesia's Rising Middle Class to Transform the Country's Consumer Market. Retrieved February 25, 2013, dari Euromonitor International: http://blog.euromonitor.com/2012/07/indonesias-rising-middle-class-to-transform-the-countrys-consumer-market.html

76

Goldgehn, L. (2004). Generation Who, What, Y? What You Need to Know About Generation Y. Internatioal Journal of Educational Advancement, Volume 5(No 1).

Investopedia. (2013). Disposable Income. Retrieved February 25, 2013, dari Investopedia: http://www.investopedia.com/terms/d/disposableincome.asp

Investor. (2012). Sembilan Perusahaan Asuransi Terbaik 2012. Retrieved March 12, 2013, dari http://www.investor.co.id/home/sembilan-perusahaan-asuransi-terbaik-2012/39790

James, J., Bibb, S., & Walker, S. (2008). Generation Y: Comparison between Asia and the rest of the World. United Kingdom: Talentsmoothie.

Kalsum, U., & Ahniar, N. F. (2009, June 18). Asuransi Terkait Risiko Politik Sepi Peminat. Retrieved March 2013, 2013, dari Viva Life: http://life.viva.co.id/news/read/67687-asuransi_terkait_risiko_politik_sepi_peminat

Kim, W., & Mauborgne, R. (1995). Value Innovation: The Strategic Logic of High Growth.

Kiryakova, G., Yordanova, L., & Angelova, N. (2011). Web 2.0 in Business. Trakia Journal of Sciences, Vol. 9, Suppl. 3, pp. 169-177.

Komite Nasional Kebijakan Governance. (2006). Pedoman Umum Good Corporate Governance Indonesia. Jakarta: KNKG.

Kompas. (2012). Asusransi di Indonesia Harus Digenjot. Retrieved March 2013, 2013, dari Kompas: http://bisniskeuangan.kompas.com/read/2012/10/25/0811241/Asuransi.di.Indonesia.Harus.Digenjot

Kompas. (2012). Dunia Asuransi Tidak Jujur? Retrieved March 15, 2013, from Kompas: http://lipsus.kompas.com/asuransi/ read/2011/10/20/08152452/Dunia.Asuransi.Tidak.Jujur

Meier, J., & Crocker, M. (2010). Generation Y in the Workforce: Managerial Challenges. The Journal of Human Resource and Adult Learning, Voume 6(No 1).

MIGA. (2012). World Investment and Political Risk. Washington, DC: Multilateral Investement Gurantee Agency. Diambil kembali dari http://www.miga.org/documents/WIPR12.pdf

MIGA. (2013). About Political Risk Insurance. Retrieved March 17, 2013, dari Multilateral Investment Gurantee Agency: http://www.miga.org/resources/index.cfm?stid=1870

OECD. (2004). OECD Principles of Corporate Governance. OECD.

OECD. (2013). Financial Market. Retrieved May 5, 2013, dari OECD: http://www.oecd.org/finance/financial-markets/49703438.pdf

77

O'Reilly, T. (2007). What Is Web 2.0: Design Patterns and Business Models for the Next Generation of Software. Communications & Strategies, 65(First quarter 2007), p. 17.

O'Sullivan, A., & Sheffrin, S. M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall.

Otoritas Jasa Keuangan. (2013). Tentang Kami > Visi Misi. Retrieved May 2013, 2013, dari OJK: http://www.ojk.go.id/App/ContentPage.aspx?Guid=5A3F2287-8346-465E-A474-9E6D66B1C7BD

PT Sentana Mitra Kualita. (2013). Peminat Asuransi Bencana Alam Meningkat. Retrieved March 8, 2013, dari http://www.sentanabroker.com/component/content/article/1-latest-news/76-peminat-asuransi-bencana-alam-meningkat.html

SAS. (2013). Risk Management. Retrieved May 3, 2013, dari SAS: http://www.sas.com/resources/solution-brief/risk-management-brief.pdf

Tempo. (2013, January 30). 2014, Pemerintah Buat Hedging Asuransi Bencana. Retrieved March 10, 2013, from Tempo: http://www.tempo.co/read/news/2013/01/30/087457956/2014-Pemerintah-Buat-Hedging-Asuransi-Bencana

Tempo.co. (2013, January 30). 2014, Pemerintah Buat Hedging Asuransi Bencana. Retrieved March 10, 2013, from Tempo: http://www.tempo.co/read/news/2013/01/30/087457956/2014-Pemerintah-Buat-Hedging-Asuransi-Bencana

Transparency International Organization. (2012). Corruption Perceptions Index 2012. Retrieved March 10, 2013, dari Transparency Internationa: http://cpi.transparency.org/cpi2012/results/

WanaArtha Life. (2012). Company Profile 2012. Retrieved March 13, 2013, from http://www.wanaarthalife.com/download/data/Company_Profile_2012_(English).pdf

WanaArtha Life. (2013). WanaArtha Life. Retrieved May 1, 2013, from http://www.wanaarthalife.com/

Wikipedia. (2013). Communal Work. Retrieved March 17, 2013, dari Wikipedia: http://en.wikipedia.org/wiki/Gotong_royong

World Bank. (2013). The World Bank: Population, total. Retrieved February 26, 2013, from The World Bank: http://data.worldbank.org/indicator/SP.POP.TOTL

Yeyati, E. L., & Sturzenegger, F. (2010). Monetary and Exchange Rate Policies. Handbook of Development Economics, Volume 5.

78

big paper gbe yodhi

Documents

business implications663

business implications643

business implications513

business implications323

business implications613

business implications383

business implications553

business environment133