Demand for Islamic insurance products increases

More and more customers are paying attention to the compliance of insurance products with Sharia rules because they want to make sure that the products they buy are halal, or in accordance with Islamic law. 

Recent surveys conducted by private life insurance companies Allianz Life Indonesia in Jakarta, Bandung in West Java, Padang in West Sumatra, and Samarinda in East Kalimantan show high demand for halal insurance products. "A total of 97 percent of the approximately 300 respondents agreed that halal investment is important," said Karin Zulkarnaen, Allianz Indonesia's head of Market Management, during a press conference in Central Jakarta on Monday. 

"In addition, 93 percent of the respondents said that they are comfortable with Sharia products because they provide transparent investment and profit-sharing schemes in addition to management that complies with Islamic principles," he continued, adding that 87 percent of respondents had no problem purchasing Sharia products and 88 percent said it was important to implement religious values, including in financial management. 

Karin added that with a Muslim population of about 87 percent of Indonesia's total population of 252 million, the largest number of Muslims in one country in the world, the country provides a large market for Sharia insurance. The Financial Services Authority (OJK) in its first quarter 2015 report shared Karin's thoughts, noting that the Islamic finance industry has great potential to grow. 

According to the report, the Islamic finance industry currently has a relatively small market share compared to the conventional financial industry. Of the total Indonesian financial industry, 4.7 percent of the market is filled by Islamic banking, 4.7 percent by Islamic investment funds, 3.6 percent by the Islamic non-bank financial industry (IKNB), and 3.1 percent by the value of Islamic bonds (sukuk). During the period from January to March this year, IKNB syariah recorded an asset value of Rp 44.2 trillion (US$3.28 billion), most of which was contributed by Islamic insurance assets of 53.8 percent. 

Although iknb syariah's asset value fell 5.7 percent year-on-year (yoy), the Islamic insurance industry saw an increase in asset value by 6.4 percent year-on-year to Rp 23.80 trillion from Rp 18.41 trillion. OJK also noted in its report that the investment value of the Islamic insurance industry rose 6.9 percent from Rp 15.61 trillion recorded in the same period last year to Rp 20.81 trillion. 

Especially in the Sharia life insurance business, OJK recorded a large increase in the amount of contributions (premiums) from Rp 1.41 trillion last year to Rp 2.12 trillion, or 50.35 percent higher yoy. The Sharia life insurance industry also recorded an increase in asset value and investment value by 35.21 percent and 37.53 percent to Rp 19.39 trillion and Rp 17.70 trillion, respectively. 

Director of Allianz Life Indonesia, Alan Darmawan, said that his company provides a broad market to develop its sharia insurance segment. "Currently, Sharia insurance contributes 9 percent of the total assets under management (AUM) of Rp 27 trillion and the value of Allianz Life Indonesia's financial institution pension fund (DPLK) until June this year," he said. 

Allianz subsidiary, a Germany-based insurance company, launched its latest Sharia life insurance product on Monday that also serves as a Hajj planning fund, Allianz Tasbih, hoping to penetrate new markets and develop the current number of Sharia product customers reaching 125,000 customers.

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