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
ii

Table of Contents
CHAPTER 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. Companys 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
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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 ............................................................................................... 66
3.13.1. Opportunity ................................................................................................................... 69
3.13.2. Threats ........................................................................................................................... 69
CHAPTER IV: CONCLUSION AND RECOMMENDATION .......................................................... 71
4.1. Conclusion ............................................................................................................................ 71
4.1. Recommendation .................................................................................................................. 73
iv

4.2. Future Condition of the Industry ........................................................................................... 74
REFERENCES .......................................................................................................................................... 75

v

List of Tables
Table 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

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List of Figures
Figure 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

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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 Wanaarthas 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 companys external factors, the researcher limits the

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discussion on these topics below: demographical, social, cultural, domestic political,
international political, natural, information technology, processing technology, governmental,
economic development, regional economy, industrial and sector policies, and monetary and
fiscal policies. From each topic, the researcher will analyze companys external factors to
identify threat and opportunity and then will discuss their implication to the company.
Besides that, for the simplification of the writing, furthermore the company name will be
simplified as WanaArtha Life which is also the brand name of the company.

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CHAPTER II: COMPANY PROFILE

2.1. About the 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 communitys future financial planning. In order to achieve that, since
early 2010, WanaArtha Life has been continuously enhancing the level of services towards its
customers by refurbishing its standard operational procedure based on international best
practice and applying the web based technology for life insurance daily operational system.
Besides that it is well understood that the exposure towards our products is another
importan role, therefore WanaArtha Life is expanding its distribution channels into three
types of distribution channels: namely the distribution line agency, bancassurance and
corporate.
WanaArtha itself has two party who own the shareholder of the company. The
majority of the shareholder is from PT Faden Consolidated Companies who own 97.2 % and
the rest by Yayasan Sarana Wanajaya. Below is the proportion of the companys shareholder.
Shareholder proportion :
PT Fadent Consolidated Companies 97.2%
Yayasan Sarana Wanajaya 2.8%

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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. Companys 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.

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2.4. Awards
Media Asuransi Magazine

2012
The Best
Life Insurance Company
Equity Rp 250 Billion Rp 750 Billion
2011
The Best
Equity Rp 100 Billion Rp 250 Billion

Investor Magazine

2012
The Best
Asset Rp. 1 Trilion Rp 3 Trilion

2012
Special Award
Based on Investment Growth
Performance over 5 years

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InfoBank Magazine

2012
Very Good
Financial Performance of 2011

2011
Very Good

Business Review Magazine

2012
Asset Rp 2 triliun Rp 5 triliun

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CHAPTER III: BUSINESS ENVIRONMENT

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)

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

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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 km
2
of land area and divided by lot of islands. The
table 3.2 above shows us about land area comparison among 33 provinces in Indonesia in
percentage form. It can be seen from the table 3.2 above that the largest province is Papua
which has 16 percent of all Indonesian land area. From the information above, it can be
concluded that provinces located in Papua (Papua and Papua Barat), Kalimantan (West
Kalimantan, Central Kalimantan, East Kalimantan, South Kalimantan), and Sumatra (Aceh,
North Sumatera, West Sumatera, Riau, Riau Islands, Jambi, South Sumatera, Bangka
Belitung Islands, Bengkulu, Lampung) region have wider land area compared to those
located in Java (DKI Jakarta, West Java, Banten, Central Java, DI Yogyakarta, East Java).
In contrast, the land area comparison among provinces in Indonesia is not directly
proportional with the population comparison among Indonesian provinces. It seems Java
Island that approximately has less than 8 percent of total Indonesian land area is the most
populous region in the country (57.48% of total Indonesian people). However on the other
hand, Papua and Maluku region which has more than 25 percent of all Indonesian land area
has only few people (2.6% of total Indonesian people). Table 3.3 shows the population and
population density among provinces in Indonesia. It can be concluded that the most populous
provinces in Indonesia are West Java, East Java, and Central Java. It also can be concluded
that the population in Indonesia isnt spread evenly.
From the density point of view, it can be seen from the table 3 that the population
density mostly focus on Java Islands, especially DKI Jakarta. As we know, Java Island
proportion to the the Indonesian land area is small (6.77%) compared to the other islands.
The huge Island, such as Kalimantan (28.48% of Indonesian land area) only contribute few
number of population density. From this perspective, it can be seen that Java has the huge
proportion of population denstiy even though it has small portion of the Indonesian land area.
In brief, it can be concluded that the population density in Indonesia isnt spread evenly.

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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

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

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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

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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 isnt not spread evenly across
country. This is hard for WanaArtha Life to penetrate and explore the market,
especially in rural area. WanaArtha Life needs to conduct extra effort to explore the
rural area.
More cost to penetrate or explore the market more in particular area
The population and the population density in Indonesia isnt not spread evenly across
country. In particular area who only have small portion of population will have
negative impact for WanaArtha Life. It will additional cost for the company because
the effort is greater to explore the market. Its hard for the company to achieve
economics of scale because the number of potential target customer is smaller since
the population is smaller too.
3.1.3. Business 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

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Life because it easy for them to explore or exploit the market since the customer or
potential customer is greater in that particular area. So that, it is easy for WanaArtha
Life to achieve economics of scale. Therefore, it is recommended for WanaArtha Life
to open branch offices to help the company in exploring or exploiting the market in
that particular area.
3.2. Social
Work Environment of WanaArtha Life Insurance Company
WanaArtha Life was established since 1974. Because of this condition, the work
environment of the company was set for the Generation X before. Generation Xs
characteristics are different from the generation Ys characteristics. They usually more loyal
than the generation X.
Over the time, after more than 30 years of running the business, of course WanaArtha
Life insurance had employee from the generation Y era. They have to hire people that
originally come from the generation Y in order to help them in running the business
activities. On the other hand, several generations X people that worked for the company had
retired. As a company that had been set as the generation X work environment, of course this
is one of the problem for the company. They are different. The ways the company has to treat
are also different. The work environment of WanaArtha Life insurance company is also has
to be changed as a reaction to face this phenomenon.
Generation 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 companys employees consists of people from the Generation Y. From the companys
perspective, especially the company that has been run for a long time since the previous
generation had established, they have to ready to react differently in order to treat the
generation Y properly in the business work environment.

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Generation Y have their own characteristic that differs them with the previous
generation. Because of this characteristic, the organization (firm, institution, etc) have to take
into account how to treat them in the right way. The organization have to form the right
strategy to make the business environment work is as proper as possible for them to work
with.
The generation Y is different from the previous generation. That is why the
organization also has to react and treat differently in order to gain advantage from their
involvement in the business activity. In this condition, WanaArtha Life insurance company
has to change their business environment to fit this condition. WanaArtha Life insurance has
to give what the most of generation Y wants, so that the WanaArtha Life could gain the
advantages from their involvement in the business activity.
Basically, Generation Y wants to know why! Todays youth are curious, they want
the facts, they want the hard data, and most of all they want the truth (Goldgehn, 2004). This
generation is very creative and very flexible. They were raised during a period when the
world has welcomed and protected. Their parents was relatively rich to cover their daily life
need. It means that meaningful of work is more important rather than the salary itself for the
generation Y.
Table 3.5 shows us the most common of generation Y thinks about the certain
category in working. From this table, we can say that they want the meaningful of job tasks.
They want fair work environment for one of another employee. They want flexibility of time
to do their other activities besides working. At last, it can be concluded that the meaningful of
work is very important for them. They dont care to much about the salary. What they do care
is the benefit of what they got from that salary.
Table 3.5. What the generation Y thinks (Meier & Crocker, 2010)
Category Description
atmosphere work environment attitudes or culture
autonomy freedom to make decisions
feedback job-related communications
growth opportunities to learn, training & development
interesting work work-related issues that are task-oriented
leadership issues relating to management style or effectiveness
location geographical site
mobility travel opportunities/obligations
policy rules & regulations

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promotion opportunities to advance, career development
relationships issues that target co-worker relationships
respect feelings of being valued
responsibility obligations to perform
salary any issues regarding pay or benefits
schedule work hour issues, flexibility of hours
stability long-term career, continuity of work & earnings
support help & encouragement from company, manager, or co-workers
This idea also coherent with the idea from a research titled Generation Y:
Comparison between Asia and the rest of the World by Justine James, Sally Bibb, Simon
Walker in 2008. They believe that there are similar characteristic between generation Y in
Asia and the rest of the world are looking for from the employer, which are (James, Bibb, &
Walker, 2008)
Having the chance to learn and develop.
The opportunity to do work that excites them.
Having a job aligned to their talents.
Having a mentor at work.
It is essential for the generation Y to have meaningful work. They dont care too
much about how big the salary is. If they are think that their job is not that meaningful
enough and they dont see so much benefit, it is more likely for them to quit from that job. So
that, it is essential for the manager to understand them and trust them because that is the one
of the main reasons why generation Y leave organizations where-ever they are in the world
(James, Bibb, & Walker, 2008).
James, Bibb, and Walker also argue that being trusted is the key to keeping this
generation motivated and engaged at work. This is undoubtedly more important during times
of economic downturn as people become more insecure about their jobs and concerned about
changes that may happen in their organizations.
After those elaborations, it is essential for the WanaArtha Life insurance company,
especially for the manager to know about the characteristic of Generation Y. The manager
should oversea how to treat them well to gain win-win solution both for the sake of the
company and the generation Y itself. Because, if the company or the manager can treat them
well, it will bring advantages that the company never had before. It is basically because the
generation Y is relatively more creative than the generation X. They have more ideas for the

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companys sake. They are a generation that is motivated, educated, and have higher
expectations than ever before (Meier & Crocker, 2010). Therefore, it is beneficial for the
companys innovation processes.
Since WanaArtha Life insurance still changing the work environment from the
generation X era to the generation Y era, it is important for the manager to implement the
proper work environment to answer what the generation Y wants. The manager should form
the proper work environment in order to gain the advantage of having the generation Y
employees. Or besides, they will quit and look for another job that suit them.
3.2.1. Opportunity
More capable employees from generation 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 companys
growth.
Advantages from Generation Y employees
They are more creative, flexible and have more ideas. It is good for the companys asset
because they are more active and aggressive to do the work. It is support the companys
innovation processes since the todays era, value innovation is very important to compete
with one another business.
3.2.2. Threats
Possibility to lose the Generation Y 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
Todays 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

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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 Ys phenomenon.
2) It is time for the WanaArtha Life to change the paradigm from the generation X to the
generation Y paradigm.
3) Creating the proper generation Y work environment.

3.3. Cultural
System of Insurance Agent
What is the system of insurance agent? It is simply one of the system that used by the
insurance company in promoting, selling their insurance product to the customers. They use
the system agent in order to promote and sell their insurance product. Just like the salesman
or saleswoman that we are commonly met in the certain time or place, the insurance agent is
almost just the same. They offer the insurance company product to the customer. They do it
by several medias, such as by phone, by email, or directly meet the potential customers.
The system of insurance agent is commonly used by most of the insurance company
in Indonesia even in the world. The agent will be in charge to search the potential customer
and convince them to buy the companys insurance products. The agent furthermore will gain
benefit from the commission if successfully convince and attract that particular customer to
buy the companys insurance products and the company will gain benefit from the customers
who buy the companys insurance product. Today, this system is not only being used by the
insurance company but also by the other company such as automotive company.
Todays era, the successful insurance agent could gain millions of rupiah from
convincing and attracting the customers to buy the insurance product from his/her
representative insurance company.

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The Problems of Insurance Agents in Indonesia
In todays era, the competition of insurance company in Indonesia is more tighten.
Many insurance companies compete one another to attract more customers. Indonesia who
has the emerging of middle class phenomenon is become one of the prospect market.
Furthermore, this competition may induce the unhealthy or unfair competition emerges. The
insurance agent as the person who directly meet with the customer become more aggressive
to attract more people for his/her sake and also for the sake of his/her company. As a result,
many of insurance agent will do whatever it takes to attract customers.
As the customer point of view, many of them are disappointed with the insurance
agent. Many of them argue that the insurance agent only said the beautiful point at the
beginning but didnt say about the consequences that the customer may face. Frans, Chief of
BMAI (Badan Mediasi Asuransi Indonesia) said that many peoples point of view claimed
that insurance is consisted with lot of lies. They (the insurance agent or insurance company)
were not honest and did what they had promised before (Kompas, 2012).
On the one hand, many people also comment that the ways of insurance agent in
attracts or contacts with the potential customers are not polite. Even if they use the proper
media, such as by phone, email, direct visit, or so on, sometime they violence the independent
right of the particular customer. Sometime, some people dont want to be distracted with the
bunch of unimportant message such as the insurance offering. They argue that if they need,
they will directly go to the insurance office, so that the insurance agents dont have to bother
them with bunch of offering of the insurance products.
The Culture in Indonesia
Indonesia is a various country. Indonesia consists of many regions, tribe, language,
and so on. The people in Indonesia are so diverse. That is what makes the market penetration
in Indonesia can diverse from one another area. Indonesia is also adapting the east culture
that well known has personal trait such as friendly, not individualistic, helping each other,
high tolerance, and so on. Even, Indonesia used to has a gotong royong term in Soeharto
era, which means a conception of sociality familiar to large parts of Indonesia and Malaysia
(Wikipedia, 2013).

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Indonesia itself has several key concepts and values in the social life. According to
the Communicaid, in their article entitled Doing Business in Indonesia said about the key
concepts and values of Indonesian culture, which are (Communicaid, 2009):
1. Communication Style - Indonesians tend to communicate in a subdued and indirect
manner. They do not always say exactly what they mean. Indonesians speak in a subtle
tone and therefore it is up to the listener to pick up on communication subtleties by
paying attention to body language and gestures. Indonesians are polite and diplomatic in
their speech and will make great efforts not to offend others. Indonesians will do
anything to save face even if it means avoiding confrontation or telling others what they
want to hear rather than dealing with immediate issues.
2. Time - Time in Indonesia is approached in a very relaxed and flexible manner.
Indonesians do not rush through business negotiations and often do not take the time to
plan everything in great detail. Punctuality is not always observed, as Indonesians do not
like to feel hurried and do not have the western sense of urgency. The Indonesian attitude
towards time is reflected in that, to them, time is not money. They may show less interest
in profit or material success but rather building relationships.
3. Conformity - Indonesia is a collectivist society that places higher importance on the
group than the individual. Your Indonesian counterparts will always place family and
community concerns over that of the business or individuals.
4. Religion - Indonesia currently is the worlds largest Islamic nation Muslims pray five
times a day and in some workplaces in Indonesia there are separate rooms for daily
prayers. There are however varying degrees to which Islam influences Indonesian
business culture, but it is essential to remember its influence when working with
Indonesian counterparts. Ramadan is a major Islamic tradition that includes fasting for an
entire month. Although foreigners are not required to fast, it is considered impolite to eat
or drink in front of others during this time.
That is why some people in Indonesia sometime dont like salesman/saleswoman
including the insurance agent. Some insurance agents forget to approach them in respect with
the Indonesian culture. Some insurance agents may opportunist. They only think about their
benefits rather than both benefit the agents and the customers.
Indonesian people are upholding respect and honesty. They dont want to be hurried
to make a decision. They want the insurance agent have a respect in promising or selling their

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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

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insurance agent is very superior for the insurance company in order to gain more customer
and expand market share. However, the company should aware about the approach of that
particular agent in promoting or selling the insurance product. Over time, this culture will
bring the opportunities and threats for the WanaArtha Life. Furthermore, the business
implication for WanaArtha Life insurance company to face the opportunities and the threats
are:
1) Creating the rule of insurance agency in order to meet the companys, industries and
cultures standard.
2) Give new value for the customer. The value innovation could be reach by innovate in 3
platforms, which are product, service and delivery (Kim & Mauborgne, 1995).

3.4. Domestic Political
Insurance 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 hasnt been changed until present.

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However, recently the house of representative of Indonesia (DPR) has a bill about
insurance business. After years of using the old law, they feel that the law about insurance
business has to be changed because lot of articles stated on the laws need to be revised.
According to Vice Chairman of Commission XI of DPR, Andy Timo, said that Commission
XI of the House of Representatives will soon discuss the draft revision of the business of
Insurance Law number 2 of 1992 on Insurance Business. The bill aims to harmonize the
positions and institutional Otoritas Jasa Keuangan (OJK) by January first 2013, because of
that, Bapepam LK and all insurance businesses will be in one setting which is from OJK
(Dewan Perwakilan Rakyat Republik Indonesia, 2013).
One of the issues in promoting bill about insurance business is about the ownership of
insurance company in Indonesia. According to Andy Timo, general insurance reached 80
companies, 47 life insurance companies, 5 Sharia life insurance companies. Unfortunately is
that almost 80 percent owned by foreign investors. He also said that capital issue is still an
obstacle for local insurance businessman, therefore, the government want to issue a useful
and comprehensive law and required by the insurance industry (Dewan Perwakilan Rakyat
Republik Indonesia, 2013).
It indicates that many players in insurance company in Indonesia are basically from
foreigners, and the people who enjoy the benefit are mostly from foreign investors. That is
why government needs to revised the law. One of them is because of this reason.
On the one hand, insurance industry is one of promising industry. Andy Timo said
that, growth of insurance in Indonesia reached 20 percent annually. It indicates that the
Indonesian insurance market potential is very large, as the penetration of insurance to society
is still 4 per cent were aware of insurance. Furthermore, the potential market in Indonesia is
still big and lot of opportunity for insurance company or new company to enter this business
(Dewan Perwakilan Rakyat Republik Indonesia, 2013).
Beside the focus of ownership issue, the other issues of promoting new law are how to
educate the society to be more aware about insurance. Like Ive mentioned before, the
penetration of insurance business in Indonesia is still low, only 4%. It means there are lots of
big opportunities to maximize the profit in insurance industry. The other issue is about how to
deal with the customer protection. Furthermore, this bill will include the protection of
consumers in which insurance companies are obliged to guarantee the participants of the
Lembaga Penjamin Simpanan (Deposit Insurance Agency).

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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 isnt matter how much the portion of the foreign
investors, as long as it is established by Indonesian citizen or Indonesian legal entity, and it is
already formed as an insurance company subject to its foreign law, the foreign investors can
play in the insurance industry in Indonesia. That is why most of insurance industry is owned
by foreigner. It indicates that at that time there were capital scarcities to establish new or to
play in the insurance industry; therefore they need capital injections that one of them came
from foreign investors.
On the bill of Insurance Business, they change the content for the Ownership of
Insurance Company. It is stated in article 1, chapter III about Legal Entity And 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 dont close the opportunity of foreign investor to play in the

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insurance industry. Government tries to hold the foreign investors part and give the
opportunity for the local investors to more involve in this industry.
The foreign investor can also involve in this business only if they have insurance
company or parent company that one of its subsidiaries is engaged in similar Insurance
Business and along with Indonesian citizens or Indonesian legal entity. It indicates that
government want to more involving the local player in this industry. They dont stop the
foreign investment but they try to hold on the part of foreign investors.
On the next part of the bill article also have said that foreign nationals can be the
owner of the Insurance Company only through transactions on the stock exchange. It means
that government wants to add transparency in the process of owning the Indonesian insurance
company from foreign investor. From the previous law, the foreign investors have no
obligation through the stock exchange.
From this perspective, it indicates also that government also tries to minimize the
foreign workers in the insurance company since mostly insurance companies are owned by
foreign investors. Government wants to involve more the local worker for this industry and
limit the number of foreign workers.

3.4.1. Opportunity
The decreasing of foreign investors that play in the insurance business in 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.

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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 dont have so much impact about the ownership issue since most of ownership are
owned by the national citizens. However, the big question come up about the owner of PT
Fadent Consolidated Companies who almost own all the shares of WanaArtha Life. It is still
a question about the data of that company, since there is not to many information regarding
that company. If it is found that, PT Fadent Consolidated Companies own the part or even all
the shares, there is a possibility that it will be affected with the regulation of the limitation of
foreign investors.
Besides that, it would be hard for WanaArtha Life to get lot of funding from the
foreign investors if the bill passes. The part of the foreign investors would be limited. So that,
the other way to get more funds or capitals come from the national bank debt, IPO, or
basically from internal resource.

3.5. International Political
The commons sense of the establishment of insurance is because there are
uncertainties of life. Insurance plays in the role of life uncertainty. Because of uncertainty,
people tend to be afraid of what would be coming next. People are afraid that something bad
will happen in the future. No one will know what would happen in the future. Is it good? Or
is it bad? This thinking, that usually people tend to think about what if bad things happen in
the future and affect our one particular aspect, is the common paradigm of business
opportunity to cover the uncertainty of life.
Because of this issue, there is come up a business model that will cover the
uncertainty that would happen in the future. Furthermore, insurance will answer all those

33

problems. The basic business of insurance company is to cover the uncertainty of people or
business that would happen in the future. For example is life insurance for people, or the fire
insurance for the business.
Talking about uncertainty, politic is also about uncertainty of life. Politic always goes
up and goes down unpredicted. Its hard to predict what would be coming next in the political
side. Politic makes many companies have to aware of the possibility that would happen next
because of politic. There are many things that would happen because of politics, for example
labor riot because of the policy of the minimum rate of labor wage who was happened in the
middle of 2012. This kind of thing of course hurt the company especially manufacture
company that operated in that area because most of the labor participate or forced to
participate in that action.
Political environments are not only from domestic side, but politic also comes from
the international side. Many things had happened in 2012 and it affected directly or indirectly
the company activities. According to MIGAs journal, World Investment and Political Risk
2012 that global economic growth estimates for 2012 indicate a continuing fragile recovery.
The ongoing sovereign debt crisis and recession in the euro zone, curtailed bank lending and
domestic deleveraging, fluctuating but elevated commodity prices, and the ongoing political
turmoil in the Middle East and North Africa have slowed the initial rebound that followed the
2008 global financial crisis. This slow progress has had an impact on developing countries,
which initially fared well in terms of rebounding growth rates, private capital flows, and
foreign direct investment (FDI). From this perspective, it indicates that international political
turnover not only affects the country itself but also the company itself and the potential of
foreign direct investment. It clears that political turn around affects the existence of business
activities of the particular company in the particular country.
Because of the possibilities of political risk that would happen, nowadays comes up a
paradigm of new business opportunity of insurance called political risk insurance. Political
risk insurance basically comes up to cover all the possibilities that would happen because of
the political environment from both nationally or/and internationally.
According to MIGA, (Multirateral Investment Gurantee Agency), 2013, Multinational
enterprises and banks face a number of risks when conducting business overseas. Some of
these risks can be removed or mitigated by conducting due diligence on the parties involved

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and on the economic viability of the proposed business. Other risks are harder for investors or
lenders to predict. These include some commercial risks and, non-commercialor 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 actionsor inactionsof governments.
As a risk-mitigation tool, PRI helps provide a more stable environment for investments into
developing countries, and to unlock better access to finance (MIGA, 2013).
From those explanations, it indicates that Politic Risk Insurance helps business to
overcome the risk possibilities that comes from the political issue. PRI helps business a lot to
run their activities because PRI will relatively cover the uncertainty of political risk. PRI also
helps country because by providing PRI will help the country to easier get the foreign direct
investment because PRI will relatively guarantee the stability of political issue. It is superior
for Indonesia who is a developing country who needs lot of foreign direct investments to help
Indonesia develop lot of things. It is also superior for Indonesia, since the stability of political
issue in Indonesia still questionable.
Because of this issue, the Political Risk Insurance industry has grown year by year.
Between 2008 and 2011, issuance of political risk insurance (PRI) has increased by 29
percent for Berne Union members, an increase that has exceeded that of foreign direct
investment (FDI) flows into developing countries over the same time period (MIGA, 2012).
Berne Union members itself was founded in 1934 in order to promote international
acceptance of sound principles in export credit and investment insurance and to exchange
information relating to these activities. Today, the Berne Union has 86 members, including
Prague Club members, comprising mainly export credit agencies, multilateral organizations,
and private insurers.
The PRI industry expanded in 2011 and evidence from the first half of 2012 indicates
that this trend is continuing. The PRI industry, as a specialized line of insurance, is affected
by the demand for PRI itself, as well as by changes in capital availability in the broader
insurance market. Figure 3.1 shows about PRI by Berne Union Members and FDI Flows into
developing countries.

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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.

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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).

37

From those 2 perspective, it indicates that, first the demand of PRI internationally are
increasing. More businesses or companies are more aware to protect and cover their business
from the political risk. Second, Indonesian political risk insurance players are few. There are
no many players in this field. It indicates that there are still emerge a question mark about this
business opportunity. It can be assumed that many insurance company are still afraid to grab
this opportunity. They dont have the capabilities and the resources to catch up this
opportunity and they dont prepare enough to compete with foreign insurance company who
already offer the PRI.
Many insurance company in Indonesia, including WanaArtha Life insurance are
prefer to play in the profitable side of insurance, such as life insurance. If we look deep about
the insurance product that they offer and relate to the political risk, they tend to offer the
insurance product as the possibility result of political risk and affects the business activity.
For example fire insurance. Fire can be happened as the result of politic instability, like what
happened in 1998 in Indonesia. Many companies were burned because of the protests and
riots.

3.5.1. Opportunity
The increasing demand of political risk 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.

38

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 hasnt good enough to play in this area. It needs high investment
of capital to build the resources and also the capabilities needed.

3.6. Natural
Disasters in 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.

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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)

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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,

41

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 todays era, insurance is very popular to cover all of those uncertainty. Insurance will
hedge the risk of the possibility of the disaster that may happen and affect us as a person, a
business man, and any other that may be affected because of this possibility.
Insurance is a way to cover the uncertainty that may happen and natural disaster is
one of it. Insurance company usually has a product to cover the natural disaster that may
affect personal person or a business activity. Like, other insurance company, WanaArtha Life
also has a insurance product take care about the tragedy that may happen because of natural
disaster.
WanaArtha Life products at this present time are about the life and health insurance
for personal person or group and the derivative product that may correlate with the life or
health of that particular person or particular person in the group. For example the main
insurance is life insurance of a person and the derivative insurance is the education insurance
of the kid of that particular person that may affected because of that particular person pass
away and cannot fulfill his/her job to pay the regular tuition fee of their kid.
Trend of Natural Disaster Insurance in 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.

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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.

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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 hasnt been entered by
WanaArtha Life insurance. To cover the lack of resource in order to play in this market, I
would like to recommend for WanaArtha Life insurance to joint venture or strategic
partnership with other insurance company, especially from outside who have strong

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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 doesnt make the WanaArtha Life in bad or good
condition. By assuming that the assets are the supportive assets, it means that there is a
chance of other company to be more superior than WanaArtha Life since they have more
resources (assets).
The other implication is that WanaArtha Life should keep explore the market
since the natural disaster in Indonesia (uncertainty) is increasing every year. It means the
market is very huge. Furthermore, it is a must for Wanaartha to re-insurance the company
in order to hedge the risk.

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

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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

47

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

48

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

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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 doesnt mean that the
website is bad or obsolete. This action basically based on the company point of view. From
this example, the option whether chooses Web 1.0 and Web 2.0 can be grouped from the
paradigm of the importance and the control (customer/user point of view). So that, it can be
grouped as (1) degree of importance and (2) degree of control.
Relate to the WanaArtha Life website, the degree of control of users is relatively low.
They want to control all the website activity themself. It seems because the characteristic of
the website is content only that makes the user participation is low. On the one hand, the
culture of Indonesian people is sometime unusual with the Web 2.0 unique style. From the
target customer point of view, most of them are adult that already have their own personal
funding and born before 1990s. It means, there is a huge possibility that they commonly
used to deal with the Web 1.0 rather than Web 2.0

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From the degree of importance, the importance of using Web 2.0 is also relatively
low. They consider that by implementing or not implementing Web 2.0 doesnt give to many
negative impacts for the company. By implementing Web 1.0, the company can still run their
business well.
However, by implementing the Web 2.0 will give advantages to the company. The
main advantage is can increase the customer participation. The customer can share their ideas
about insurance or about the company. Such ideas are like testimonials, discussion, etc. By
transforming the website, the customers can interact as if directly to the company and to the
other customers.
But, of course the disadvantage is about the control. The company should have
controls to the website so that the degree of the cutomers participation can be limited.
Because the users participation can also be a boomerang for the company. Any negative
comment or participation from the customer may affect the activity of the company, such as
brand image.

3.7.1. Opportunity
Customers 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 companys 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.

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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 companys regulation. The
lack of control will give bad impacts to the company, for instance bad comments or
testimonials that will affect the companys brand image
Monotone web
If the company keep pursuing to use Web 1.0, the web will become monotone. It only
provides the contents that needed by the customer. The customer only access it only if
they need the information inside.
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
companys business activity. It will enhance the engagement of the company and the
customer. However, WanaArtha Life should remember about the degree of control if they
want to to implement the Web 2.0 and create the regulation or the appropriate boundary.

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

53

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

54

(SAS, 2013). By implementing risk management software whether it is from SAS or from
other vendor, the purpose is to gain advantage from those risk and reduce the risk as much as
possible.
WanaArtha Life itself isnt stated publicly that they implement risk management
software or not, but in this case, it is assumed that they implemented the risk management
software. The risk management software in todays era is like a must software for a big
company especially for the insurance industry because they play with risks. The framework
from Boehm is a framework from the point of view as a software engineer in order to make a
risk management software. However, it can be used for the company point of view to choose
the right risk management software by determining the factors from those two important
things, assessment and control of the risks.

3.8.1. Opportunity
Gain advantage from the possible 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

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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 doesnt match with the what the
software offering. The company should be careful about modifying the software in order to
meet the companys demand because to many in-house application will make the
maintenance cost increases. It is basically happen because the company needs to work
double, maintain the in-house application and maintain the 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 companys 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

56

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 companys
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

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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.

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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.

59

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;

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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.

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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

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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 Yogyakartas
population was 3,457,491. In the region economic side, Yogyakartas 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
and Company Service
3,188,428 3,724,285 4,090,675
4,552,667

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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 Yogyakartas 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,
WanaArtha Life Life, and so on. It needs extra effort for WanaArtha Life to compete
in this region and explore more the market.

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Because its tight competition in Yogyakartas 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 todays 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.
OJKs 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
OJK itself has two kind of mandates in Indonesia, regulatory mandate and supervisory
mandate. The more detail is as follows (OECD, 2013):

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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 CEOs 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; registeredlicense 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.

66

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 companys 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 &

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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.

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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)
Period
BI
Rate
Period
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%

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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.

70

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.

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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 Threats
Business
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 Social
Generation 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 Ys
phenomenon.
Creating the proper
generation Y work
environment.
3 Cultural
Insurance 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
companys,
industries and
cultures standard.

4
Domestic
Political
Insurance draft
bill
The limitation of
foreign investors
to play in
insurance industry
Capital scarcity
since the part of
foreign investors
is going to be

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in Indonesia limited
5
International
Political
Political 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 Natural
Natural 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
7
Information
Technology
Web 2.0
Customers
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
8
Process
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
companys
requirements in
compare with the
potential product
offering (2) the
vendor reputation
and track record
9 Government
Good corporate
governance
Good corporate
governance will
enhancing the
companys ethical
conduct
Corruption,
collusion and
nepotism would
be the biggest
threat for the
company.

Implement Good
Corporate
Governance

73

10
Economic
Development
Emerging 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

11
Regional
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

12
Industry 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

13
Fiscal 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

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.

74

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
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.

75

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
governments 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 companys 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.

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