Yanuar Dananjaya, Bsc.

, MM

Insurance
Main business of insurance company: assuming risk
on behalf of customers in exchange for a fee
(premium)
Assuming risk in form of payment of claim
Profit from difference between premium and claim
payment

Insurance

Premium > expected claim value to have profit.

From the point of view of insurance buyer
expected value of insurance claim is negative, due
to very low probability of claim
Why customer agree? avoidance of risk

Yanuar Dananjaya, Bsc., MM

2 Problems of insurance:
Adverse selection Individuals who has higher risk
tends to apply for insurance, thus increasing probability
that risk happen
Reduced by screening medical exam, smoking,
history, age, etc

Insurance

Reduced by group insurance whole company,

whole citizen, etc
Moral hazard insured individual is more careless
after buy insurance, thus increasing probability that risk
happen
Reduced by requirement. Ex: install water sprinkle
in fire insurance. Must not engage in dangerous
activity in life insurance

Yanuar Dananjaya, Bsc., MM

Life insurance:
Claim payment to beneficiary (penerima manfaat) in
case of death during insurance period
Appropriate for individual with money value and
dependents

Insurance

Beneficiary must experience loss in someway if

police holder is dead. children, wife, employer,
debitor
Individually, time of death is hard to predict. But as a
group life expectancy for any age group is quite
accurate

Yanuar Dananjaya, Bsc., MM

Types of Life insurance: Term, Whole Life,

Endowment/Universal Life
Term life (Asuransi jiwa berjangka) only for certain
period (1 week, 1month, 1 year, 5 years, etc)
Cheap premium

Insurance

For a periode of time considered important. Ex: a

project
No cash value
Different premium (usually more expensive) if
extend the period

Yanuar Dananjaya, Bsc., MM

Types of Life insurance: Term, Whole Life,

Endowment/Universal Life
Whole/Permanent life insurance (Asuransi jiwa
seumur hidup) Theoritically whole life, actual 99 or
100

Insurance

Premium much more expensive compared to term

LI in term LI probability of death is low, in whole
LI probability 100%
Premium fix forever
Has cash value
Cash value given to beneficiary in case of death
as addition of claim, or at end of period

Yanuar Dananjaya, Bsc., MM

Types of Life insurance: Term, Whole Life,

Endowment/Universal Life
Endowment (dwiguna) For whole life but with high
cash value
Premium more expensive than whole life, flat
forever

Insurance

High cash value, there is a guaranteed

minimum
Cash value given to beneficiary in case of death
as addition of claim, or at end of period
Cash value can be paid in a certain dates before
end of period
Usually marketed as dana pendidikan anak

Yanuar Dananjaya, Bsc., MM

Types of Life insurance: Term, Whole Life,

Endowment/Universal Life
Endowment (dwiguna) For whole life but with high
cash value
Interesting for parents that wants to protect their
children money if they die + guaranteed
education cost (almost risk free)

Insurance

Usually return is very low

Usually better to have term/whole life insurance
w/o endowment, invest the balance in mutual fund
Better risk-return
Can be withdrawn anytime
Lower fee

Yanuar Dananjaya, Bsc., MM

Insurance Riders (Asuransi tambahan)

Certain features added to the underlying insurance to
optimize protection, with additional premium
Ex: Waiver of premium, disability, acceleration on
critical illness, traffic accident, hospital, ICU
Only during the period of underlying insurance

Insurance

Can be canceled or renewed at any time

Yanuar Dananjaya, Bsc., MM

Unit link
Certain percentage of premium is for mutual fund
Identical to other mutual fund: has NAV, can be
redeem, has several types (stock, bond, money
market, etc).
Mutual fund is only open for insurance holder

Insurance

Can do top up to the mutual fund

After achieve high value, can be used to pay
premium.