Surrender Claims for Unit-Linked Insurance Rise, AAJI Highlights Consumer Purchasing Power and Customer Education

Asosiasi Asuransi Jiwa Indonesia (Doc. Ist)

Printable.biz.id – AAJI Links Rising Unit-Linked Surrender Claims to Consumer Purchasing Power.

The Indonesian Life Insurance Association (Asosiasi Asuransi Jiwa Indonesia or AAJI) suspects that the high number of surrender claims, or policy terminations, in unit-linked insurance is related to consumer purchasing power.

According to AAJI data, as of the end of 2024, total surrender claims reached IDR 77.15 trillion, with 74.5% coming from unit-linked products.

Why Are Many Policyholders Cancelling Their Unit-Linked Policies?

Fauzi Arfan, Head of Product, Risk Management, and GCG at AAJI, outlined several reasons behind the increase in unit-linked surrender claims:

1. Consumer purchasing power is still in recovery, leading many policyholders to withdraw funds from their policies for urgent needs, such as education expenses or other financial necessities.

2. A lack of understanding about unit-linked insurance, as some policyholders are unaware that these products are designed for long-term benefits rather than short-term investments.

Despite the rise in surrender claims, Fauzi emphasized that this does not indicate a loss of trust in unit-linked insurance. He believes that better education and product innovation can improve public awareness and interest in these products.

Alongside the growing number of policy terminations, unit-linked premiums also declined by 11.5% year-on-year (YoY) to IDR 75.03 trillion by the end of 2024.

However, AAJI remains optimistic about unit-linked prospects this year due to several factors:

1. New regulations enhancing transparency and consumer protection.

2. Increased financial literacy, helping consumers better understand the long-term benefits of these products.

3. More flexible product innovations tailored to consumer needs and risk profiles.

Despite challenges related to purchasing power, AAJI encourages insurance companies to continue innovating. One strategy is to offer unit-linked products with more efficient cost structures and greater flexibility.

"Although surrender claims have risen, this does not necessarily reflect declining trust in unit-linked products. More intensive education and product innovation strategies are expected to enhance public understanding and interest in unit-linked insurance (PAYDI) going forward," said Fauzi.