Bank CIMB Niaga, the country’s fifth largest lender by assets, will grow in the coming years by tapping into the underinsured population in the region’s largest economy, an executive has said.
“At the moment, the insurance business contributes only about 7 percent to 8 percent of the total fee-based income at CIMB Niaga,” said Akhiz Nasution, head of insurance at the bank.
He said that figure was expected to increase to 10 percent next year with the introduction of a new Shariah-based insurance product.
Akhiz was speaking to reporters in Jakarta after CIMB Niaga and AIA Financial signed a cooperation agreement. The alliance will allow AIA Finance to sell a Shariah-compliant product called Fortuna X-Tra Plus Syariah through CIMB Niaga’s network of branches in the country.
Bank CIMB Niaga is majority controlled by Malaysia’s Khazanah Group.
Rudi Kamdani, a director at AIA Financial, said the Shariah product had a lot of untapped potential in Indonesia.
“The penetration level of life insurance in Indonesia is only about 1.26 percent of gross domestic product, while Shariah-based insurance is only about 2.7 percent of that total life insurance,” he said.
With the country’s large Muslim population, he added, Shariah-based financial instruments were in increasingly high demand among consumers.
“We launched this product because many customers came to us asking for Shariah- compliant products,” Rudi said.
Fee-based income at CIMB Niaga rose 69 percent to Rp 1.89 trillion ($212 million) in the first nine months of the year, from Rp 1.12 trillion in the same period last year. Akhiz did not provide details on the contribution of its bancassurance business to CIMB Niaga’s fee-based income.
Fee-based income is money that banks make from insurance and transactions.
Akhiz expects to distribute the insurance products to CIMB Niaga’s branches across the nation, starting initially with 250 branches. The bank has about 700 branches across the country for conventional banking and 23 CIMB Syariah branches.