Re-evaluation of Strategic Alliance in Insurance Sector (Case Study at PT Penyedia Jasa Indonesia)

• Main Author: Putri, 29116394, Mega
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/28831
• Institution: Institut Teknologi Bandung

In the last five years, the average growth of gross premium (GP) was about 19.76%. The biggest contribution to GP of the insurance industry in 2016 was GP of life insurance (46.2%). PT Penyedia Jasa Indonesia saw this opportunity to expand their business in financial services. Alliancing with PT Okta Insurance that provides life insurance and micro insurance products, since May 2017, PT Penyedia Jasa Indonesia has been a referral partner that provides space and market crowd to help promote the insurance products under the permission and supervision of the Financial Services Authority of Indonesia (FSAI) or Otoritas Jasa Keuangan (OJK). However, the strategic business unit (SBU), formed since the alliance, has not generated profit in 2017 because the realization of the SBU was only in the last 2 months with a few number of employees assigned to this SBU and no marketing through this SBU. The total number of active providing assurance consultant (PAC) in 2017 was only 520 personnel. PAC is an insurance agent who is certified by the LIAI (Life Insurance Association of Indonesia) to educate and socialize customers about the insurance products. In order to find out whether the SBU with an initial investment of IDR 425 million will be acceptable or not to continue, a re-evaluation was needed. In this research, the re-evaluation focused on the financial aspects. <br /> <br /> The re-evaluation that was done consists of financial projection analysis (using the net present value or NPV, payback period or PBP, internal rate of return or IRR, and profitability index or PI method), sensitivity analysis, and Monte Carlo simulation. The re-evaluation results were determined by the assumptions that were applied: the PAC growth of life insurance, the percentage of continuous premium, and the PAC growth of micro insurance, that contributed to the total revenues projection which was a part of the income statement projection of the SBU. <br /> <br /> The results of the re-evaluation of the SBU’s financial projection were all acceptable, where the NPV was IDR 3.17 billion, more than 0; the PBP was around 3 years, 7 months, and 5 days, less than the project timeline which was 5 years; the IRR was 30.71%, higher than the weighted-average cost of capital or WACC (10.98%); and the PI was 7.46, higher than 1. The assumption that affected the NPV and IRR results the most was the assumption of the PAC growth of life insurance. This assumption was applied for the growth of the total number of active PAC for regular insurance product. Considering the fluctuations of the assumptions, it would be better for PT Penyedia Jasa Indonesia to extend the 2-year-contract.