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Daniel: [00:00:12] Hello and welcome back to Insurance Business TV. I'm Danny Wood, news editor of Insurance Business Australia. Today we're joined by Kameswara Natakusumah. He's WTW's new country leader and head of corporate risk and broking in Indonesia. WTW, of course, formerly Willis Towers Watson, the Global Risk Management and insurance brokerage company. Kames is here to share his future plans in Indonesia and explain the insurance challenges in that country. It's a vast country that consists of many thousands of islands and a population of about 275 million. Kames joins us now from Jakarta. Welcome Kames.

Kameswara: [00:00:52] Alright, Danny. Thanks for having me. How you doing?

Daniel: [00:00:54] It's my pleasure. Very well. Congratulations on your new role. Firstly, and by way of introduction, briefly, what do you see as your area of responsibility and what are you most looking forward to?

Kameswara: [00:01:08] Thanks, Danny. Yes. I lead WTW operations in Asia and head up our corporate risk and broking business in the country. As you know, Indonesia is an important growth market for WTW and given the low incidence penetration in the country, we see a big scope for growth in Indonesia. While the pandemic has impacted business in this country, the insurance industry has interestingly bucked the downward trend seen in the other sectors due to an increased awareness of risks, as the pandemic emphasizes the importance of risk management and insurance protection when faced with a disruptive event. As an advisory broker. These are interesting times to be engaged in discussion with our clients. Given the evolving nature of the landscape, companies today are paying much closer attention to the current and future risks which to date have been somewhat underappreciated in terms of its impact to the businesses. I'll give you two good examples that would include climate change and cyber risks. These risks are interconnected with the risks that companies face, and hence they can have far reaching effects. For instance, cyber exposure can easily lead to supply chains disruptions, especially as businesses accelerate the pace of digitalization. Cyber attacks are also an increasing source of business interruption, while also posing reputational risk for companies. Significant cyber attacks could also pose a liability risks against directors and officers, resulting in claims as the focus on personal accountability at the board level intensifies. Henceforth, with the increased complexity and connected nature of risks, organisations must account for a much wide range of risks, invariably leading to gaps which companies typically struggle with. So what I'm excited about is how we at WTW can provide integrated solutions for companies in Indonesia and across the globe that address the critical intersection between people risks and capital.

Daniel: [00:03:15] You mentioned, I suppose, how these risks in the world now are becoming so interconnected. And those things like cyber, of course, are risks everywhere. But can we look back at your career a little bit? You were involved in a few start up companies before you took on this new role. I'm just wondering how that helped prepare you for your new role and what you learnt from that?

Kameswara: [00:03:35] Great question, Danny. Thanks for asking that, to be very honest. When I left office in January 2019, around that period, I was actually trying to leave the insurance business and wanted to learn from the startup companies. They so I joined several companies, including Insurtech Company, one which co-founded by two Italian who co-founded Lazada, by the way, in Asia, and an Indonesian very young gentleman who was also part of Forbes 30 under 30. So the company has Value Fund raised Series A in Q4 last year as a statement of the investor trust and confidence for the potential of digitalization of the insurance business in Indonesia. The main lesson, the main lesson I learned that would include, I would say, agility. Persistence, working at high pace and having the ability to pivot on business plan. I mean, business changes all the time. This company can easily pivoting to the new business block and adjust in the correct direction. I see some of this energy from the young people, employees also in Indonesia, and I could apply that to the company. So I think this is in line also with our strategic priorities across WTW globally in achieving our vision. And most importantly, young talents are important assets of our organization.

Daniel: [00:05:02] Generally speaking, what are some of the challenges that are particular to Indonesia? It's obviously a huge country, big disparities of wealth. What are some of the challenges you have to deal with there when you're providing insurance services?

Kameswara: [00:05:17] Another great question. I would say, number one, what we what I would call disaster protection gap. Indonesia is one of the most disastrous prone countries in the world in terms of major catastrophe, given our geographic location. From an instant perspective, the protection gap for disaster is something that needs to be improved for Indonesia. I don't know whether you have been approached observing, but in Indonesia in recent years, flooding in our densely populated capital of Jakarta, for example, has worsened due to record of rainfall. Most companies or institutions have equipped the instant program with flood cover. However, most residences in Jakarta, which is the capital city, by the way, do not have a proper flood insurance to protect their properties, except when they are forced by the lenders or the banks. So I think the because of that situation, it is difficult for the country because in the absence of meaningful instance, cover the cause of relief and reconstruction forced on government and non-government non-governmental organization and of course, the affected household, which is a financial burden to low income countries. Moving forward, the instance industry, I think, needs to intensify its cooperation with both public and private sector to implement more effective flood disaster risk management system. At the same time, there needs to be more incentive for people to acquire flood protection for households and small businesses in particular. Specific measures could include using innovative risk transfer solutions, such as what we call parametric insurance, which provide rapid payouts that would allow households and businesses to recover much more quickly in the initial stages. So that's number one. Number two, I mentioned earlier, cyber also very is very happening now in most countries, especially Indonesia. So cyber threat have also some have also come into greater focus with the rise of cyber attacks in the country. Government agencies, businesses, consumers being targeted by cyber criminals, Indonesian National Cyber and Crypto Agency, or what we call the SSM has recorded about 1.65 billion cybersecurity traffic, by the way, that during the period from January to December last year. Among that number, 62% of the traffic anomalies in Indonesia is a result of malware infections. 10% of that, probably roughly 10% was Trojan activity and 9% were attempts to collect target information. Authorities have warned the Internet users are facing greater threat of data theft, which is a full vulnerability faced by both businesses as well as individual consumers in Asia. We at W, W has recorded about 400% increase in cyber claims as the end of last year, and businesses in Indonesia face a real threat of financial and reputational losses from cyber attacks Danny.

Daniel: [00:08:31] You've mentioned a couple of things that really resonate in Australia, cyber issues and especially flooding. In recent weeks we've had horrendous flooding across the east coast of Australia and the big issue is how unaffordable insurance policies covering flood are for businesses especially and most of them don't have it because of that. Is there a similar acceptance in Indonesia that flood coverage insurance is as it stands, is too expensive? And I've heard you mentioned flood protection a lot. So is that the main focus for you?

Kameswara: [00:09:03] Yeah, it's very good question, Danny. You see, since 2017, actually, the Financial Services Authority, okay, in Basel, we operate just one has set up this flood tariff in addition to earthquake. So they put this flood and earthquake tariff and that's what makes it a little bit more expensive for consumers to buy. In the past, flood is just they can embed into what we call property or sensors or industrial or sensors. Now, since 2017, it has to be a separate premium rate of flood risk. So, yes, that that is an issue. However, I think looking at the Indonesia is a wide geography, right from from south to to to east, for example. So south to north it took 6 hours. So similarly to Australia, six hour flight. So not all islands are flood prone, so therefore the OJT has segregated into five flood zones. So one, two, three, four, five. Right. So obviously those consumers or businesses who are located in the flood prone area, they pay more. But those live in Kalimantan Island, for example, or Sulawesi Island, for example. They pay much, much deeper premium in terms of flood. So I think it's fair and unfair in a way because the majority of the businesses are located in Jakarta. So they have to pay more premium because Jakarta is, as I mentioned, it's sinking. If you read the some newspapers or media in Jakarta, it's shrinking a little bit from year to year. So that's a reflection of the high flood zone you see. So but in terms of insurance, I think the market has enough capacity, if that is your question. However, of course the Indonesian market will need support from reinsurance market overseas because Indonesia has been has been labelled as slot and earthquake slash catastrophe countries similar with Australia for your flood. But yeah, I think it's expensive for some people, but it's not depending on the flood zone area according to a tariff. Danny.

Daniel: [00:11:12] Let's talk about climate change and supply chains issues. How are those two big global concerns playing out in Indonesia?

Kameswara: [00:11:22] That's my favorite question. Climate sustainability and ESG, environmental, social and governance are priority for many companies around the world. Indonesia is not different. We are seeing a shift in corporate mindset on these issues, largely due to pressure from foreign investors. At the same time, the Indonesian government has been very vocal in its commitment towards sustainable energy transition, tackling deforestation and reaching carbon neutrality in the forest sector by 2030. On our part, we are working with companies in Indonesia to support them on their path toward net zero. Within WTW, we have launched what we call the Climate Transition Pathway or CTP. This is an accreditation framework which we have pioneered where companies will undergo accreditation to assess the alignment of their transition plans to the goals of the Paris Agreement. Such an accredited accreditation framework provides insurance companies and financial institutions with a consistent approach to identifying business with robust low carbon transition plans. It will also provide guidance to organisations planning their transition to a low carbon economy. At present I would share this with you. WTW is advising the Indonesian government on energy transition since Indonesia is one of the largest coal producers in the world after Australia. Obviously we are conducting a joint study now with a team comprising various ministries within the Indonesian government as well as department representing the Indonesian government on climate transition and the impact to the local economy in Indonesia on the supply chains, digitalisation. Again, this is about digitalisation of supply chains and the high volumes of data being exchanged with multiple third parties. Partners also means that organisations are increasingly exposed to cyber risks by supply chain partners. This is a real threat at a time when businesses in Indonesia continue to digitalise at a rapid pace given the supply chain disruption and bottlenecks we are seeing globally, which can cause inventory, backup and delay in shipment. By the way, we often advise companies to be very vigilant on their credit management. This is an important time for businesses to evaluate, to evaluate the adequacy of their trade credit insurance program, whether they have purchased it in the past, and check the adequacy of limit and coverage of their credit instruments.

Daniel: [00:14:02] Let's talk a little bit about some of the industries where you see opportunities. We've touched on them a little, but I understand digitization and e-commerce are two critical areas for you.

Kameswara: [00:14:14] Yeah, well, yeah. One of the most feasible consequences of COVID 19, not just Indonesia, is the rapid acceleration of digital transformation more than ever, as you can see. Companies must go digital to survive and thrive, and more consumers have engaged in online transactions than ever before. This means that businesses, especially SMEs and microeconomics, needs to be prepared in dealing with risks associated with the more digital economy and ensure they are resilient when faced with digital risks. E-commerce and digitalisation are therefore big areas of growth due to the increase of cyber risk exposures as more Indonesian consumers take to e-commerce and more businesses digitise their operations. You see, Indonesia's ecommerce market stood at roughly 32 billion USD in 2020 and I think it is the expectation is that will increase to roughly $83 billion by 2025. So it's huge. We will see B2B to see collaboration, hooking up with regional suppliers with the SME or local businesses in Indonesia to reach people in the outlying communities. There remains a massive market of 170 million consumers living in the second and third tier cities waiting to be tapped. And bearing in mind Indonesia as a whole is 275 million population, so under 70 million population of consumers as potential target market for this e-commerce and digitalization. With this growth of e-commerce and digital payment in Indonesia, WTW recently teamed up with Sompo Insurance in Indonesia to launch what we call a personal instant cyber protection for consumers in Indonesia. We, in fact, will going to launch it on the 30th of March. So that's. Next week. Danny so the insurance provide coverage for financial losses arising from in particular from identity theft and e-commerce purchase protection, among many other coverage. Obviously, this is the first personal cyber insurance product in Indonesia, and we believe it is timely given the gap. Timely because given the gap in the services market and the greater threat of phishing attacks and data theft.

Daniel: [00:16:41] You're only a month into your job, but you sound like you're very busy implementing some new initiatives. What do you see, though, is your biggest challenge at the moment?

Kameswara: [00:16:52] We are not alone in the war of fatality and retention challenges. So, yes, manpower is a big issue, big challenges. Therefore, one of my priorities is to build a strong talent pool in WTW Indonesia to ensure that we also have a succession plan for our leadership team. I am planning to fast track the initiation of our Young Future Leaders program. In my view, grooming talent internally within the organisation is the best option for rather than hiring from the external. Except of course, for a certain skill set where we don't currently have the house. And the second challenge, I would say, because the insurance business in India is highly regulated by the FSS and therefore regulatory changes is another area of concern in Indonesia. But basically we must be able to adapt quickly to new laws ensuring our readiness while at the same time achieving our business growth and client retention. By the way, are going to be like new leadership very soon. Hence, we are expecting some new regulatory changes. And the last one, I would say in Indonesia, I think we need to we have an issue in rebuilding image of instance business to the people of Indonesia. Why? Because I have seen I don't know whether you have observed. Also, we have seen several cases, predominantly on life insurance sector, that some life insurers went into bankruptcy or they do or self liquidation due to payment default of unit linked products which were sold directly by the the marketing team or agents as well as through bank insurance program. So consumers have been attracted by high return on their investment unit product, but unfortunately the expected return did not eventuate. So I am concerned with the situation which may reduce the trust and confidence level of consumers in Indonesia, in particular for life insurance sector, but hopeful, of course, that the new board member of the Financial Services Authority, that they will improve the control mechanism going forward to protect policyholders and restore consumers confidence.

Daniel: [00:19:16] Kames, thanks very much for your time. Interesting talking to you.

Kameswara: [00:19:20] Likewise. My pleasure, Danny. Thanks for having me.

Daniel: [00:19:23] And Kameswara Natakusumah is the new head of Indonesia and head of corporate risk and broking. That's all from insurance business TV. You can find all our broadcasts on our insurance business website. Bye for now.