Firm-Level Determinants of Agency Channel Performance in Indonesia’s Life Insurance Industry
DOI:
https://doi.org/10.61459/ijfs.v3i2.90Keywords:
Agency Channel, Life Insurance, Firm-Level DeterminantsAbstract
The insurance sector plays a crucial role in supporting economic stability and household financial protection. However, insurance penetration in Indonesia remains significantly lower than in many peer countries. Improving insurance premium growth is therefore essential, and the agency distribution channel represents one of the key contributors to this objective. This study identifies the key determinants influencing agency channel performance in Indonesia’s life insurance industry, focusing specifically on firm-level factors and their implications for premium growth and market penetration. Using panel data from life insurance companies over the period 2018–2024, a random effects regression analysis reveals significant positive impacts from company total assets, acquisition costs, training costs, number of branch offices, and agent productivity. Affiliation with banking groups, while statistically significant, shows a negative association. Meanwhile, the number of agents, marketing expenses, ownership type, and external macroeconomic factors, including financial sector development indicators, showed no significant influence. These results suggest that internal company resources, structured incentive schemes, well-designed training programs, and expanded branch offices networks are vital for enhancing agency productivity and driving premium growth. The findings emphasise quality over quantity in agency management and suggest targeted strategies for improving distribution effectiveness. From a policy perspective, regulatory authorities such as Otoritas Jasa Keuangan (OJK) should encourage agency professionalisation and closely monitor incentive systems to improve distribution effectiveness and expand insurance penetration. By doing so, the life insurance sector can enhance household financial protection, support financial inclusion, and contribute more effectively to Indonesia’s long-term economic growth.
Downloads
References
Adebowale, S., & Adefulu, A. (2019). Training and employee productivity of selected insurance: Perspectives for the board of directors. Corporate Board Role Duties and Composition, 15(3), 17–26. https://doi.org/10.22495/cbv15i3art2
Anitha R., & Kumar M. A. (2016). A Study on the impact of training on employee commitment in the private insurance sector in coimbatore district. International Journal of Commerce and Management Research, 2(11), 73-79.
Apergis, N., & Poufinas, T. (2020). The role of insurance growth in economic growth: Fresh evidence from a panel of OECD countries. The North American Journal of Economics and Finance, 53, 101217. https://doi.org/10.1016/j.najef.2020.101217
Beck, T., & Webb, I. (2003). Economic, demographic, and institutional determinants of life insurance consumption across countries. The World Bank Economic Review 17, 51–88. https://doi.org/10.1093/wber/lhg011
Berger, A. N., Hancock, D., & Humphrey, D. B. (1993). Bank efficiency derived from the profit function. Journal of Banking & Finance, 17(2), 317–347. https://doi.org/10.1016/0378-4266(93)90035-C
Chen, Z., Li, D., Liao, L., Moshirian, F., & Szablocs, C. (2009). Expansion and consolidation of bancassurance in the 21st century. Journal of International Financial Markets, Institutions and Money, 19(4), 633-644. https://doi.org/10.1016/j.intfin.2008.10.002
Chen, B., Powers, M. R., & Qiu, J. (2009). Life-insurance efficiency in China: A comparison of foreign and domestic firms. China & World Economy, 17(6), 43–63. https://doi.org/10.1111/ j.1749-124x.2009.01173.x
Chen, M. S., & Chang, P. L. (2010). Distribution channel strategy and efficiency performance of the life insurance industry in Taiwan. Journal of Financial Services Marketing, 15, 62-75. https://doi.org/10.1057/fsm.2010.6
Chen, T. (2020). The role of distribution channels in market discipline for the life insurance industry. The Geneva Papers on Risk and Insurance Issues and Practice, 46, 107–129. https://doi.org/10.1057/s41288-020-00172-9
Choi, B. P., & Elyasiani, E. (2009). Foreign-owned insurer performance in the US property-liability markets. Applied Economics, 43(3), 291–306. https://doi.org/10.1080/00036840802552353
Choudhuri, B. S. (2014). Factors influencing customers’ awareness about the several branches of the life insurance corporation of India. EXCEL International Journal of Multidisciplinary Management Studies, 4(8), 20–26.
Cummins, J. D., & Doherty, N. A. (2006). The economics of insurance intermediaries. Journal of Risk & Insurance, 73(3), 359–396. https://doi.org/10.1111/j.1539-6975.2006.00180.x
Cummins, J. D., Weiss, M. A., Xie, X., & Zi, H. (2010). Economies of scope in financial services: A DEA efficiency analysis of the US insurance industry. Journal of Banking & Finance, 34(7), 1525–1539. https://doi.org/10.1016/j.jbankfin.2010.02.025
Dragos, S. L., Mare, C., Dragota, I., Dragos, C. M., & Muresan, G. M. (2017). The nexus between the demand for life insurance and institutional factors in Europe: New evidence from a panel data approach. Economic Research-Ekonomska Istraživanja, 30(1), 1477–1496. https://doi.or g/10.1080/1331677x.2017.1325764
Fier, S. G., & Pooser, D. M. (2016). Advertising effectiveness for financial services firms: Evidence from the life insurance industry. Journal of Insurance Issues, Western Risk and Insurance Association, 39(2), pages 137-168.
Fiordelisi, F., & Ricci, O. (2011). Bancassurance efficiency gains: Evidence from the Italian banking and insurance industries. European Journal of Finance, 17(9–10), 789–810. https://doi.org/10. 1080/1351847x.2010.538519
Grabova, P., & Sharku, G. (2021). Drivers of life insurance consumption - an empirical analysis of western Balkan countries. Economic Annals, 66(231), 33–58. https://doi.org/10.2298/ eka2131033g
Kajwang, B. (2022). Effect of digital distribution channels on performance of insurance sector.Journal of Marketing Studies, 5(1), 32–42. https://doi.org/10.47941/jms.957
Kaya, N., & Kiliç, N. Ö. (2020). The effect of insurance premium on economic growth in European Union countries: Panel data analysis. Akademik Araştırmalar Ve Çalışmalar Dergisi (AKAD), 12(23), 442–451. https://doi.org/10.20990/kilisiibfakademik.705585
Oktiani, I., Priyarsono, D., & Andati, T. (2017). Firm specific factors and macroeconomic determinant of life insurance companies. International Journal of Science and Research (IJSR), 6(1), 639–644. https://doi.org/10.21275/art20164109
Osei, F., Adjabeng, F. N., Owusu-Mensah, S., & Atakora, A. (2022). Does advertising help improve consumer purchasing behavior toward insurance products? Open Journal of Social Sciences, 10(12), 39–59. https://doi.org/10.4236/jss.2022.1012004
Pjanić, M., Mitrašević, M., & Luković, S. (2023). Profitability determinants of life insurance companies in the Republic of Serbia. Strategic Management. 30(4), 60-70. https://doi.org/10.5937/straman2300041p
Pozza, I. D., Brochado, A., Texier, L., & Najar, D. (2018). Multichannel segmentation in the after-sales stage in the insurance industry. International Journal of Bank Marketing, 36(6), 1055- 1072. https://doi.org/10.1108/IJBM-11-2016-0174
Rauch, J. (2023). Determinants of direct distribution: Evidence from the European insurance market. International Journal of Managerial Studies and Research, 11(8), 62-73. https://doi. org/10.20431/2349-0349.1108006
Rubio-Misas, M. (2022). Bancassurance and the coexistence of multiple insurance distribution channels. International Journal of Bank Marketing, 40(4), 724–745. https://doi.org/10.1108/ ijbm-04-2021-0129
Sare, Y. A., Agyemang, A. O., Ayamba, E. C., Bawuah, B., & Koranteng, A. G. (2023). Insurance and sectorial growth nexus: Evidence from a developing economy. Cogent Economics & Finance, 11(2), 1-13. https://doi.org/10.1080/23322039.2023.2228096
Segodi, M. P., & Sibindi, A. B. (2022). Determinants of life insurance demand: Empirical evidence from BRICS countries. Risks, 10(4), 73. https://doi.org/10.3390/risks10040073
Siddiqui, S. A., & Das, S. (2018). Agency channel vs. alternate channel in Indian life insurance industry: An analysis of individual prospects. International Journal of Research and Analytical Reviews (IJRAR), 5(4).
Siddiqui, S. A. (2021). The effect of branch office locations on technical efficiency: Evidence from the Indian life insurance industry. Global Business Review, 25(6), 1559–1575. https://doi. org/10.1177/09721509211027427
Spotorno, L., Moro, O., & Anderloni, L. (2016). Bank affiliation influence on life insurers’ performance before and after the financial crisis. Journal of Economics and Management, 26, 5–33. https://doi.org/10.22367/jem.2016.26.01
Zerriaa, M., Amiri, M. M., Noubbigh, H., & Naoui, K. (2017). Determinants of life insurance demand in Tunisia. African Development Review, 29(1), 69–80. https://doi.org/10.1111/1467- 8268.12239
Zinyoro, T., & Aziakpono, M. J. (2023). Performance determinants of life insurers: A systematic review of the literature. Cogent Economics & Finance, 11(2), 1-58. https://doi.org/10.1080/23322039.2023.2266915
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 The International Journal of Financial Systems
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
IJFS article's license is CC-BY-NC. Authors grant the journal/publisher publishing rights with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.