EP #14: Visualizing Economic Re-Growth Like the Salim Group through the Insurance Sector

EP #14: Visualizing Economic Re-Growth Like the Salim Group through the Insurance Sector

About this Podcast

The global COVID-19 is compelling B2C brands – across industries and markets – to reinvent their short-term and long-term strategies, so they are better positioned in a post – COVID world. We caught up with Reginald Hamdani, CEO of Jagadiri – and in-charge of all digital businesses under one of Indonesia’s largest business conglomerates: Salim Group. Reginald sheds valuable insights on how they are embracing the power of digital transformation to navigate through these challenging times:

  • The impact of the COVID-19 lock-down on the Insurance business in Indonesia
  • The value of empowering and servicing the Bottom of the Pyramid (BoP) as a focus demographic
  • How to prepare for the next wave of economic growth by leveraging technology and digital transformation
  • The changes in consumer behavior trends post COVID-19

Listen in to understand how emerging economies can be revitalized through a digital-first Information and Communication Technology (ICT) strategy.

Episode Transcripts

Saket Kumar Jha/Prashant Pramhans: So how are things on your own – how’s business? How is it all okay?

Reginald Hamdani: So business is basically also facing a lot of challenges. As you know, the insurance market, actually, business is there, right? Unfortunately, the affordability is not there. Especially for us, because we are actually tapping into the lower segment, so we are offering affordable insurance, on the direct channel, hence, to give you a fishamnation, our market is basically-mostly young, the average is about 32, right? 28 to 32, on an average basis, and typically to represent their economic status, they are actually a cardholder for silver or a lower gold card, right- so you can make that market a relatively lower market. We are starting a policy for – one policy is about 180,000 rupiya, now it is about 12 dollars, right, a month. For the whole family, about 20 bucks, of the 5 people. So that kind of low premium, right, so the myth is there, but the problem is the affordability isn’t there, right? Despite this, the premium prices are very low. That’s one on the retail side, we also have a group insurance business where we are actually covering for a cab driver, and as you know, the cab driver’s also facing a lot of challenges now, we used to cover about 350,000 cab driver, but now we just lost on that business, because of  –  cab also lost their driver, in this, hopefully, short term period of time. So I just – I got video clips, explaining the situation in the cab where drivers are actually returning their car, because it’s on the lease basis, right? They are returning the car. So now there are 100,000’s of cars in their pool, right, which these drivers are returning back because there is no point for them to keep the car.  

Saket Kumar Jha/Prashant Pramhans: Right.

Reginald Hamdani: Right? So no passenger, no nothing, how can they afford to pay the repayment for the car, right? So my customer, he just returned back, and then they just went back to their hometown. So even in that situation, there is also – we are on the protection side of the driver, they decided to suspend for time being. So yeah. In other business as well, we provide 4-5 coverage for the group, also being suspended as well. So yeah. Directly staff, or in groups we are facing a lot of challenges. 

Saket Kumar Jha/Prashant Pramhans: So Regi, Abitabh is our CEO and he manages the entire of international – across, including US and rest of the world. And we all work with him, under his team and leadership. And Abitabh, Regi is designated as the CEO of Jagadiri, but he manages the entire digital business ecosystem of Salim group. So you consider payday, or auto cash or auto point and some of the other initiatives, like 5 to 8 apps which are right now under development with a certain coalition with some of the universities, some of the Telco, some of the – another P2P lending, so that entire piece of digital transformation and creating a fintech ecosystem within Salim, and the idea is around, let’s say, how do you reach to around 190 million population, which are unbanked. 

Reginald Hamdani: Wow.

Saket Kumar Jha/Prashant Pramhans: Yeah, so that is the massive initiative which Regi has been working upon. 

Abitabh Bhaskar: Regi, good evening. Thank you so much for giving us time over this call. You know that your group company has been contributing to the Indonesian economy in the way in which, in India, Tata and Reliance group, has been one of the key contributors of the economy. Look forward to a company like this, when it comes to situations, and I’m very confident we’ll definitely be looking forward to Salim group, and some of those groups in Indonesia where – when it comes to a situation to overcome, you’re the ones who will definitely be allowing the companies to navigate through the challenge which will start now, maybe 2 months or 3 months from now, now it’s just a tip of an iceberg, where people have not really seen the real impact, it has started getting impacted, as you rightly mentioned, like the cab people are just moving and putting their vehicle, moving to their hometown, they are the ones who are contributing to one way or the other to the economy, in terms of spending, in terms of consuming other services like for example, your organization – if 350,000 people are not paying their premium if that’s a big chunk of money coming your way to your group company. And the same way, the people who are not consuming the service; how’ll the money get rotated, and this spiral impact, will definitely be there. Just to understand, how are you navigating; what divisions are you making it, what kind of spending, where you are just starting to cut your cost, what’s the formula to overcome this 3-4 year – 3-4 months, which is definitely going to be a crisis, I think.

Reginald Hamdani: Right, thank you, thank you – and it’s good to hear that we share the same principle in doing business. Obviously, what makes us, what I learned from the challenge – we survived a couple of crisis’s, across this process, and one of the things that – because the channel always believes that when you want to do business, you better have a very good foundation of the business itself, the model has to be right. It’s not just about losing money, but it is also about losing profitability. We actually focus a lot on business where the profit is not much, but the scale is big. That’s where the interest of our Chairman (is) – So actually the question that you ask, the best – chairman can answer because he is the one who actually has proven to be able to navigate a lot of crises. But a few weeks ago, we had a senior meeting where Mr. Salim shared his direction with a lot of us. Obviously at this time, what the chairman is encouraging all of us to do, right? We need to obviously manage our expenses and so forth. But he also mentioned that our group employs about 60% of 50,00 employees. And we also, at this time, we need to help the government in –as much as we can, not to do any downsizing of our people, because it will not help the economy in any way, that’s what he’s actually saying. As much as we can, we need to maintain it, right? So look at the expenses, cutting people is the least we have to do; that’s what his direction is. And of the direction, he emphasizes us to focus on – like what you said, on the market like Grab, this industry is like Grab and so forth, they are actually very extensive in labor, right? And now, we are losing because of this and they are the ones who are actually getting the biggest impact out of all, right? So our focus is now on building some initiative that is able to help them navigate these difficulties. The economy is one thing, health is also another thing, but the one that we are concerned about is basically the social unrest. Yep, that is our major concern. Because with this uncertain situation going on, we don’t know when will be the end of it, right? And how big is the impact on the features that we are going to face, right? So our biggest concern right now is social unrest; when people go hungry, they become desperate, they are easily-how to say- poisoned by this negative idealism and so forth, right? The trigger, riots, and so forth. That’s what we are actually worrying about. So a couple of initiatives the chairman is doing, because of it – we are also big in helping the government to overcome the disaster. We have our emergency kitchen with 50 people, so we are already deploying that kitchen to potential areas that could be the epicenter for this social unrest. So we started deploying that and we are now creating a program for a foster family program, right? So we just look at the statistics; there are about 26 million people in Indonesia that earn an income that lasts them for 160,000 rupiya. So it’s about 30 bucks in a month, less than 30 bucks now, so we are actually come out with some initiative where all these big groups like ourselves, Synormous, Kiputra can join together, adopting this family and then start meeting their financial difficulties, meeting their basic necessities, by having this program that we directly initiate to these families. So we are exploring these avenues to stabilize the basic necessities first. The following is basically, we are now – since 5 years ago, we dedicated ourselves to this session. Actually, our focus is how to help the rural population, rural economy to grow. Because we believe the next growth of the economy is not going to come from cities, they are going to be from rural areas.

Abitabh Bhaskar: Correct.

Reginald Hamdani: So, we’ve been doing a lot of groundwork to actually prepare for the next wave of economic growth in the rural areas. So for instance, in communication, we lay down cables, for fiber optics, we are already reaching a distance of 20,000 km of fiber optics which we put, we obviously are strengthening our supply communication; so we operate 6 satellites, in all those remote areas, we strengthen with FISAT technology; now we are using the new technology that enables bigger capacity, for us winning and so forth. So this kind of infrastructure, we already lay down, we also develop distribution capabilities, so we are in India now about 46,000 sub-districts, total Indonesia is about 80,000 sub-district, but those who have potential, about 50,000 to 55,000, we have kind of created about 46,000 sub-district, and we are now building also logistic points like houses, 55,000 houses throughout these areas. So now we are preparing, and now we are identifying the production in each of the sub-districts, so what they produce, what they need, we are now mapping all of that stuff. And the recent initiative we are doing, actually we are stuck buying because the chairman also believes, right, you don’t sell the product, you buy the product, especially in this time of midst, right, we start buying products, we just – how farmers in Jambi area, typically they are very strong in coconut, right, and vegetables. Now, because their main destination for export is actually Malaysia and China. But now, they cannot do that; they cannot export these products because of this, right, so now we are channeling it, we are buying those capacities, to ensure that economics is still moving on. And in Papua also we are buying – and we are doing a lot of agriculture initiatives, to help all these farmers. So that’s pretty much what we are doing. We are trying to help this method of pyramids, trying to ensure financial stability, and in the short term, we are trying to do as much as we can, provide their end of life, yeah, their basic necessity. 

Abitabh Bhaskar: Wow! That’s unbelievable and brilliant and awesome to hear and –

Reginald Hamdani: The chairman has a very strong vision-

Abitabh Bhaskar: Great initiative and you know I’ve spoken to a couple of more CEOs in the last two weeks, and this is something which is absolutely new and the way in which – it’s not a short-term thing, it’s absolutely a long term vision. Taking care of a short-term thing in a much more limited and planning manner. And I’m very confident, once the situation passes, Salim will be remembered for long, long years; how you have contributed to the ecosystem, society and also eventually how you all have supported the government and economy. So one thing- in these times, you must also be facing challenges in terms of – to execute this also, you need people movement, you need to have people in respective locations, how’s that getting managed in a – there is a restriction, there is a lockdown, you need all parts of your people, in the bottom, in the middle, top I can understand, everybody will be available for video conferencing and you all can get in a group to discuss all things but the real execution happens in the ground, right? So you will have to be in a warehouse to collect stuff, people have to be at the respective 40-50 odd locations spoken about, and to talk to the people, to make them understand, to distribute what you wanted to, and also to collect it. So it is a collective force of large people and it has to happen in a manner which is envisioned, through – how’s that getting managed in the current crises where nothing is, you know, there is – transportation is not there, absolutely, the people movement is restricted, how are you people managing that?

Reginald Hamdani: Okay. So a couple of initiatives we are doing, number one, obviously, we are working out to government, working with the government, number two, we also have a local partner in a couple of locations we are focusing on, number three, our distribution is not actually stopped, because we are excluded from these – I’m not gonna call it lockdown because it’s not lockdown, but it’s limited mobility, right; we are excluded from that. 

Abitabh Bhaskar: Restricted movement. 

Reginald Hamdani: Yes. So we are actually excluded from that, so logistically, our distribution is still going on. Actually, we are telling the people, we cannot stop this, because if we stop this, right, then social unrest will definitely happen. 

Abitaṣbh Bhaskar: Absolutely.

Reginald Hamdani: So, thanks to all these people, who are working for us, working very hard to make sure we are – the movement of goods, the movement of products is still ongoing. So, with this, we are utilizing all these tech holders to move together, to make things happen. And actually, we’re also doing this cross border – normally within Indonesia, like we are helping also the Singapore government, there they have difficulties in getting products in Asia, so forth and – so, what you said, channeling product from Indonesia, we are redistributing it Indonesia also, we are exporting to countries where we can still get our product moved. 

Abitabh Bhaskar: That’s great; one another question more, just wanted to understand; one is you have a big company, they also has to communicate to the customers – communicate to the customers in the form of multiple channels, some of them are like ATL, BTL channel, and social media is there, there are some definite budgets which must have been allocated at starting of the financial year, do your communication and get the kind of business and things like that; what’s happening right now on that and three months later, what will be the ideal plan; so any thoughts on that, because the reason I am saying it; a lot of other companies has also been asking that; one side, you need to look at your cash flow, on the other side, you need to look at these 3-4 months, how you need to manage, and then the business has to happen. If the business doesn’t happen, then you won’t be challenged. So how are you meeting these- which all channels which you have completely stopped, which are the channels which you are keeping it in a continuing – and post COVID impact, what is that which you know the vision which you have laid out, in terms of the communication spending and things like that, any tips on that front, Regi?

Reginald Hamdani: So basically I’ve to understand the group. So our group is focused on – the whole group, aside from our mining, our energy, and other upstream business, the downstream business is pretty much the physical business, physical presence business, right, like Indomar, like Kentucky Fried Chicken, and all these retail businesses are pretty much physical business. And we only started to do the dedication in the last 5 years, and the product itself like E-commerce, payment and so forth, it only happened in 3 years to 2 years ago. So most – if you are asking about our communication, we are still – much more on – because our customer is pretty much the interaction, the physical, huh, the face-to-face interaction; so the conventional communication is still used for that. But in our digital business now, as you said, currently we are downplaying – not stopping, but we are downplaying the spending in this social media and so forth, but after that, what’s going on, obviously we come up again and another initiative we are actually doing, I think this might benefit to you also guys. So basically the chairman has a– I don’t know, controversial ideas, I think it is brilliant to a certain extent, so again, since our focus is on rural areas, we find out a lot of people are – they don’t have access to a smartphone, so he’s asking how much acquisition, how much we are spending, how much communication cost we are spending, and then he’s telling us, why don’t you give headphone instead? Everyone gets a mobile phone. Right? And after that, because the spending is pretty much the same as a mobile phone. Right? So you as well give a mobile phone. And then you build apps that build into these mobile phones, right? We can start engaging with them through mobile phones. 

Abitabh Bhaskar: Wow. That’s pretty awesome. What is your-what do you foresee, three or four months down – how’s the culture getting changed from now, the way in which people behave; I think a lot of the – people who are not used to work from home started doing work from home, the spending culture, the infrastructure of the usage culture, and a lot of behavioral changes happening in the society. What do you feel Indonesia will look like from three months from now, across the people spending, buying, and social behavior; is there anything you feel – you’re seeing the first sign of movement or anything that you feel will happen three months- four months from now?

Reginald Hamdani: On a serious note, basically what we are seeing- we also had this discussion in the management meeting, basically we are saying that the way of seeing things is likely to change. People are adopting more technology for sure because they are forced to adopt this, we see that – in fact, in our – the chairman said we don’t need an office like it anymore now, because we keep on saying that – we still see that some functions are performing better remotely. So, we see this as one of the opportunities, and we see also on people behavior now because they are forced to adopt this technology, how they will communicate, how we change our lifestyle; so we see that this actually – happy us; because we see that when we raw on this automation, technology adoption, people are likely to adopt better, because of this equation. For instance, like in our group, most of our senior people are actually literally senior people, okay? Where they are not used to using these remote tools. But now, they start embracing it, they start – even though people are setting up for them but they start engaging this. Right? And interestingly, I just found out also, one of the seniors never uses mobile banking. Not because of this situation; she has to learn how to use it. And she found out that it is actually much more convenient. So see, people are actually scared to adopt technology but in this situation, it is forcing people to actually adopt it. Right? So now we see that because of people, they have no option but to adopt it, right? And say if things are back to normal, what we see is, actually technology adoption is going to be increasing. 

Abitabh Bhaskar: That’s the brilliant thing. And if any-all-there are like many CEOs including me, you know, who’s looking out for some silver lining and advice; if you have to give any advice to any of the CEOs who are managing maybe a group or a company, what would your one-liner quote to them, one or two liner – you feel, what they should be thinking about, to overcome that?

Reginald Hamdani: Overcome what? Overcome the situation now or –

Abitabh Bhaskar: You know managing or overcome the situation, both, if-

Reginald Hamdani: Yeah. What I’m telling the team is basically number 1, the changes I’ve seen in them, right; so start adopting it, start managing people, actually what I found out – my managers are doing much better in monitoring their team, right, during this crisis, during this work from home thing. They control better, they monitor their job today better, right? So I told them that take it up, and on the spending side, I told them that – I know that most of the other companies spend – less of people, I said that as much as we can, don’t do that, in this situation, but let’s engage them on – be more – how to say it, taking ownership of the company, right? So rather than cut people, we hire others – we cut down on salaries, or take unpaid leave and so forth, rather than cutting off people, and one of the messages from Mr. Salim is basically manage liquidity, right? 

Abitabh Bhaskar: Yeah. Thank you so much and in Indonesia, we will definitely catch up!

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