At first thought, there seems to be no correlation between Investment and Insurance.

In Indonesia, however, it is not uncommon that people put their money into the investment products that are managed by the insurance companies. For instance, “Rupiah Equity Fund” product managed by an “ABC Insurance company”.

Here are 3 things that Investors have to be aware of when considering insurance’s investment products:

• Sustainability

Considering that a third party manages the money and the investment can be long term (i.e. 5 to 20 years), an Investor should be extremely selective which product is sustainable until it reaches maturity.  

Be mindful that there is still management fee that will be deducted from the balance. Will it give better net return compared to putting the money in the bank deposit accounts?

• Liquidity

At any time, the market condition can turn from bad to worse. Make sure that the insurance company can return the outstanding balance in full, when an Investor chooses to cash-out.

OJK (Financial Services Authority) helps to identify bogus and risky investment products. However, even a decent insurance company may struggle to cover their position when Investors start pulling out their money because of market conditions.

• Too Good To Be True

An Investor might be presented with exemplary cases where one or two investment products have generated exceptional return in the past (e.g. 15% annual return).

Be mindful that history does not always repeat itself. Like the saying, ‘if it is too good to be true, maybe it is’.