In partial fulfilment of the requirements for the master’s degree from Institut Teknologi Bandung By DHEA ERWINA LAURENTS Student ID: 29321060 (Master of Business Administration Program) UNLEASHING MASS MARKET : PROPOSED BUSINESS STRATEGY FOR DIGITAL INSURANCE COMPANY TO TAP THE UNTAPPED MARKET SEGMENT - AN EMPIRICAL STUDY OF MILLENNIALS AND GENERATION Z FINAL PROJECT INSTITUT TEKNOLOGI BANDUNG September 2023 i ABSTRACT UNLEASHING MASS MARKET: PROPOSED BUSINESS STRATEGY FOR DIGITAL INSURANCE COMPANY TO TAP THE UNTAPPED MARKET SEGMENT - AN EMPIRICAL STUDY OF MILLENNIALS AND GENERATION Z By Dhea Erwina Laurents Student ID: 29321060 (Master of Business Administration Program) The insurance industry is currently facing various challenges, including fierce competition, changing customer expectations, and disruptive technological advancements. To overcome these challenges successfully, insurance companies need to adopt innovative approaches in product development and digitally transform its business. By doing so, they can cater to the evolving needs of customers, adapt to market changes, and provide enhanced value to their clients. In the specific context of Indonesia, insurance companies are confronted with the significant obstacle of low insurance penetration, which has remained stagnant over the past five years from 2017 to 2021 (AAJI, 2022). Additionally, insurance literacy and inclusion rates are alarmingly low, standing at only 19.40% and 13.15% respectively, well below the national averages of 38.03% and 76.19% (OJK, 2019). Despite DELI being the fourth-largest asset among insurance companies in Indonesia, it has not been the preferred choice for Indonesian customers when purchasing insurance products, as indicated by Statista data published in 2022. As a result, DELI's limited range of insurance products fails to meet the needs of the broader mass market, which constitutes a significant portion of the Indonesian population. This missed opportunity to tap into a vast customer base has hindered the company's market share and competitive standing. To address this issue and capitalize on the untapped mass market segment, this research analyzes both the internal and external factors of DELI to formulate effective business strategies, particularly focusing on digital insurance products. The external environment is analyzed using various tools, including PESTEL analysis, Porter's 5 forces competitor analysis, and consumer analysis. The consumer analysis involves collecting data through questionnaires distributed to Millennials and Generation Z, who are potential target markets. The data analysis, using multiple linear regression, measures the influence of perceived innovation, perceived value, and perceived price on purchase intention. Furthermore, the internal analysis utilizes a resource-based view and VRIO framework to assess DELI's resources and identify key factors essential for ii achieving superior firm performance and gaining a competitive advantage. The results of both internal and external analyses are then used to formulate a SWOT analysis, which serves as the foundation for the TOWS matrix to propose seven alternative strategies by the author. Among these strategies, DELI should prioritize the development of innovative and tailored insurance products, actively target, and tap into untapped market segments, and carefully manage commission costs to establish a sustainable business model. SMART target analysis is employed to ensure these strategies align with DELI's specific business goals. Keywords: insurance industry, digital business strategy, product development, Millennials, Generation Z, perceived innovation, perceived value, perceived price, purchase intention. iii ABSTRAK MEMBEBASKAN PASAR MASSAL: PROPOSAL STRATEGI BISNIS UNTUK PERUSAHAAN ASURANSI DIGITAL DALAM MENYASAR SEGMENT PASAR YANG BELUM TERJANGKAU - STUDI EMPIRIS TERHADAP GENERASI MILLENNIAL DAN GENERASI Z Oleh Dhea Erwina Laurents NIM: 29321060 (Program Studi Magister Administrasi Bisnis) Industri asuransi menghadapi berbagai tantangan, termasuk persaingan yang semakin ketat, ekspektasi pelanggan yang berubah, dan kemajuan teknologi yang pesat. Untuk menghadapi tantangan ini dengan sukses, perusahaan asuransi harus mengadopsi inovasi dalam pengembangan produk dan transformasi bisnis digital. Pendekatan ini memungkinkan mereka memenuhi kebutuhan yang berkembang dari pelanggan, beradaptasi dengan perubahan pasar, dan memberikan nilai yang lebih besar kepada pelanggan mereka. Di Indonesia khususnya, perusahaan asuransi menghadapi tantangan yang signifikan dalam rendahnya penetrasi asuransi dan pertubumbuhan stagnan selama lima tahun terakhir dari 2017 hingga 2021 (AAJI, 2022). Selain itu, tingkat literasi asuransi dan inklusi asuransi juga sangat rendah, yaitu hanya 19,40% dan 13,15% dalam lima tahun terakhir, jauh di bawah rata-rata Indonesia sebesar 38,03% dan 76,19% (OJK, 2019). Meskipun DELI memiliki aset pertanggungan asuransi terbesar keempat di antara perusahaan asuransi di Indonesia, data dari Statista yang diterbitkan pada tahun 2022 menunjukkan bahwa DELI tidak menjadi pilihan utama bagi pelanggan Indonesia dalam membeli produk asuransi. Akibatnya, rentang produk asuransi DELI yang terbatas tidak memenuhi kebutuhan dari pasar massal yang merupakan bagian besar dari penduduk Indonesia. Kesempatan yang terlewatkan untuk menjangkau pangsa pasar pelanggan yang besar telah menghambat pangsa pasar dan posisi kompetitif perusahaan. Untuk mengatasi masalah ini dan memanfaatkan segmen pasar massal yang belum dimanfaatkan, penelitian ini menganalisis faktor internal dan eksternal dari DELI untuk merumuskan strategi bisnis yang efektif, dengan fokus khusus pada produk asuransi digital. Lingkungan eksternal dianalisis menggunakan berbagai metode, termasuk analisis PESTEL, analisis Porter's 5 forces, dan analisis konsumen. Analisis konsumen melibatkan pengumpulan data melalui kuesioner yang didistribusikan kepada Generasi Milenial dan Generasi Z, yang merupakan target pasar potensial. Analisis data, menggunakan regresi linear berganda, mengukur pengaruh inovasi yang dirasakan, nilai yang dirasakan, dan harga yang dirasakan terhadap niat pembelian. iv Selain itu, analisis internal menggunakan pendekatan berbasis sumber daya dan kerangka kerja VRIO untuk menilai sumber daya DELI dan mengidentifikasi faktor kunci yang penting untuk mencapai kinerja perusahaan yang unggul dan memperoleh keuntungan kompetitif. Hasil dari analisis internal dan eksternal kemudian digunakan untuk merumuskan analisis SWOT, yang menjadi dasar untuk merumuskan matriks TOWS dengan mengusulkan tujuh strategi alternatif oleh penulis. Diantara strategi-strategi tersebut, DELI sebaiknya memprioritaskan pengembangan produk asuransi yang inovatif dan disesuaikan dengan kebutuhan nasabah, aktif menargetkan dan menjangkau segmen pasar yang belum dimanfaatkan, serta mengelola biaya komisi dengan bijaksana untuk membentuk model bisnis yang berkelanjutan. Analisis target SMART digunakan untuk memastikan bahwa strategi-strategi ini sejalan dengan tujuan bisnis spesifik dari DELI. Kata Kunci: industri asuransi, strategi bisnis digital, pengembangan produk, Generasi Milenial, Generasi Z, inovasi yang dirasakan, nilai yang dirasakan, harga yang dirasakan, niat pembelian. v UNLEASHING MASS MARKET: PROPOSED BUSINESS STRATEGY FOR DIGITAL INSURANC E COMPANY TO TAP THE UNTAPPED MARKET SEGMENT - AN EMPIRICAL STUDY OF MILLENNIALS AND GENERATION Z VALIDATION PAGE By Dhea Erwina Laurents Student ID: 29321060 Master of Business Administration Program Institut Teknologi Bandung Approved Date 24 July 2022 Supervisor (Dr. Dina Dellyana, Apt., MBA., CBAP) NIP: 115110011 vi FINAL PROJECT GUIDANCE Unpublished masters’ final project is registered and available in the Library of Bandung Institut of Technology, and is open for public, provided that the author owns the copyright in accordance with the intellectual property rights that are applicable in the Library of Institut Teknologi Bandung. Bibliographical references are allowed to be use in a limited manner, however the citation and summarization can only be proceeded upon the author’s permission and must include the scientific norm of stating this final project as the source. This final project has to be cited as: Reproduction or publication of parts or whole of the final project must be under the consent of the Head of Graduate School, Bandung Institute of Technology. Laurents, D. E. (2023): Unleashing Mass Market: Proposed Business Strategy for Digital Insurance Company to Tap the Untapped Market Segment – An Empirical Study of Millennials and Generation Z, Masters’ Final Project, Institut Teknologi Bandung. vii DECLARATIONPAGE This final project is dedicated to my parents, brother, extended family, and my partner who always support me. viii ACKNOWLEDGEMENTS With utmost gratitude and appreciation, the Author extends sincere thanks to Allah SWT for His boundless mercy and grace. It is through His blessings that the Author has been able to successfully complete the final project within the designated timeframe, surpassing all initial expectations. The Author also sends abundant blessings and salutations upon the Prophet Muhammad SAW. This final project serves as a significant milestone in the Author's pursuit of a master's degree in business administration. Throughout the journey of preparing this final project, the Author has been fortunate to receive extensive support, guidance, and invaluable advice from various individuals and would like to express deep gratitude to the following individuals: 1. Author’s parents, brother, and extended family for their unwavering prayers, support, and affection throughout the journey of completing this final project. Their constant encouragement and love have been a source of strength and inspiration. 2.