Indonesia insurance seen stifled<\/p>\n
SYDNEY (Reuter): Indonesia's life insurers risk being stifled
\nby strict investment controls, low entry capital requirements and
\ncontinued currency volatility, a senior industry executive said
\nyesterday.<\/p>\n
"If these problems are not handled wisely in a relatively
\nshort time, it can hinder life insurance's growth in Indonesia,"
\nsaid Suratno Hadisuwito, president of Bumiputera 1912 Mutual Life
\nInsurance Co.<\/p>\n
Hadisuwito said the volatility of the rupiah -- devalued five
\ntimes since 1951 and down 20 percent against the U.S. dollar this
\nyear after a speculative run on regional currencies -- had
\ndamaged the perception of long term life insurance contracts.<\/p>\n
"If the government cannot guarantee the intrinsic value of its
\ncurrency, it is only logical if people avoid long term contracts
\ninvolving the currency," he told delegates on the second day of
\nthe Pacific Insurance Conference in Sydney.<\/p>\n
As life insurance contracts typically run for five to 30
\nyears, they carry a high exposure to currency falls which
\nconsumers want to avoid.<\/p>\n
"For Indonesians, the tragic experience of repeatedly high
\ninflation on the national currency in the past has left a trauma
\nin their minds," Hadisuwito said.<\/p>\n
Strict regulation on investments introduced in 1993, placing
\nlow limits on instruments including time deposits and real estate
\nhad also created problems requiring portfolio adjustments and
\nleading to lower returns, he said.<\/p>\n
"Rigid limitations have hindered life insurance companies to
\noptimize their investments," Hadisuwito said.<\/p>\n
The low level of rupiah two billion (US$722,000) in paid up
\ncapital required for start up insurers could also lead to
\nproblems in the longer term if rampant competition is allowed to
\nrage unchecked.<\/p>\n
Analysts see the imminent arrival of cut-throat competition in
\nIndonesia, potentially one of Asia's most lucrative life markets
\nwith only 9.5 percent of its 180 million population insured and
\nits economy expanding six to eight percent annually.<\/p>\n
"With the capital requirement for a life insurance company
\nthat small, many new insurance companies become operational
\nalmost simultaneously, although many of them are not yet
\nfeasible," he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesia-insurance-seen-stifled-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}