Insurance companies asked to realign their management<\/p>\n
By Frits Pangemanan<\/p>\n
JAKARTA (JP): Insurance companies need to realign their
\nmanagement and services in order to survive amid the fierce
\ncompetition with other financial institutions, business leaders
\nsay.<\/p>\n
The president of PT Sun Alliance Insurance Indonesia, Eddy
\nDarante, said recently that during the past five years, after the
\ngovernment deregulated the insurance industry in 1989, there has
\nno significant progress made by the insurance industry.<\/p>\n
The insurance business, in fact, requires not only strong
\ncapital, but also a professional management teams, including
\nagents, brokers, adjusters, underwriters and actuaries, he said.<\/p>\n
\"But the country's academic institutions do not provide
\nprograms to produce professionals in those areas,\" he said.<\/p>\n
Due to the lack of professionals, many insurance companies
\nneed to hire expatriates or Indonesians graduated from foreign
\ninstitutions.<\/p>\n
Eddy also expressed concern that the insurance industry has
\nnot been able to introduce standards on the underwriting of risks
\nand losses.<\/p>\n
In returns, adjusters and underwriters who are responsible
\nboth for weighing up the extent of losses and risks and for
\ncomputing the level of premiums, have introduced their own
\nschemes which are usually aimed at promoting their own business
\ninterests, he said.<\/p>\n
\"The absence of the standards has made people more reluctant
\nto insure themselves for risks,\" he said. \"Many people seem to be
\nafraid that insurance companies will cheat them.\"<\/p>\n
A senior actuary, H. Tuwanakota, who is also the vice
\nsecretary general of the Indonesian Insurance Council (DAI) for
\nlife insurance affairs, said it is the responsibility of the
\ninsurance industry to inform the public not only on financing
\nmanagement, but also on the underwriting of losses and risks.<\/p>\n
\"It is a fact in Indonesia that people are not accustomed to
\ninsuring against risks, including those concerning their health
\nand mortality,\" Tuwanakota said.<\/p>\n
Capitalization<\/p>\n
Hotbonar Sinaga, director for production and marketing affairs
\nof PT Asuransi Jiwa Tugu Mandiri, said that shortage of
\ncapitalization is the main problem faced by Indonesian insurers.<\/p>\n
\"Due to the shortage of capitalization, insurers need to
\nreinsure part of their insured sums to overseas institutions,\" he
\nsaid.<\/p>\n
He acknowledged that some parties see reinsurance as causing
\ncapital flight, but said it is needed by domestic insurance firms
\nto avoid big losses.<\/p>\n
Eddy called on the domestic insurers to be careful in choosing
\nforeign reinsurers, considering that many of them are now facing
\nbig problems for reimbursing large amounts of claims.<\/p>\n
Over the past two years, 14 major insurers have gone bankrupt,
\nmost of them in Britain, two in Bermuda and one in Singapore, he
\nsaid.<\/p>\n
In addition, 31 big foreign insurers and reinsurers are now
\nfacing difficulties due to being confronted with large claims,
\nDarante said.<\/p>\n
He noted that during the past six years, disasters in the
\nworld absorbed a total $57.51 billion from the insurance and
\nreinsurance industry.<\/p>\n
Yas Budiman, president of PT Reasuransi Umum Indonesia, said
\nthat local insurance companies have thus far made profits because
\ntheir premium revenues exceed the claims they have to pay.<\/p>\n
In 1992, for example, the gross premium revenues of all the
\ninsurance companies in the country reached Rp 3.29 trillion
\n(US$1.51 billion), as compared to the claims of Rp 1.63 trillion.<\/p>\n
In 1991, the total revenues from premiums reached Rp 2.65
\ntrillion and the claims Rp 1.52 trillion.<\/p>\n
Services<\/p>\n
Sinaga also expressed concern that the services provided to
\nthe public by insurance agents and brokers are far from
\nsatisfactory.<\/p>\n
\"I would say that any parties related to the insurance
\nindustry should improve services because they are competing with
\nother financial companies in raising funds from the public,\" he
\nsaid.<\/p>\n
He said that banks, for example, now introduce various
\nproducts, including savings and other deposits with high interest
\nrates and various incentives.<\/p>\n
Insurance companies should also provide better information for
\nthe public because many Indonesians still consider insurance as
\nuseless, he said.<\/p>\n
In addition, the low levels of salaries have also caused
\npeople to be reluctant to spend money for insurance, he said.<\/p>\n
Sinaga said improvement of management and services is expected
\nto boost the growth of the insurance industry in the country.<\/p>\n
He said the number of insurance policy holders in the country
\nis expected to double from 15 million, or eight percent of the
\ncountry's total population, at present to 30 million within the
\ncoming five years. (fhp)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/insurance-companies-asked-to-realign-their-management-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}