BI Rate Hike: Are Car Insurance Premiums Set to Rise?

JAKARTA – The weakening rupiah, which has touched Rp 17,800 per US dollar, is causing concern across various sectors, including the automotive industry. This situation is driven by rising global geopolitical tensions and heightened uncertainty in international financial markets. However, car insurance premiums have so far remained unchanged despite the rupiah’s depreciation and the Bank of Indonesia’s (BI) rate hike. According to him, car insurance premiums are not directly determined by the rupiah’s exchange rate or BI’s benchmark interest rate. This means that as long as vehicle insurance values and risk levels do not change significantly, premiums will likely remain stable. “Rates are determined by region, risk levels such as accident rates, driver behaviour, vehicle usage, repair or replacement costs like bodywork painting, spare parts, and other factors,” he said. Nevertheless, the rupiah’s depreciation could still exert indirect pressure on the automotive and insurance sectors. Meanwhile, the Bank of Indonesia has set its benchmark rate at 5.25%, a 50 basis point increase from the previous 4.75%. The decision was made during BI’s Governor’s Meeting as a measure to maintain economic stability and the rupiah’s exchange rate amid global volatility.