Few families interested in earthquake insurance

Few families interested in earthquake insurance

The Jakarta Post, Jakarta

Even though Catherine is alarmed by what she perceives as the
"remote, but realistic" chance of an earthquake rocking her Rp
1.5 billion (nearly US$157,000) West Jakarta residence, she will
not budge on her refusal to purchase earthquake insurance.

"If disaster strikes, I'll accept it as fate," said the 28-
year-old civil engineer, who earns Rp 8 million per month. "It's
an act of nature, what can I do?"

She said that because of her beliefs, it was unnecessary to
protect her property by purchasing earthquake insurance, costing
between 0.175 percent and 0.4 percent of the insured property per
year.

Catherine's attitude against the need for insurance reflects
the deeply ingrained culture and beliefs of the vast majority of
Indonesians, according to the chairman of the Indonesian General
Insurance Association (AAUI) Frans Sahusilawane.

"A lot of Indonesians are taught to view risk as a part of
life, which should be accepted no matter what," he said. "This
view leads Indonesians to act irrationally. They know insurance
can benefit them, but they refuse to purchase it."

Citing an example, Frans said only 2 percent to 3 percent of
assets in Aceh, which was devastated by the Dec. 26 earthquake
and tsunami, were insured.

Frans' view was shared by Werner Bugl, president director of
PT Asuransi MAIPARK -- a reinsurer specializing in pooling
earthquake coverage risks for the Indonesian insurance industry.

Bugl said people who exposed themselves to the risk of
financial losses resulting from earthquakes were taking "an
unnecessary gamble".

He said although the tsunami and recent earthquakes have led
to an increase in inquiries for catastrophic insurance policies,
the growth in the number of policies was not significant compared
to the potential losses from a disaster.

He added that a lot of people still had a tendency to think
that they were immune to catastrophic disasters, just because the
probability of it occurring was low.

Bugl said his company -- which pools the earthquake policies
for all 102 general insurance companies in Indonesia -- protected
Rp 28 trillion in assets, 10 percent being for residential
property in 2004.

The premiums for earthquake insurance amounted to about 0.2
percent of the total non-life insurance premiums in Indonesia.

Frans estimated that the number of earthquake policy holders
in Indonesia, which was rocked by 26 earthquakes of at least 6.0
on the Richter scale in the past 60 days, was "extremely low" and
less than 1 percent of total homeowners.

He added that a disproportionate amount of earthquake policy
holders, about 50 percent, were located in Jakarta and West Java.

In comparison, one in six homeowners purchases earthquake
protection, costing an average of 0.279 percent of the value of
the assets in California, one of the world's most unstable
geographic regions.

MAIPARK recommends insurance companies lower their premiums to
between 0.104 percent and 0.330 percent, depending on a wide
array of risk factors, such as geographic zone and construction
material.

The premium covers destruction caused by an earthquake and any
subsequent disasters triggered by it, such as a volcanic
eruption, a tsunami, a fire or flooding.

Bugl added that the public's lack of trust in insurance
industry also contributed to the low penetration rate.

"It's an image problem," he said. "There should be no need to
worry since insurance companies, similar to the banking industry,
are now strictly regulated by the government."

Catherine concurred, saying the negative image of insurance
companies was also a factor in her decision not to purchase
insurance.

"I don't trust insurance companies," she said. "Several people
I know had difficulties processing their claims."

Nevertheless, she maintained that because such destructive
disasters struck only "once in several decades," paying the
premiums were a "waste of money".

"It's better to invest the money instead," said Catherine.
"Then when an earthquake strikes, I can use the money to repair
the house myself." (002)