Fire insurance rates cut by up to 60%
Fire insurance rates cut by up to 60%
JAKARTA (JP): Amid concerns over the continuing outflow of
funds to foreign firms for fire insurance services, local
insurance firms have cut fire risk premium rates by 50 to 60
percent, to a new range of 0.045 percent to 2 percent per annum.
The chairman of the Indonesian Insurance Council, B. Munir
Sjamsoedin, said yesterday that the tariff war among local
insurance firms has been so intense the council decided to adjust
existing fire rates.
"This situation is closely related to the international
insurance market, which is currently oversupplied. Some foreign
insurers, therefore, entered the local market by offering more
competitive rates to customers," Munir said.
Consequently, Munir added, many local customers insure their
houses, apartments, office buildings and other premises with
foreign insurers.
He noted that a number of local insurance firms and securities
brokers offered brokerage services to foreign insurers to offer
products to local customers.
"If we don't address this problem, I'm afraid our general
insurance industry will reenter a process of self-destruction, as
happened in the early 1990s," Munir said.
However, he declined to elaborate on the total possible amount
of the premiums paid by local customers to foreign insurers,
saying that his council does not have the figure.
All insurance firms incorporated in Indonesia are
automatically members of the council. It established a premium
rate reference for all insurance firms in 1993 under an inter-
company agreement, when the Ministry of Finance abolished the
government-set insurance premium rates.
Frans Sahusilawane, chairman of the council's ad-hoc committee
established to review fire risk premium rates, said the cutting
of premium rates by 50 to 60 percent is expected to return local
customers to local insurers and stabilize the current oversupply
of fire risk insurance services.
He explained that the new tariffs cover residential buildings,
including apartments, office buildings, hotels and other
buildings.
He said the new rates are expected to attract more people to
enter the risk insurance industry by insuring their homes against
fire.
The new rates will be effective on June 1, and all insurance
companies incorporated in Indonesia are required to abide by the
new rates.
Under the new rate structure, the lowest annual premium rate
is 0.045 percent for fire insurance on residential houses under
the first category of construction quality, and the highest rate
is 2 percent for night clubs, dance halls, ball-rooms,
discotheques, bars and billiard halls with the lowest
construction quality.
Meanwhile, the fire insurance rates for hotels, motels, inns
and the like, certified below three-star classification, range
from 0.25 percent to 0.5 percent, depending on the construction
type of the buildings, while the rates for hotels with three
stars or higher range from 0.2 to 0.4 percent.
High-rise buildings not exceeding six stories have fire
premium rates of 0.11 percent to 0.27 percent per annum, while
those from six to 18 stories have 0.12 percent to 0.31 percent
rates, and those exceeding 18 stories have 0.13 percent to 0.32
percent.
Motor vehicle repair shops and service stations have 0.5
percent to 0.12 percent premium rates per annum.
Dwelling houses floating on rivers or sea shores, regardless
of their construction class, have an annual premium rate of 0.3
percent. (rid)