Flood Insurance Premiums May Change as Disaster Risk Becomes Key Consideration
Jakarta — The public can protect properties from natural disaster risks through expanded coverage under insurance products. However, the calculation of premiums payable by policyholders depends heavily on the potential risks present in the area where the property is located.
The Chairman of the Indonesian General Insurance Association (AAUI), Budi Herawan, stated that the coverage value for flood disaster insurance can reach up to Rp 50 million, Rp 100 million, or up to Rp 500 million. This value serves as the primary basis for insurance companies to calculate the premium amount that policyholders must pay.
“The premium is calculated by multiplying the coverage price. Is that reasonable? Does it cover even total loss?” he said when met at a press conference updating general insurance for the fourth quarter of 2025.
He conveyed that premium prices are also heavily influenced by the location of the insured property. This price classification will later be determined from actuarial assessment results.
Budi stated that the association will conduct a recalculation regarding appropriate premium amounts per zone for this flood disaster insurance. “We will then submit it to the regulator,” he said.
Budi explained that the insurance industry is currently reviewing the scope of flood disaster insurance coverage. However, flooding can also take the form of flash floods which carry risks of causing total property damage.
“The coverage value is not the issue, only the claim value was previously perhaps at maximum 50 per cent for regular flooding, but now it could be total loss, 100 per cent for flash floods,” he said.
The general insurance industry is currently re-evaluating whether the wording regarding floods still matches the events that occur when claims are filed. This document serves as the primary guide concerning the rights and obligations of both parties and determines the coverage scope of insurance policies.
Budi noted that public capacity to purchase additional expanded disaster insurance coverage remains very limited. Unlike other countries that also have relatively disaster-prone areas such as Taiwan and Japan, the government plays a crucial role when disasters occur.
Budi explained that public purchasing power to expand disaster insurance protection remains centralised in major cities.