Flood opens new business opportunities for insurers
Flood opens new business opportunities for insurers
Fitri Wulandari, The Jakarta Post, Jakarta
Although general insurance companies may suffer financial
losses due to massive flood-related claims, this year's flood
disaster may actually open the door for the industry to expand
its market, experts said on Thursday.
Chairman of the Insurance Council of Indonesia (DAI) Hotbonar
Sinaga said that the floods would open new market opportunities
for insurance firms by increasing awareness among the public of
the need for flood insurance.
"General insurance companies may have lower profit because of
the high claims," Hotbonar told The Jakarta Post.
Mustafa Ashari, director of technique and foreign affairs at
the state-owned insurance company PT Jasindo said that the flood
disaster should be a wake-up call for the public which often
turns a blind eye to the risks posed by floods.
Both experts agreed that the episode will boost the growth of
the local insurance industry well into the future, as the floods
will draw new policy holders while attracting new insurance
premiums for flood-related risks.
"The insurance market will be expanding," Mustafa predicted.
An industry executive said that flood-related claims could
pass the US$200 million mark set in May of 1998, when widespread
rioting, arson, and looting struck Jakarta and led to the ouster
of President Suharto.
Hotbonar said that the fate of the general insurance companies
in the wake of the flood disaster would depend on support from
their re-insurance companies.
"As long as they have good re-insurance, they won't go
bankrupt," Hotbonar said, adding that all re-insurance companies
in Indonesia are strong.
The insurance companies were also backed up by re-insurance
companies from abroad, he added.
The local insurance industry is still largely a developing
market. Data from DAI shows that there are currently 312
insurance companies operating in Indonesia.
They consist of 61 companies for life insurance; 105 for
general insurance; four for re-insurance; two for social
insurance and social security; and three insurance companies for
civil servants, members of the armed forces, and police.
Total investments by the industry in the year 2000 were valued
at Rp 32 billion (US$2.09 million), compared with Rp 29 billion
in 1999.
Insurance policy holders in Indonesia have been recorded at
only around 12 percent of its population of 203 million.
Regarding the massive flood-related claims, experts said that
the insurance companies will be able to pay them off, as all
companies have been supported by re-insurance companies.
Any delay in payments would likely be caused by administrative
problems from the sheer volume of the claims, they said.
Meanwhile, general insurance companies were now starting to
process flood-related claims.
Wiyono Sutioso, claim manager for PT Asuransi Allianz Utama
Indonesia, said that his company had settled 15 insurance claims
for privately owned properties valued at Rp 300 million.
According to Wiyono, small claims under Rp 50 million can be
settled within one or two days.
For commercial claims such as factories or offices, meanwhile,
more time may be needed, as it takes time to asses physical
damage and to prepare the necessary documents.
To assess damages to calculate claim recovery, Wiyono said,
his office would send surveyors to all locations.
The company also would pay off all its claims -- even for
consumers who have lost their insurance policy documents as a
result of the flooding, he said.