Flood-related insurance claims may hit record level
Flood-related insurance claims may hit record level
Fitri Wulandari, The Jakarta Post, Jakarta
Flood-related insurance claims may hit a record level, even
higher than the US$200 million paid by insurance companies as a
result of the May 1998 riots, according to an industry executive.
"The amount of flood-related claims could be higher than
claims resulting from the May 1998 riot ... which reached $200
million," said M. Iqbal of the Association of Indonesian
Insurance Companies on Wednesday.
He was responding to a question raised at a press conference
held by the Association of Indonesian General Insurance Companies
(AAUI) to provide an explanation about flood risk insurance.
He could not yet give a more precise figure, as insurance
firms are still making calculations.
But the huge number of the claims may cause certain insurance
firms to suffer a cash-flow problem, which in turn could cause
delays in the payment of claims.
In May 1998 riots prior to the downfall of former president
Soeharto involved widespread looting and arson in various parts
of the country.
Heavy rainfall for several days has caused massive floods in
Jakarta and other parts of the country, damaging buildings and
cars.
Iqbal said that the insurance claims due to the floods would
be higher than the May riots because of the widespread damage.
He explained that although the May riots affected almost every
area in Jakarta, many properties were spared. Whereas this year
floodwaters have damaged almost all properties in certain areas.
"Floods have damaged many properties even those in exclusive
areas such as The Regent Hotel," he said.
He added that total notification of flood-related claims had
reached 1,000 as of today.
"We predict that notification of claims will reach its peak
within one or two weeks, as at present most offices affected by
the floods are still closed," said Iqbal, who is also technical
director of insurance firm PT Tugu Pratama Indonesia.
Industry executives admitted that the floods would have a
significant impact on the finances of the insurance companies.
President of PT Asuransi Sinar Mas Kornelius Simanjuntak said
that certain insurance companies would have cash flow problems,
resulting in a delay in payment to their insurance policy
holders.
"We have not recovered from the economic crisis yet. Worst
still, insurance companies may be cash-strapped as not all policy
holders pay their insurance premium," he said.
AAUI chairman Frans Y. Sahusilawane said that the impact of
the floods on insurance companies also depended on the
relationship with their reinsurance companies.
If they have good back up from the reinsurance companies, they
will survive, Frans said.
Frans further said that all insurance companies would try to
settle all claims immediately.
He said that in normal conditions, simple claims could be
settled in one to two months. While major, complicated claims
such as those filed by factories, could take more than six
months.
"But we will cover all small claims first," Frans added.
However, we have anticipated that there will be delays because
of the massive claims, Frans admitted.
Frans also corrected public perception regarding flood-related
claims. He explained that flood risk is not included in standard
insurance policies.
However, a policy holder can include flood risk if they extend
the risk coverage.
"Based on the standard stipulated by the Insurance Council of
Indonesia, standard policy insurance for property and vehicles do
not cover flood risk," Frans said.
However, insurance companies do sell extended risk coverage
which includes flood risk, he added.
"But, not many policy holders extend their risk coverage to
include floods," he said.
Arizal E.R, technical director of PT Asuransi Bintang, was of
the same opinion. Out of 15,000 PT Asuransi Bintang policy
holders, only 700 had extended their risk coverage to include
floods.
"Public awareness of flood risk is still low," he said.
As long as clients have extended their risk coverage to
include floods, their claims will be covered, he asserted.