Insurance brokers demand 'equal treatment'

JAKARTA (JP): Many insurance companies in Indonesia are operating with limited capital which restricts their ability to expand, Chairman of the Association of Indonesian Insurance Brokers (ABAI) Rubianto said.

If the government is capable of extending Rp 18 trillion ($2.25 billion) for the recapitalization of commercial banks, then the insurance industry should be entitled to similar assistance, Rubianto was quoted by Antara as saying.

"It's not fair that the insurance industry does not get the same treatment from the government," he said.

"Both banks and insurance companies collect funds from the public which they then channel to the business sector. They both provide job opportunities for the people," he said.

The government announced this week that the cost of recapitalization of the banking sector would amount to Rp 34 trillion. Of this sum Rp 18 trillion would come from the government's 1999/2000 budget and the rest from the proceeds of the sales of assets of the banks under the program.

The restructuring of the banking sector is a central part of the government's economic recovery program.

Rubianto said most local insurance companies operate with limited capital thus they cannot cover risks above Rp 100 million.

"For higher risks they have to deal with a reinsurance firm abroad," he said, adding: "We need a capital injection so we don't have to reinsure abroad. The government could help us on this."

Rubianto also demanded that the government lower the tax base for insurance premiums to a level more consistent with current business conditions.

The government taxes insurance companies on the assumption that their profits reach 60 percent of the total premium.

"The 60 percent tax base should be lowered to 29 percent because in practice insurance companies only get a margin of between 30 and 40 percent," he said. (02)