Insurance deficit predicted to double
Insurance deficit predicted to double
JAKARTA (JP): This year's current account insurance services
deficit could double from last year to about Rp 1.5 trillion
(US$646.55 million), an insurance analyst said yesterday.
The Indonesian Council of Insurance's chairman, B. Munir
Sjamsoeddin, said last year's deficit in insurance services
amounted to Rp 826.15 billion, up 80.9 percent on 1994.
Munir said the insurance deficit had increased steadily in the
last six years. The deficit in 1990 was Rp 211.34 billion, rising
to Rp 282.5 billion in 1991, to Rp 353.85 billion in 1992, to Rp
398.74 billion in 1993, to Rp 456.70 billion in 1994 and to Rp
826.15 billion in 1995.
Indonesian insurance firms paid about Rp 1.71 trillion in
premiums, commissions and claims last year to foreign insurance
companies. And Indonesian firms made only Rp 882.27 billion from
them, Munir told a seminar on maximizing financial services
before the year 2003,
He said the deficit was increasing because Indonesian
insurance was inefficient and could not compete against foreign
insurance.
Local insurance companies' net retention of insurance was
small because they did not have much capital. They were also
unfamiliar with co-insurance schemes which could reduce their
risks, he said.
Most local insurance firms preferred to act as insurance
brokers rather than insurance underwriters so local underwriting
revenue was small.
He said the 96 local loss insurance firms' premiums totaled
only $1.2 billion in 1994: "Japan with 54 loss insurance firms
got premium revenue of $129 billion in 1994, while Malaysia with
only 40 loss insurance companies was able to get $1.4 billion.
"We see a worse condition in local life insurance. The 50 life
insurance companies here managed to get a premium revenue of only
$0.8 billion in 1994. Japan with 30 life insurance firms was able
to get $477 billion and Malaysia with only five gained $1.4
billion," he said.
"This simple comparison shows us that our insurance firms are
inefficient. We have about six years to improve before we must
face open competition in the year 2003, when the Association of
Southeast Asian Nations (ASEAN) will start implementing AFTA
(ASEAN Free Trade Area)," he said.
Munir, also the president of state-owned PT Reasuransi
Indonesia, said Indonesia should apply the Malaysian method which
protected and regulated insurance services.
He said insurance firms in Malaysia were only allowed to use
foreign reinsurance if local capacity had been exceeded.
"With such a regulation I think our local insurance firms
would not necessarily compete head on with foreign ones," he
said. (bnt)