Insurance firms 'must pay out on riots claims'

JAKARTA (JP): Immediate settlement of insurance claims related to last May's rioting would improve the image of the insurance industry, an executive said here on Wednesday.

PT Asuransi Allianz Utama Indonesia president Manfred Wittau said that the reputations of insurance firms were currently at stake especially following massive incoming claims from victims of the May riots.

Following intensive debates on the nature of the rioting in the final analysis insurance firms would have to pay out, he added.

"It is time for us to promote the insurance business here," Wittau told The Jakarta Post.

"By delaying payment, you don't polish your image, while at the same time, you lose money."

Allianz itself, he said, had paid out some US$5 million in claims related to the three-day orgy of vandalism and rioting in Jakarta and other cities in the country.

Wittau said his company decided to pay riot claims two weeks after the rioting occurred on May 13, 14 and 15 when most insurance firms here were in the dark about the nature of the riots.

The Indonesian Insurance Council at that time still considered the riots to be part of the political reform process and therefore, damages caused were not covered by insurance.

The government, however, insisted that the riots were criminal in nature and asked insurance firms to honor their contracts with clients.

The Insurance Council later decided that owners of shopping centers, shophouses and shops damaged during the riots could submit claims to insurance firms if their policies included coverage for riots, strikes and malicious damage.

"I myself at that time felt that the claims must be paid. I believed that the unrest was not a civil commotion because I think people who ransacked supermarkets and others had no idea in mind to topple the government," Wittau said.

He said he could not risk the name of Allianz by delaying claim payments or not paying out at all.

Most claims were settled within a week after claimants presented their documents to Allianz, he said.

Asuransi Allianz is 54.4 percent owned by Allianz AG of Germany, 24 percent by PT Asuransi Jasa Indonesia, 20 percent by MMI of Australia and 1.6 percent by PT Asuransi Wuwungan.

Some industry sources said payment of claims related to May riots had been slow because several foreign reinsurers, especially those based in Singapore, were balking at honoring policy contracts with local insurance firms.

Nevertheless, the Singapore Reinsurance Association (SRA), which groups several major international insurance firms based in that city state, has advised its members to make payments of claims to Indonesia's riot victims, after initially insisting that the riots should not be covered because they were politically motivated.

Wittau said even though reinsurance firms did not pay out, local insurance firms which issued policy must still be responsible and meet all the claims. Otherwise, local insurance firms would be abandoned by potential customers.

"Although reinsurance companies paid only a portion, you could not say to your customers, 'I cannot pay your claims fully because I did not get full payment from the reinsurance firms'," he said.

Reinsuring policy was not an easy business, he said. Local insurance firms had to choose the most reliable reinsurance firms to spread their risks. (rid)