Insurance industry sees slower business this year
Insurance industry sees slower business this year
Fitri Wulandari
The Jakarta Post
Jakarta
Business for the country's insurance industry is likely to be
slower this year due to weak economic conditions at home, an
industry expert said.
Hotbonar Sinaga, chairman of the Indonesian Insurance Council
(DAI), said that during the first semester of 2002, general
insurance only grew by 20 percent while life insurance grew by 25
percent in terms of gross premium.
"Both general insurance and life insurance can only reach 30
percent (full year) growth," Hotbonar told The Jakarta Post.
In comparison, gross premium grew by an average of 41 percent
last year for the overall industry.
While for life insurance the growth is relatively stable as it
is being supported by retail customers, business in the general
insurance industry is relatively sluggish this year.
Based on data from the Ministry of Finance, the insurance
industry grew significantly last year. The industry booked Rp 23
trillion (US$2.58 billion) in gross premium, up from Rp 16.65
trillion in 2000. Of this, general insurance booked Rp 10.35
trillion in gross premium, up from Rp 7 trillion in 2000.
The current weak economic conditions have particularly
affected the general insurance industry as many companies cut
spending on insurance as part of cost-cutting measures.
"Companies have stopped expanding their business operations.
This means less business volume for general insurers," Hotbonar
said.
He, however, said that despite the shrinking business volume,
the general insurance industry enjoyed higher premium fees,
particularly for high risk insurance such as fire, earthquake and
terrorist attacks in the aftermath of the Sept. 11 terrorist
attacks on the U.S. last year.
Firdaus Jaelani, insurance director at the Ministry of
Finance, concurred, saying that premium for high risk insurance
have gone up by between 50 percent and 75 percent.
On the future challenges of the domestic insurance industry,
Firdaus said that insurance firms must now take measures to
improve their risk-based capital (RBC).
He said that the government had set a minimum RBC requirement
of 75 percent to be reached by the end of this year.
"The next two to three years will be critical for the
insurance industry. Those who are not able to meet the tougher
RBC requirement will be forced out of the industry or forced to
merge with stronger firms in order to survive," he said.
RBC measures the solvability of an insurance company.
A survey conducted by Info Bank magazine shows that with the
new requirement, there are still 19 life insurance companies out
of 60 and 14 general insurance companies out of 104, struggling
to meet the 75 percent RBC requirement.
For eyebox
Insurance industry profile
2000 2001
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total gross premium Rp 16.65 trillion Rp 23.44 trillion
total claims Rp 9.36 trillion Rp 13.21 trillion
total assets Rp 52.43 trillion Rp 64.93 trillion
total investment Rp 42.33 trillion Rp 52.91 trillion
total insurance companies 175 173
Source: the Ministry of Finance, 2002