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.