Insurers and brokers agree to fix fees

JAKARTA (JP): Insurance companies and brokers have agreed to decide the level of brokerage fees on fire loss insurance and premium discounts in a bid to stabilize the market, an industry executive said yesterday.

Chairman of the Insurance Council of Indonesia Munir Sjamsoeddin said based on an agreement signed Monday by the council and the Association of Indonesian Insurance Brokers, brokerage fees on fire loss insurance should be set at a maximum of 15 percent of premiums.

Nontechnical rebates for policy holders or insurance sale agents which do not hold Ministry of Finance license would be set at a maximum of 5 percent of premiums, he said.

If an insurance agent has a ministry license the maximum rebate would be 10 percent, he said.

"This agreement will be effective from March 11," Munir said.

Insurance executives said the agreement was necessary to help stabilize the insurance market because insurance firms were now competing by offering cheaper fees to brokers and bigger discounts to policy holders. So brokerage fees and premium discounts are determined on the basis of negotiations.

Wars in brokerage fees and premium discounts started in 1988 after the government deregulated the insurance industry. The insurance and brokerage associations tried to reduce the competition by signing an Inter-Company Agreement in 1992 but it was not effective because it did not sanctions violators. The agreement was revised last December to introduce sanctions.

Insurance council tariff bureau head I. Handono Notoprodjo said the association planned to introduce new tariffs on fire loss insurance in about three weeks. (10)