Insurers and brokers agree to fix fees

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)