Many insurance clients cut dollar-based contracts

Many insurance clients cut dollar-based contracts

JAKARTA (JP): Many insurance companies's clients have
terminated their U.S. dollar-based insurance contracts to avoid
the high increase in premiums resulting from the rupiah's sharp
depreciation against the dollar.

Director of Allianz Aken Life Peter Endres said yesterday the
dollar-based policyholders could no longer afford to pay their
premiums.

"They terminate their contracts because they can not pay the
premiums which have risen considerably following the rupiah's
sharp depreciation against the dollar," Endres said.

The Indonesian rupiah has been hovering between 8,500 and over
10,000 against the U.S. dollar for the last several months,
rising from about 2,450 in July when the currency crisis first
hit the country.

He said the number of clients who stopped their contracts in
the last two months alone reached 750, equivalent to the contract
terminations for 1997.

Holders of dollar-based policies account for 20 percent of the
company's 50,000 policyholders.

Allianz Aken is 80 percent owned by Germany's giant insurance
company and 20 percent by PT Kresna Karya of the Aken group. The
insurance company, which started operations in 1996, has 36
branches throughout the country catering to middle to upper class
individuals and group customers.

Andres said in a bid to cope with the surge in contract
terminations, Allianz Aken had recently introduced a program to
allow its customers to convert their dollar policies into rupiah
ones as well as to reduce their policy value.

Customers could take home the surplus from the conversion into
rupiah of their dollar policy in dollars or use it to pay
premiums, Endres said.

Allianz Aken used the selling rate at Bank Indonesia as the
exchange rate for the conversion, he said.

"We are aware of the hardships facing our clients during the
current crisis, but we offer solutions so that they can stick to
their contracts," Endres said.

Endres called on the company's customers not to worry about
the company's liquidity since additional capital would be
injected this year to bring its paid-up capital to Rp 56.25
billion from Rp 9.25 billion.

Besides, Allianz Aken always adopts a conservative policy in
investing its clients' money.

"We are not speculating for exchange gains by converting into
different currencies. When dealing with our policyholders' money,
we always put security first," he said.

The clients' money was mostly deposited with international
banks and state banks, he said.

Company director Jens Reisch stated that Allianz was committed
to a long-term investment in Indonesia.

"Allianz never stops operation in any country. Anyway, we are
still confident of Indonesia's prospects," he said.

Reisch said Allianz Aken booked about 900 new policyholders
per month over the past two years, but the company projected zero
growth this year.

"Indonesians have not yet become an insurance-minded people.
The crisis will further discourage them from insuring
themselves," Reisch said.

Reisch said the country's insurance market would generally be
in a slump this year but he predicted an increase in the demand
for single premium products.

This product is especially designed for people who can afford
to pay all the premiums in advance in the expectation of higher
benefits in the future.

"Today, many people here have become poor, but many people
become rich. We are offering the single premium products to the
newly rich," Reisch said. (jsk)