National instability affects insurance companies' risk rates

National instability affects insurance companies' risk rates

Today, liquidity and sale problems are more difficult than they were before the crisis. Both are impacts of the effects of an economic crisis on Indonesia's insurance industry. Riots and an unstable political climate have worsened the situation. The Insurance Council of Indonesia's chairman, Munir Syamsudin, has said: "To be honest, last year's riots put the insurance industry in a difficult situation, especially with regard to insurance covering loss."

Another obvious impact is the number of people surrendering their life insurance to collect the premium. As for insurance covering loss, the instability in this sector is aggravating the risk rate of companies. "To insure means to take over other people's risks. If an accident occurs, the insurance company will be responsible for the financial aspects," explained Munir.

To propel the insurance business forward, he said, three obstacles need to be overcome: 1) people's low insurance awareness; 2) lack of capital, which affects a company's progress; 3) the speculative attitude of insurance underwriters. If these obstacles can be overcome, he said, then improvement in services quality and accurate promotion campaigns need to be carried out.

There are many joint venture or multinational insurance companies in Indonesia, he said, with three-quarters of the market already covered. This leaves only a quarter. However, he said, every insurance company in Indonesia should prepare to anticipate people's increased insurance needs for the future.

Furthermore, Munir said, government regulations on insurance are quite good. But it would be better if the government was more active and consistent in applying the regulations, he said. "Currently, the application is not systematic." Why? He theorized that it was because of a lack personnel to supervise insurance companies.

Should there be better reform and synergy applied by both sides -- the government and insurance companies -- we could all be sure that the insurance industry would grow faster in the future, he said.