Mon, 01 Aug 1994

Three foreign insurers will operate in RI

JAKARTA (JP): The government will soon issue licenses to three foreign insurance companies -- Principle Life, Cigna Life, both of the United States, and QEB of Australia -- to operate in the country, says an executive of the Ministry of Finance.

Shopar L. Toruan, the ministry's director insurance department, said here Saturday that the three companies will operate in cooperation with domestic partners.

Principle Life has formed a joint venture with E.G. Lita, Cigna Life with Niaga Life and QEB, an Australian loss insurance firm, with Pool Asuransi, he said.

"We hope the three foreign companies are willing to transfer their insurance know-how to their local partners," he told reporters in a press briefing held within the framework of the opening of a meeting of the ASEAN Insurance Council (AIC) here today.

There are 148 insurance companies now operating in the country, comprising of 46 life insurance firms, 98 loss insurers and four reinsurers. Out of the companies, 17 are foreign joint ventures -- four operating in life insurance and 13 in loss insurance.

Shopar said here the presence of foreign insurers in the country is still needed as the financial capability of the local companies is still relatively low.

"Around 80 percent of the country's insurance coverage is reinsured to foreign firms. It indicates the weakness of financial capability in the insurance industry," he said.

The growth of both life and non-life insurance companies in the country remains low as compared to those in other ASEAN countries.

The gross premium incomes of the insurance industry rose by 24 percent to Rp 3.29 trillion (US$1.56 million) in 1992 from Rp 2.65 trillion in 1991. The ratio between the premium revenues to the country's gross domestic products (GDP) was also still relatively low, at 1.29 percent in 1992 and 1.17 percent in 1991 despite the high growth in the premium revenues.

"Only seven percent of the country's 187 million people have been so far covered by the insurance industry," he said.

Shopar said that Indonesia still faces a number of handicaps in improving people's awareness about the advantage of insurance due to the lack of promotion drives made by insurance companies and a number of reported frauds taking place within the industry.

He said the growing middle class is a potential market for insurance companies but many of them are still afraid of being cheated.

AIC Meeting

Willy Wiguna, the chairman of the organizing committee of the meeting of AIC, said that around 50 executives of the council's members will participate in the two-day meeting to be opened in Sahid Jaya hotel today.

The meeting will be the 21st annual gathering of the council, which groups insurance companies in member countries of the Association of Southeast Asian Nations (ASEAN), including Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. The previous meeting was held in Brunei.

Willy said that the committee will propose a number of important issues to be discussed in the meeting, mostly relating to the latest development of the Asian economy such as the phase of the liberalization of trade within the ASEAN countries, the development in the insurance market in China and the liberalization of the Indian insurance market.

In addition to the agenda, the council will also hold a joint dialog with ASEAN Insurance Commissioners to discuss the proposal allowing ASEAN insurance companies to invest five percent of surplus funds in any of the association's member countries. (hen)