Andi Haswidi, Jakarta – Policyholders whose homes, cars and other property were damaged by the floods over the past days may find themselves being turned away by their insurance companies, even if they have all-risk insurance.
"All-risk does not mean that all of the risks are actually covered," the chairman of the Indonesian General Insurance Association (AAUI), Frans Y. Sahusilawane, told reporters Wednesday in Jakarta amid growing complaints from policyholders that their claims under all-risk policies had been rejected.
The term "all-risk", which is used by many insurance firms, often causes confusion among customers, especially given that many of them fail to read the small print in their policies, Frans said.
"The standard insurance policy for property and vehicles does not cover flood risks, even if it is called 'all risk'. Insurance cover for flood damage is provided as an extension to the standard policy, based upon the payment of an additional premium, of course," he explained.
He said that apart from standard and all-risk policies, insurance firms also offered insurance packages specifically tailored to satisfy individual policyholders' needs.
"Whether there is actually a clause that covers flood risks will depend on the agreement," he said. "We, the association, do not use the term "all-risk". We instead use the term "comprehensive". However, we cannot forbid our members from using the term in the absence of a regulation to that effect," Frans said, while acknowledging that the term "all risk" could lead to confusion.
Frans urged policyholders affected by the floods to submit their claims within the set deadlines so as to avoid difficulties, although he added that in the case of a disaster, such as the Jakarta floods, insurers would be expected to show leniency.
He said the time required for settling claims varied, and depended greatly on cooperation on the part of the customer. A simple house-insurance claim, backed by complete policy records, could take between one and two months to settle, while a more complex one, such as a claim for damage to a factory, could take between four and six months. Frans stressed that the country's insurance firms were committed to settling all claims resulting from the floods, with the total amount of claims expected to top the US$200 million paid out following a similar flood disaster in 2002.
"There is no definite estimate yet for this year's losses. Just to give an example, in 2002 we had to pay out about US$200 million, consisting of 1,145 claims for damage to homes, 1,804 for motor vehicles, 547 for commercial buildings and 780 for factories," he said.
"We can confidently state that all general insurance firms will suffer underwriting losses due to the floods," he said, adding, however, that he was optimistic that no firm would go bankrupt as part of all insurance cover was reinsured with local and overseas reinsurance firms.
"Even if this year's total loss doubles from $200 million, it wouldn't be a significant blow to the international reinsurance firms. For them, it would be like a tiny peanut divided into seven slices. One of the slices would be made up of the claims arising from the flood," he explained.
Frans said that international reinsurance firms were more concerned about such disasters as the tsunami in Aceh and earthquakes, which had increased Indonesia's country-risk level.
"Other than that, they are also concerned about Indonesia's instability from a political point of view," he said. Frans added that the insurance industry could do more to help people after disasters if insurance penetration was higher.
Indonesia's general insurance penetration level compared to the country GDP was about 0.65 percent last year, far lower than China's 4 percent and Europe's 11 percent.