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n anticipation of increased demand for property insurance, particularly against flooding, the Association of General Insurance Companies (AAUI) has introduced a new premium rate scheme about 20-30 percent higher than the current rates.

AAUI chairman Kornelius Simanjuntak said demand for property protection always grew following natural disasters. “So we expect demand to increase after last month’s flooding [in Jakarta],” he said.

The new rates, which will take effect as of March 14, will be applied in the capital city first, before being implemented in other regions. They would serve as tariff guidance for insurance firms to anticipate the growing demand, Kornelius added.

“The AAUI has discussed this matter for the past two years because the old rates are no longer sufficient compared to the risks [we cover]. The January flood was evidence of how flood risk had increased and it may even pose a bigger threat in the future,” he said.

The new scheme no longer classifies properties into industrial, commercial or residential buildings. Instead, it divides properties in Jakarta into three categories depending on the potential risks: low, moderate and high. Each category will determine the premium price.

The low-risk zone covers areas which have never been flooded or areas that have been flooded to a depth of 30 centimeters, such as Rawamangun in Pulogadung, East Jakarta. The rate is set at 0.045 percent of the property’s price.

The second, moderate-risk, zone covers areas in which past floods were between 30 centimeters and 60 centimeters, with a rate of 0.17 percent. One such location is Pal Meriam in Matraman, East Jakarta.

Meanwhile, the high-risk zone includes areas in which past floodwater levels have exceeded 60 centimeters. The rate is fixed at 0.52 percent. Locations in this high-risk zone include Pluit in Penjaringan, North Jakarta, and Cipinang Cempedak in Jatinegara, East Jakarta.

According to AAUI executive director Julian Noor, based on the new rate calculations, the premiums will be around 20 percent and 30 percent higher than the old rates, which were established in 2005.

The association was planning to create a separate policy specifically to provide protection against floods later this year. “But right now, we need to maintain a stable flood map,” he said.

Separately, PT Asuransi Sinar Mas director I Ketut P. Swastika said that the higher premiums would present a challenge for the company in marketing flood-related protection. “I think customers will be surprised by the new rates. We will try to find the best way to implement the policy,” he added.

So far, Ketut said, his company had received Rp 50 billion (US$5.16 million) worth of property and automotive claims as a result of the January floods. Most of the claims came from home owners.

The AAUI has previously estimated that total claims from the last flood will amount to Rp 3 trillion, 50 percent higher than 2007.

With flooding on the increase the AAUI expects to see a 30 percent jump in the demand for flood
insurance.

Andrew Sulaiman, who lives in Cawang, East Jakarta, is thinking of expanding his house insurance coverage to include flood protection.

“I bought my house last year. I renovated it and purchased a property policy, but only against fire,” the 40-year-old homeowner said.

Even though Cawang was prone to floods, Andrew said he did not expand the coverage to include flooding due to the expensive premiums. However, the last flood which hit Jakarta changed his mind.

“My house was flooded and it was quite bad,” he added, declining to go into details on the losses he suffered in the flood.