JAKARTA. Insurance brokerage business in this year is not as attractive as last year. Setting premium rates imposed by the Financial Services Authority (FSA) at the beginning of this year making the insurance brokerage industry's performance declines.

Premium income of insurance brokers is forecast to shrink more than 10% this year compared to last year.

The FSA’s rules aims to end the price war among insurance company. To increase the number of customer, many insurance company offered premium rates as cheap as possible and gave the large amount of commission to the broker.

As a result, the insurance industry becomes unhealthy because there was concern the premium amount was sufficient for a claim. The impact was the payment of claims to customers could be hampered. Therefore, FSA released the circular to raise rates and gave limits the amount of brokerage commissions.

Freddy Pieloor, Special Advisory Team Association of Insurance and Reinsurance Broker Indonesia (Apparindo) said that the rules bring many clients loose the protection. It is because higher premium bring burden to the customers.

According to Freddy, one of the highest premium rates is property insurance. Some customer decided not to buy insurance and prefer to manage their own risk.

Freddy said, the maximum limit of brokerage fees for insurance is also reduced. Before, the brokerage fee was about 25%. Now, the maximum earned commission is only 15%.

Wunwun Maulidi, Director of Insurance Brokers Proteksindo added, the growth of the insurance broker's commission this year is predicted going to slow down. "This year may only reach 10%," said Wunwun. In fact the increase of Proteksindo commission could reach 30% in every year.

The insurance brokerage business is also more difficult due to the competition with other financial institutions, such as banks and finance companies are more stringent. The market share of insurance brokerage is getting smaller.

Based on FSA, insurance brokerage industry revenue reached Rp 1.48 trillion last year, grew 25.82% from the previous year. Meanwhile, the number of assets in the insurance brokerage industry last year reached Rp 4.29 trillion.

Editor: Hendra Gunawan