In the distribution and manufacturing industries, oil stocks are more than just inventory. Their value can reach billions of rupiah and form the backbone of operations. Ironically, however, many oil distributors and manufacturing companies still view storage risks as merely a technical issue, not a financial risk that requires serious protection.
In fact, a single incident such as a warehouse fire, major spill, or theft can immediately erode a business’s capital. Without proper protection, these losses must be borne solely. This is where oil stock insurance acts as a business protection strategy, not just a formality.
For a FREE consultation, contact L&G Insurance Broker today!
Website: lngrisk.co.id
Email: halo@lngrisk.co.id
Customer Service L&G: 08118507773
Oil Storage Risks That Can Cause Major Losses
1. Warehouse and Storage Area Fires
Oil is a flammable material. An electrical spark, short circuit, or operational error can trigger a major fire in a short time. Many warehouse fires have shown that the fire not only destroys the building but also the entire stock inside.
For oil distributors, a fire means multiple losses: lost stock, damaged warehouses, interrupted deliveries, and threatened business contracts. Without oil stock insurance, the impact could completely shut down the business.
2. Stock Spills and Contamination
Oil storage risks don’t always come in the form of major incidents. Spills due to leaking drums, forklift errors, or damaged containers are common and often overlooked. However, contaminated oil is generally unsaleable and must be destroyed.
This type of loss often goes unnoticed until it becomes significant. This is an example of an oil storage risk that often escapes management’s consideration.
3. Theft and Loss of Stock
Warehouses with high volumes and fast turnover are at high risk of loss. Internal and external theft can occur undetected for extended periods. For oil distributors, stock loss means supply disruptions to customers and potential contractual penalties.
Without insurance coverage, this loss immediately impacts financial statements.
4. Damage Due to Non-Ideal Temperature and Storage
Oil requires specific storage conditions. Extreme temperatures and humidity can degrade quality, alter specifications, and trigger claims from industrial customers. These quality losses are rarely covered without proper protection, even though the costs can be substantial.
Real Loss Simulation: Why It Could Be in the Billions
Let’s look at a simple simulation.
A distributor stores 1,500 drums of oil with an average value of Rp. 2 million per drum.
Total stock value: Rp3 billion.
If a fire or major spill destroys 70% of the stock, the potential loss could reach Rp2.1 billion. This figure does not include:
- Cleaning fees
- Operational disruption
- Delay in delivery
- Loss of customer trust
Without oil stock insurance, all losses must be borne by the individual and have the potential to disrupt business continuity.
Types of Insurance Needed to Protect Oil Stocks
1. Property All Risks Insurance (PAR)
This is the primary protection for warehouses and stock. A Property All Risks policy provides comprehensive coverage against fire, explosion, theft, and various other physical risks.
For oil distributors, this insurance isn’t an option, but rather a basic necessity. The coverage value must be adjusted to reflect the actual stock value to avoid underinsurance when making a claim.
2. Transportation Insurance (Marine Cargo Insurance)
Risks don’t stop at the warehouse. Distributing oil to customers or between locations carries the potential for accidents, spills, and loss. Transport insurance ensures stock remains protected during transit.
Without this policy, losses in transit often cannot be claimed.
3. Business Interruption Insurance
Damaged stock often leads to operational disruptions. Business interruption insurance provides compensation for lost revenue and fixed costs while a business is unable to operate due to a covered risk.
This is a strategic protection for medium to large scale distributors and manufacturers.
4. Temperature and Quality Risk Insurance
For high-specification oils, protection against quality degradation due to temperature and humidity is crucial. This additional policy helps cover losses that are often invisible but have significant financial impact.
Why is it Mandatory to Use the Services of an Official Insurance Broker?
Purchasing a policy alone doesn’t guarantee optimal protection. This is where the role of a licensed insurance broker becomes crucial.
1. Comprehensive Risk Analysis
Experienced brokers analyze the entire risk chain: warehousing, storage, transportation, and operations. This ensures every oil storage risk is properly mapped.
2. Preparing the Right Insurance Program
Not all distributors need the same policies. Brokers ensure a combination of oil stock, transportation, and business interruption insurance that meets their business needs without wasting premiums.
3. Claims Assistance that is in the Client’s Favor
When a loss occurs, the claims process is often the biggest challenge. A licensed insurance broker acts as the client’s representative, ensuring claims are processed quickly, fairly, and optimally.
4. Legality and Compliance
Official brokers registered and supervised by the Financial Services Authority (OJK) provide legal certainty and professionalism. This is crucial for businesses with high risk exposure, such as oil distributors.
Why is L&G Insurance Broker the Right Choice?
With over 30 years of experience, L&G Insurance Broker understands that oil stock protection is not universal. L&G helps clients:
- Identify real risks, not assumptions
- Develop an insurance program that is relevant to business conditions
- Monitor claims through to completion
For distributors and manufacturers, working with an experienced broker is not an additional cost, but rather a strategic decision to maintain business continuity.
Conclusion
Losses of billions due to oil stockpiles are neither a small risk nor a remote possibility. Without proper protection, One event can rock your business.
The right combination of oil stock insurance and the assistance of a licensed insurance broker is the most effective way to protect high-value assets.
👉 Don’t wait for the loss to happen.
Consult with L&G Insurance Broker about protecting your business’s oil stocks, an experienced risk management partner who ensures protection actually works when needed.
For a FREE consultation, contact L&G Insurance Broker today!
Website: lngrisk.co.id
Email: halo@lngrisk.co.id
Customer Service L&G: 08118507773
