Hello, friend Liga Asuransi! We’re delighted to welcome you back to our trusted information channel, covering various aspects of risk protection. Understanding the theory of calculating property insurance premiums is one thing, but seeing it applied in practice is another. By analyzing various insurance premium simulations for different property types, you can see firsthand how every factor, from location to security systems, affects the final cost.
This article will walk you through three different premium case examples, each with unique characteristics, and show how premium calculations are performed. We will highlight how L&G Insurance Broker can help you navigate each of these scenarios to get the optimal property insurance policy.
Case Study 1: New Residence in a Modern Housing Complex
This scenario represents the most common and relatively low-risk profile. This property serves as an excellent benchmark for comparison with more complex cases.
1. Detailed Property Profile
- Type and Size: 2-storey residential house, 250 m².
- Age and Condition:Newly built (less than 5 years old), made of reinforced concrete and steel. It’s in excellent condition, with new electrical and plumbing systems that meet SNI (Indonesian National Standard) standards.
- Location: Located in a modern housing complex on the outskirts of the city, the area has good drainage and a history of being free from flooding, significant earthquakes (it’s in a low-earthquake zone), and riots.
- Sum Insured: Rebuilding costs (Replacement Cost Value or RCV) is estimated at IDR 8 million/m².
○ Total RCV Value:250 m² x Rp. 8,000,000 = Rp. 2,000,000,000.
- Security Features: Equipped with an alarm system, smoke detectors, and a modern light fire extinguisher (APAR) system connected to the housing security post.
- Desired Coverage: The basic Flexible Policy or FLEXAS policy covers fire, explosion, lightning, and aircraft crashes. The owner also wanted extended coverage (endorsements) for theft and damage due to riots, civil commotion, and sabotage (SRCC).
2. In-depth Premium Calculation Estimates
- Basic Premium Rate (Flexible): Based on the very low risk profile, the basic premium rate for fire risk is0.12%This rate is set by the Financial Services Authority (OJK) but can vary between insurance companies.
- Coverage Extension Rates (Endorsements):
○ Theft Rates:0.03%
○ SRCC rates:0.05%
○ Earthquake Rates: Despite being in a low-earthquake zone, the owners decided not to take it. If they had chosen to, the rates could have been around0.10%from the insurance value.
○ Flood Rates: Since the property is not in a flood prone area, the rates are very low, around 0.01%, but the owner also chose not to add it.
- Total Premium Rate: 0.12% + 0.03% + 0.05% = 0.20%.
- Gross Premium Calculation:
○ Gross Premium = Sum Insured x Total Rate
○ Gross Premium = Rp 2,000,000,000 x 0.20% =Rp. 4,000,000.
- Add Fee:
○ Stamp Duty: Rp 12.000.
○ Policy Cost: Rp 100.000.
○ Others: Rp 15.000
- Total Annual Premium: Rp 4,000,000 + Rp 12,000 + Rp 100,000 + Rp 15,000 =Rp. 4,127,000.
3. In-depth Analysis and Savings Opportunities
The premium for this property is relatively affordable. Discounts on security features provide significant savings. Without expert assistance, owners may not realize that premiums could be even lower under other scenarios:
- Raising the Deductible (Own Risk): If the owner is willing to bear a higher deductible (for example, IDR 1 million instead of the standard IDR 500 thousand), the insurance company may offer an additional discount of up to 5% of the gross premium.
- Additional Personal Items Coverage: If the owner has valuables in the home, they can add personal effects coverage (Personal Effects) at an additional cost of around 0.02%, which will increase the premium but provide more comprehensive protection.
Case Study 2: Ruko (Shophouse) in a Business Center
This scenario shows how commercial use, dense locations, and operational risks can drastically increase premiums.
1. Property Profile and Commercial Risk Analysis
- Type and Size: A 3-story shophouse with a building area of 350 m². It serves as an office on the top floor and a cafe on the ground floor.
- Location:Located in a busy business district, in an area that has a history of waterlogging during heavy rains and several cases of minor riots in the past.
- Insurance Value (RCV): Redevelopment costs Rp 9 million/m². Total: 350 m² x Rp 9,000,000 = Rp. 3,150,000,000.
- Additional Risks: There are cooking utensils on fire, valuable computer servers, and the risk of business interruption.
2. Complex Premium Calculation Estimation
- Basic Premium Rate (Commercial Complexity): Base rates for commercial properties are higher than residential due to higher operational risks, approximately 0.18%.
- Coverage Extension Rates (Endorsements):
○ Flood Rates:0.07%(higher due to flood-prone location).
○ Earthquake Rates:0.10%(located in a light earthquake zone).
○ Hurry Rates: 0.05%.
○ Business Interruption Rates:0.04% (based on estimated daily cafe turnover).
- Total Premium Rate: 0.18% + 0.07% + 0.10% + 0.05% + 0.04% = 0.44%.
- Premium Calculation:
○ Gross Premium = Rp 3,150,000,000 x 0.44% =Rp. 13,860,000.
- Add Fee:
○ Stamp Duty: Rp 12.000.
○ Policy Cost: Rp 100.000.
○ Others: Rp 15.000.
- Total Annual Premium: Rp. 13,860,000 + Rp. 12,000 + Rp. 100,000 + Rp. 15,000 =Rp. 13,987,000.
3. Advanced Risk Analysis and Negotiation
Premiums for shophouses are much higher than for residential homes due to the more complex risk levels and broader coverage. Without assistance L&G Insurance Broker, the owner may have difficulty determining the exact tariff. Brokers will help:
- Operational Risk Evaluation: They will help owners highlight risk mitigation measures such as installing a fire extinguisher system in the cafe kitchen or storing valuables in a safe to get better rates.
- Business Valuation: The broker will interact with insurance companies to ensure the Business Interruption loss estimate is accurate and fair.
- Comparing Offers: Brokers will compare quotes from various companies that specialize in commercial insurance to ensure the owner gets the best coverage.
Case Study 3: Large-Scale Industrial Warehouse
This scenario demonstrates the need for specialized expertise and in-depth risk assessment for large-scale properties.
1. Property Profile and Risk Complexity
- Type and Size: 5,000 m² storage warehouse in industrial area.
- Insurance Value: Rp. 20,000,000,000(including building and inventory values).
- Special Risks: Stores flammable materials, has 24-hour operation, and frequently experiences heavy vehicle traffic.
- Protection System: It has a sprinkler system, hydrant, and 24-hour security guards.
2. Very Complex Premium Process and Calculation
For large-scale properties like this, premium calculations can no longer be done using a simple formula. It involves a process called underwriting and risk survey carried out by a team of experts from the insurance company.
- Step 1: Dispatch of Expert Team (Risk Engineer): The insurance company will send risk engineers to conduct an in-depth physical survey. They will evaluate:
○ Existing fire protection systems (sprinklers, hydrants, alarms).
○ The type of material stored and how it is stored.
○ Warehouse layout, including access for firefighters.
○ Emergency procedures and staff training.
- Step 2: Risk-Based Rate Determination: After the survey, the teamunderwritingwill determine very specific premium rates. For example, the base rate might be only 0.15% due to a sophisticated sprinkler system, but it could increase if specific risks are identified, such as inadequate maintenance on fire extinguishers.
- Step 3: Complex Premium Calculation:The final premium is calculated by combining the risk rate, the insured amount, and other factors such as reinsurance (insurance for the insurance company). Premiums can range from tens to hundreds of millions of rupiah per year.
- Step 4: Negotiation and Finalization: This is where the role L&G Insurance Broker becomes very important. Brokers will negotiate for the best rates and ensure that all risks have been properly evaluated.
3. Analysis
In this scenario, the assistance of an L&G Insurance Broker is vital. They will:
- Representing you in complex negotiation processes with the team underwriting insurance company.
- Ensure your risk survey report is presented accurately to get the best rates.
- Compare quotes from different companies specializing in industrial insurance to find the ideal property insurance policy.
The Crucial Role of L&G Insurance Brokers
Of the three insurance premium simulationAs seen above, it’s clear that each property has a unique risk profile and insurance needs. Understanding the factors that influence these is the first step, but obtaining an accurate and comprehensive simulation requires expert assistance.
L&G Insurance Broker is the ideal partner for this task. They will simplify the complex process, ensure you get the ideal property insurance policy, and most importantly, guarantee maximum asset protection at a reasonable cost. Don’t hesitate to contact L&G Insurance Broker for a free consultation. To find out about premium calculations, please contact us at 08118507773.
