When a Smelter’s Main Machine Fails, Everything Can Come to a Halt
Imagine a modern nickel smelter in Sulawesi operated by a Chinese company. Production is running smoothly, with thousands of tons of processed nickel shipped each month. But one night, an electrical short circuit occurs in one of the main transformers.
A small fire escalated into a major one in a matter of minutes. Several critical machines melted, and production came to a complete halt for three months.
When the company filed an insurance claim, they received shocking news—the claim was denied. The reason: the damage was caused by electrical short circuits which are not included in the standard policy clauses.
The agent who helped purchase the policy never explained this. As a result, the company suffered losses of over Rp 180 billion, including lost revenue due to production interruptions.
The Hard Truth: Many Chinese Mining Entrepreneurs Face Similar Problems
Over the past five years, Chinese investment in mining and smelting in Indonesia has surged, particularly in the nickel, alumina, and ferronickel sectors. The value reaches billions of US dollars. However, many of these companies face serious insurance coverage issues.
Some common mistakes that often occur:
- The policy only covers the riskFire & Lightning, not included Machinery Breakdown.
- There is no protection.Business Interruption, even though the biggest loss actually comes from the cessation of production.
- The insured value is far below the actual value (underinsurance).
- Policies are purchased from agents or acquaintances who do not understand the risks of the mining industry.
Why Are the Risks in the Smelter Industry So Complex?
The mining and smelting industry has a very high combination of risks:
- Technical risks – equipment failure, high pressure, extreme heat and chemicals.
- Operational risks – human error, cooling system failure, unstable power supply.
- Environmental risks – pollution, landslides and gas explosions.
- Business risks – project delays, breakdowns of imported machinery, or losses due to downtime.
A single incident can result in losses of hundreds of billions of rupiah per day. Therefore, designing insurance policies for smelters cannot be outsourced to general agents but must be handled by industrial insurance brokers who understand the technical and contractual nature of mining projects.
Real Case: Insurance Broker Successfully Settles Smelter Claim
A Chinese company operating a ferronickel smelter in Sulawesi experienced turbine failure due to excessive pressure. Losses are estimated at Rp 85 billion.
Fortunately, the company used an insurance broker as its advisor from the start. The broker’s team negotiated a policy that covered:
- Machinery Breakdown (MB),
- Fire and Lightning,
- Consequential Loss/Business Interruption, dan
- Expediting Cost to accelerate repairs.
With L&G’s support, all claims were paid in full within four months, and the plant resumed operations without losing export contracts.
Lessons from This Case: Insurance Brokers Are Not Just Intermediaries
Many Chinese entrepreneurs think brokers simply add costs. In fact, the role of insurance brokers officially registered with the OJK is crucial.
Brokers like L&G Insurance Broker have the following main functions:
✅Analyze risks professionally.
✅Develop an insurance program according to the project profile.
✅Negotiate the best premiums and clauses with insurance companies.
✅Assisting with the claims process from start to payment.
The most important difference: an agent represents an insurance company, while a broker represents you as the insured (customer).
OJK Establishes Clear Regulations
The Indonesian government through POJK No. 69/POJK.05/2016 and its derivative regulations requires that:
“Insurance brokerage companies act for and on behalf of the insured in obtaining insurance coverage, settling claims, and providing risk management consultation.”
This means that the OJK ensures that only authorized brokers are allowed to assist clients with negotiations and claims. If a business uses an unauthorized agent or a party without OJK permission, all risk and responsibility rests with the business owner.
Important Components of Insurance for Smelter Projects
To ensure comprehensive protection, Chinese mining entrepreneurs need to pay attention to the following insurance components:
- Property All Risks (PAR) – protects all buildings, machinery and production facilities from various causes of damage.
- Machinery Breakdown (MB) – protects against sudden breakdown of major production machinery.
- Business Interruption (BI) – replaces lost revenue during the repair period.
- Erection All Risks (EAR) – for new smelter construction projects or plant expansions.
- Liability Insurance – protects against third party claims resulting from accidents or environmental damage.
Without broker guidance, policies often only cover a fraction of the above risks.
Fatal Mistake: Not Involving a Broker From the Start
The most common mistakes occur not at the time of claim, but at the time of initial policy purchase.
Many Chinese entrepreneurs hand over insurance matters to local financial staff or agents without proper risk analysis.
However, insurance brokers can help from the start:
- Assess asset value and operational risks,
- Designing an appropriate policy structure,
- Ensuring all important additional clauses are included,
- Avoid duplication or protection gaps (coverage gap).
L&G Digital Technology: Transparency, Speed, and Easy Access
In the digital era, L&G Insurance Broker presents an online risk management platform system that makes it easier for Chinese entrepreneurs to monitor all policies and claims in real time.
With this system, customers can:
- View policy status and premium payment schedule,
- Monitor claim progress,
- Access risk reports and recommendations online.
The L&G team also has specialists who are fluent in Mandarin and English, facilitating cross-cultural communication and speeding up administrative completion.
Conclusion: Protect Your Large Investment with the Right Partner
A smelter project is a long-term, high-risk investment. A single mistake in selecting an insurance partner could cost hundreds of billions of rupiah and disrupt business continuity.
For this reason, Chinese mining entrepreneurs in Indonesia must ensure:
- Only work with official insurance brokers registered with the OJK,
- Involving brokers from the project planning stage,
- Review all policies to cover production and business interruption risks,
- Choose a partner who has a high reputation, experience and integrity.
And in this case, L&G Insurance Broker is the right choice — a professional insurance broker with extensive experience in the mining, construction, energy, and heavy industry sectors.
We don’t just sell policies, but help you manage risk, protect assets, and ensure every claim is paid in full and on time.
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DON’T WASTE YOUR TIME AND SECURE YOUR FINANCIAL AND BUSINESS WITH THE RIGHT INSURANCE.
HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)
Website: lngrisk.co.id
Email: halo@lngrisk.co.id
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