Foreword:
Over the past decade, Indonesia has emerged as a new magnet for business expansion in Southeast Asia. Its market is large, its consumer base is growing rapidly, massive infrastructure projects are underway across the region, and the industrial sector is showing remarkable growth. It’s no surprise that many large Malaysian companies are viewing Indonesia not as an alternative market but as a primary growth engine.
However, behind all these great opportunities, there is a hidden reality that is often overlooked by foreign investors: business risks in Indonesia cannot be treated according to the standards of their home country.
Not because Indonesia is more dangerous, but because the risk characteristics are different, the legal system is different, and the financial protection mechanisms are different.
Many Malaysian companies arrive confident that their decades of experience in their country can be readily applied to Indonesia. They bring mature operational standards, solid management, and insurance schemes that are considered “the safest.” Unfortunately, they often fail to realize a crucial point: insurance coverage that is valid in Malaysia or Singapore may not be valid and applicable in Indonesia.
This mistake has, in practice, cost many foreign companies tens to hundreds of billions of rupiah in losses. It’s not because they failed in business, or because their projects were shoddy.
But because they are wrong in placing risk protection.
This article dissects in full:
- why this error occurs frequently,
- what are the legal consequences,
- how the unique risks in Indonesia work,
- and why Indonesian insurance brokers play a strategic role that cannot be replaced by foreign parties.
This article is not written to scare you, but rather to open your eyes to the fact that the success of business expansion is not only determined by turnover and projects, but also by how strong the protection against the risks that lurk behind it is.
A Big Lesson from Malaysian Business Expansion in Indonesia
In 2024, a large business group from Malaysia—Mega Bina Group Malaysia—expanded their investment in Indonesia by opening businesses in various sectors:
- construction,
- manufacturing,
- logistics,
- retail,
- energy, and
- technology.
With decades of experience in Malaysia, they are confident that risk management patterns are the same as in their home country.
All of their company’s assets, projects and liabilities in Indonesia are covered using the following policies:
- from Malaysia,
- from Singapore,
- dari offshore captive,
- without consulting an Indonesian broker.
At first everything seemed safe—until disaster struck.
Disaster 1 — Manufacturing Factory Burns Down
- Loss: USD 1.8 million
- Claim rejected because Malaysia policy is invalid.
Disaster 2 — Construction project experiences structural accident
- Loss: USD 900,000
- Foreign police are considered to be non-existent in Indonesia.
Disaster 3 — Domestic shipments damaged by weather
- Domestic marine claims are not recognized.
Disaster 4 — Data breach in technology unit
- Loss: Rp. 4.5 billion
- Foreign cyber policies do not cover Indonesian risks.
- Total losses of more than Rp. 40 billion in one year.
All these losses happened because of just one mistake:
They do not understand that all risks in Indonesia must be insured by Indonesian insurance companies, not Malaysian ones.
It was at that critical point that they found the solution:
👉use Indonesian insurance brokers to protect their entire business portfolio.
3 Urgent Steps for All Malaysian Companies in Indonesia
To prevent fatal risks from befalling other Malaysian companies, here are three steps that must be taken:
- Ensure all assets, projects and liabilities are insured through an Indonesian insurance company.
This is not an option—it is a legal obligation.
- Use an Indonesian insurance broker licensed by the OJK
A broker is a representative of the insured, not a representative of the insurance company.
- Develop a comprehensive insurance program specifically for Indonesian risks
Includes risks:
- flood,
- earthquake,
- unrest,
- geographical factors,
- extreme weather,
- and social risks.
If these three steps are followed, Malaysian companies will be much better protected.
Legal Basis – Why Malaysian Companies Must Use Indonesian Insurance
The regulations are clear and firm:
Law No. 40 of 2014 concerning Insurance
Article 18 paragraph (1)
“Protection of interests in Indonesia must be covered by an Indonesian insurance company.”
Article 18 paragraph (2)
Foreign police do not apply to risks in Indonesia.
It means:
- factories in Indonesia
- office in Indonesia
- projects in Indonesia
- liability in Indonesia
- domestic shipping
- equipment and vehicles
Must not be insured with Malaysian or foreign insurance companies.
Business Risks in Indonesia Are More Complex Than in Malaysia
Indonesia is a huge market, but full of unique risks:
- Natural hazards: earthquakes, flash floods, landslides
Not available in Malaysia.
- Social risk: riots (RSMD/CC)
It happens quite often.
- Logistics risks: island nations
Shipping depends on sea.
- Industrial risk: unstable electricity in some areas
Impact on manufacturing & data centers.
- Cyber risk: cyber attacks are very high
Indonesia is at the top of Asia’s cyber attack rankings.
- Labor risks: employee demands
Indonesian labor laws are quite strict.
Each of these risks requires specific insurance coverage and strong wording.
Types of Insurance That Are Mandatory for Malaysian Businesses in Indonesia
Here is a list of basic protections that almost all Malaysian companies require:
- Property All Risks / Industrial All Risks
For factories, warehouses, offices and other physical assets.
- Construction All Risks / Erection All Risks
For construction and energy projects.
- Marine Cargo & Stock Throughput
For domestic and international shipping.
- Public Liability & Employer’s Liability
To protect against lawsuits.
- Cyber Liability
A must for tech companies and companies with sensitive data.
- Professional Indemnity
For engineering, consulting, IT and professional services companies.
- Business Interruption
Replacing income disrupted due to incidents.
- Machinery Breakdown
For mechanical, electrical and production machinery equipment.
- Contractor’s Plant & Machinery (CPM)
For heavy equipment, especially in mining or construction projects.
Why Indonesian Insurance Brokers Are a Must for Malaysian Companies
Indonesian insurance brokers have a strategic role:
- Analyzing Indonesia-specific risks
Including geological and social risks.
- Designing a complete insurance program
Action plan tailored to the Malaysian industry:
- logistics
- technology
- energy
- construction
- manufacturing
- Best premium negotiation
Brokers tender to 10–30 Indonesian insurance companies.
- Maintaining compliance with Indonesian law
So that the police are not considered illegitimate.
- Accompanying claims through to payment
Large claims require documentation and negotiation skills.
Without a broker → the risk of claim rejection is very high.
Case Study – How a Broker Saved a Malaysian Company
Case: Malaysian factory catches fire, claims Rp 12 billion
With brokers:
- wording already includes RSMD/CC
- claim paid in full
Case: Malaysia EPC project fails testing, losses USD 1.3 million
Insurance Broker ensures coverage testing & commissioning → claims are paid.
Case: Malaysian startup data breach
No broker → cyber claim denied
With L&G wording → 90% of claims accepted
Why L&G Insurance Broker Is the Best Partner for Malaysian Businesses
L&G Advantages:
- Over 30 years of experience
Serving clients from Malaysia, Singapore, China, India, Korea, Japan, Europe.
- Experts in construction, energy, mining, manufacturing, logistics and technology risks
Explore all sectors.
- Best premium negotiation
Through tenders to dozens of Indonesian insurance companies.
- Expert in big claims
Including fire, heavy equipment, cyber, liability, and EPC projects.
- LIGASYS digital system
Real-time monitoring of policies, claims, and compliance.
Free Steps to Get Started With L&G
Malaysian companies can start by:
- Free risk assessment
- Free compliance check UU 40/2014
- Free evaluation of Malaysian policies to be adapted to Indonesia
- Free tender to Indonesian insurance companies
- Free risk management consultation
There is no charge until the policy is issued.
Don’t Let Insurance Mistakes Destroy Your Business in Indonesia
Indonesia is a big market with big opportunities.
But without proper protection, the risks are very high.
Malaysian companies must ensure:
👉All policies must be issued by an Indonesian insurance company.
👉Use an Indonesian insurance broker to represent your business
👉Choose L&G Insurance Broker as your risk security partner in Indonesia
With the right strategy, Malaysian businesses can grow quickly and safely in Indonesia.
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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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Disclaimer
This article is intended for educational purposes and does not replace professional legal or technical advice. Each business sector presents different risks and requires a specific analysis before selecting a policy or insurer. Readers are advised to consult with a licensed insurance broker or relevant expert to ensure the suitability of the insurance program to their operational needs and compliance with Indonesian regulations.
