The manufacturing industry is one of the main drivers of the Indonesian economy. In the coming years, this sector’s role is expected to become increasingly dominant, driven by increased domestic and foreign investment. The Indonesian government is also encouraging the development of industrial estates, special economic zones, and the downstream processing of mining products to increase added value. All of this opens up significant growth opportunities for the manufacturing sector.
However, behind these opportunities lie various risks that could threaten business continuity. Factories with investments worth hundreds of billions to trillions of rupiah are highly vulnerable to unforeseen events such as fires, explosions, machine failures, and natural disasters. The resulting losses include not only asset damage but also the loss of potential profits due to production interruptions.
This is where the main question for factory owners and investors arises: “How much will insurance premiums cost to protect my manufacturing assets?” The answer to this question is not simple, as premiums are determined by various factors such as industry type, asset value, location, and claims history.
This article will comprehensively discuss the manufacturing industry’s potential, the risks it faces, relevant insurance types, premium rate determinants, and premium cost simulations. Finally, we’ll highlight the importance of an experienced insurance broker like L&G Insurance Broker in ensuring maximum protection at a competitive price.
Contact L&G Insurance Broker now at 08118507773 for a free consultation before the risks haunt your business.
The Huge Potential of the Manufacturing Industry in Indonesia
Indonesia’s manufacturing industry encompasses a diverse range of sectors, from food and beverages, textiles, automotive, electronics, chemicals, steel, and pulp and paper. According to data from the Ministry of Industry, this sector contributes over 18% to national GDP. In fact, Indonesia is touted as the largest manufacturing base in Southeast Asia.
Several factors that support the development of the manufacturing industry in Indonesia include:
- Large domestic market: with over 270 million inhabitants, demand for manufactured products continues to increase.
- Government support: through downstreaming policies, investment incentives, and infrastructure development.
- Foreign investment: more and more global companies are making Indonesia their production hub.
- Industrial areas: the development of modern industrial areas makes it easier for investors to obtain integrated facilities.
However, the greater the industry’s potential, the greater the risks that must be managed. A single factory fire can cause hundreds of billions of rupiah in losses, halt production, and even impact the company’s reputation. Therefore, risk management and insurance are essential to support the sustainability of the manufacturing industry.
Types of Manufacturing Industries and Their Characteristics
The manufacturing industry has many different types, each with different risk characteristics. Here are some of the main categories:
- Light Industry
Includes food and beverage, textile, garment, electronics, and assembly factories. Its characteristics:
- Moderate fire risk.
- Using medium scale machines.
- The location is usually in a planned industrial area.
- Chemical and Pharmaceutical Industry
Includes fertilizer, pharmaceutical, cosmetic, and chemical factories. Characteristics:
- High risk due to the use of flammable or explosive chemicals.
- Requires special protection standards.
- Heavy Industry
Including steel, smelters, petrochemicals, pulp & paper. Characteristics:
- The investment value is huge.
- The risk of fire, explosion and engine damage is very high.
- Requires strict supervision in HSE (Health, Safety, Environment).
- Technology-Based Industry
- Such as semiconductors, automotive, and robotics-based manufacturing. Characteristics:
- Risk of damage to modern machines.
- High sensitivity to electrical and cooling disturbances.
Each of these industries requires a different insurance approach. Companies operating in light industry certainly don’t require as high premium rates as petrochemical plants. Conversely, chemical and steel plants require maximum protection becausethe risks the big one.
Risks Faced by the Manufacturing Industry
The following are the main risks that often threaten manufacturing plants:
- Fire and Explosion
Fire is the most common risk. For example, an electrical short circuit in a textile factory could trigger a major fire. In the chemical industry, the potential for explosions is much higher.
- Engine Failure
Production machinery is a vital asset. If it breaks down, it not only costs a lot to repair but also results in lost production potential.
- Natural disasters
Floods, earthquakes, and even hurricanes can damage factory buildings and machinery. The location of the factory greatly determines the level of risk.
- Human Risk and Human Error
Operator error, worker negligence, or poor supervision can trigger fatal accidents.
- Production and Business Disruptions
Losses are not only from physical damage, but also from the cessation of operations which results in lost profits.
- Third Party Liabilities
A fire in one factory can spread to surrounding industrial areas, giving rise to compensation claims from third parties.
These risks show that insurance is not just a formality, but a fundamental need to maintain the sustainability of manufacturing businesses.
Real Case Examples
To illustrate the impact of risk in the manufacturing sector, let’s look at some real cases:
- Plastic Factory Fire in Tangerang: In one night, the entire warehouse and production machinery were destroyed by fire. Losses are estimated at Rp 300 billion. Without insurance, the company was forced to permanently close operations.
- Chemical Plant Explosion: A minor malfunction in the cooling system triggered a chain reaction that led to an explosion. In addition to material losses, the company faced lawsuits from the surrounding community.
- Flooding in the Karawang Industrial Area: Hundreds of factories were damaged by the massive flooding. Many companies did not receive their full claims because their policies only covered standard risks, not flooding.
These cases demonstrate the importance of having a Property All Risks (PAR) policy that includes comprehensive coverage, as well as additional coverage as needed by the industry.
Types of Insurance That Are Suitable
Some types of insurance that are relevant to the manufacturing sector include:
- Property All Risks (PAR) / Industrial All Risks (IAR)
Provides comprehensive protection against FLEXA risks (Fire, Lightning, Explosion, Aircraft crash) to additional risks such as floods, earthquakes and riots.
- Business Interruption (BI)
Covering losses due to the cessation of operations, including loss of profits and fixed company expenses.
- Machinery Breakdown (MB)
Covers sudden and unexpected damage to production machines.
- Public Liability Insurance
Protects the company if there are claims from third parties due to losses caused by factory activities.
- Construction Insurance (CAR/EAR)
To protect factory construction or expansion projects.
- Additional Insurance (Add-on)
For example, Terrorism & Sabotage Insurance, Cyber Insurance, and Marine Cargo Insurance for raw materials and production results.
With this combination, manufacturing companies can have 360-degree protection against all major risks that may occur.
Insurance Premium Cost Estimate
Manufacturing insurance premiums are calculated based on asset value, industry type, location, coverage, and claims history.
- OJK Rates for Property Insurance
- Low risk (electronics, textile factories): 0.05% – 0.15% of asset value.
- Medium risk (food & beverage, light chemicals): 0.1% – 0.25%.
- High risk (smelters, petrochemicals, steel): 0.2% – 0.5%.
- Calculation Simulation
- Factory asset value: Rp. 500 billion.
- Category: medium risk.
Rate: 0.15%.
Annual premium = Rp. 750,000,000.
If Business Interruption Insurance worth IDR 200 billion is added, the additional premium is around IDR 100–200 million.
- Premium Determining Factors
- Factory location (flood/earthquake prone or not).
- Fire protection system.
- Risk management standards.
- Claim notes.
- The Role of Brokers in Premium Negotiations
An experienced broker can compile comprehensive underwriting information to convince insurance companies to offer competitive rates with extensive coverage.
- The Importance of Using Insurance Broker Services (±300 words)
Insurance brokers work for the benefit of their clients, not the insurance company. Some of the key benefits:
- Risk Consultant – identifies risks and ensures assurance as needed.
- Market Comparison – get the best premiums from various insurance companies.
- Claims Assistance – ensuring claims are paid according to the policy.
- Long Term Strategy – helps reduce premiums year over year through risk management.
With a broker, companies not only purchase a policy, but also get strategic protection.
Conclusion
The Indonesian manufacturing industry offers significant opportunities, but also significant risks. Property All Risks Insurance is the primary solution for protecting factory assets, while additional coverage such as Business Interruption and Machinery Breakdown ensure business continuity.
Premiums vary depending on industry type, asset value, location, and coverage. Premium rate estimates are based on OJK regulations, but the final results will vary from company to company.
To obtain the best premiums and maximum protection, manufacturing companies need to work with an experienced broker. L&G Insurance Broker is ready to be your strategic partner:
- Provides free premium simulation.
- Drafting policies according to your needs.
- Accompany claims until completion.
💡Contact L&G Insurance Broker now to get the right, competitive insurance solution that supports the sustainability of your manufacturing business.
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
