History of Insurance Development in Indonesia

13 April 2022

The colonial period inhabited by the Indonesian nation not only left the story of oppression and atrocities committed by the invaders to the natives, but also the colonials who were more civilized, also brought business practices that developed to the present.  One of them is the insurance business.  The term insurance itself comes from the Dutch word verzekering which means coverage or insurance.

The history of the development of insurance business in Indonesia is divided into 2 (two) periods, namely the colonial period until 1942 and the period after World War II or the period of independence.

Colonial Period

The insurance business entered Indonesia during the Dutch colonial era. At that time, the existence of insurance was needed by the Dutch in order to ensure the continuity of their business in the plantation and trade sectors in their colonies. Their success in doing business in the plantation and trade sector, especially in Indonesia, which at that time was still called Nederlands Indie (Dutch East Indies), certainly needed to get guarantees or protection for threatening business risks.  For the record, Europeans in the XII century already know marine insurance (Marine Insurance).

The insurance companies that operated during the Dutch colonial era were mostly companies established directly by the Dutch and companies that were subsidiaries of insurance companies headquartered in the Netherlands, The United Kingdom, and other countries.  According to the book History of Insurance in Indonesia, the first insurance company established by the Dutch was Bataviaasche Zee en Brand-Assurantie Maatschappij. This insurance company engaged in the trade and plantation sector was didirikan on January 18, 1843 in Kali Besar Timur, Jakarta.  Covered risks are any risks caused by fires and risks of transporting commodities.

Next followed the establishment of other insurance companies that are subsidiaries of insurance companies in the Netherlands such as NV Handel, Industrrie en Landbouw Maatschappij Tiedeman & van Kerchem and Escompto Bank, and Nederlansch Indische Levensverzekering en Lijfrente Maatschappij (NILLMIJ).  In 1853 the loss insurance company N.V. Assurantie Mij Nederlansche Lloyd and loss insurance Assurantie Mij Langeyeld Schroeder and Assurantie Mij Blom van der Aa were founded. N.V. Assurantie Mij Nederlansche Llyod is the forerunner of the first fire insurance in Indonesia, namely PT Llyod Indonesia.

Because the insurance business that existed at that time only aimed to ensure the sustainability of the colonial business, then the types of insurance that existed at that time were not widely known by indigenous peoples widely or only for certain circles. Moreover, the business system run is a monopoly so that the existing insurance business is only for trading activities and meets the interests of the Dutch, British, and other Europeans.

Most of the types of insurance that existed at that time were fire insurance and transportation insurance.  Meanwhile, for motor vehicle insurance relatively has not appeared because the number of motor vehicle ownership at that time was still small and dominated by the Dutch and other foreign nations, so it does not require insurance coverage.

However, in the midst of the dominance of foreign insurance companies, there are also insurance companies initiated by the indigenous people, namely Onderlinge Lavenzekering Maatschappij Persatuan Goeroe-Goeroe Hinda Netherlands (OL). Mij. PGHB) or now known as Bumiputera Joint Life Insurance (AJB) 1912. This insurance company in the form of a mutual legal entity was initiated by 3 teachers, namely Mas Ngabehi Dwidjosewojo, Mas Karto Hadi Soebroto, and Mas Adimidjojo. On the way, OL. Mij. PgHB has undergone several name changes, namely OL Mij Boemi Poetra and Tanggoeng Djiwa Boemi Poetera Company (PTD Boemi Poetera).

The establishment of Budi Utomo in 1908 also had a role in encouraging the establishment of local insurance companies. One of the founders of OL Mij Boemi Poetra, Mas Ngabehi Dwidjosewojo, is a member of the Yogyakarta branch of the Budi Utomo association. Local insurance companies founded by the indigenous are De Bataviasche Onderlinge Levensverzekerings Maatschappij, V. Indonesia, and De Onderlinge Levensverzekerings Maatschappij Djawa. All insurance companies are in the form of onderling or joint companies because they were founded in the spirit of mutual cooperation and mutual help between nations.

Insurance business activities in Indonesia were then stopped during world war II due to the closure of insurance companies owned by the Netherlands and Britain. During the occupation of the Japanese army for approximately 3.5 years, the insurance business in Indonesia did not record any developments, even recorded setbacks. The reason is, indonesia's economic condition at that time was so chaotic that many companies went out of business, including insurance companies. The only insurance company that survived or survived the poor economic conditions was O.L Mij Boemi Poetera or PTD Boemi Poetera.

Times After The World War or Period of Independence

After the end of the world war, Dutch and British insurance companies resumed operations in Indonesia which was already independent, by establishing a collective insurance business entity called Bataviasche Verzekerings Unie (BUV) in 1946.   Since the form is a collective effort, each BUV member will get a certain share of each closure. This business scheme was chosen because at that time the insurance power was still very lacking. However,  dutch and British-made insurance companies that had dominated this only lasted until 1964.

In 1950, the first loss insurance company was founded, NV. As the first national loss insurance company, NV must compete with foreign companies that are superior both in terms of capital and technical knowledge. The establishment of national loss insurance then sparked the courage of national entrepreneurs to set up a loss insurance company.  On the other hand, the government also issued regulations that require all imported goods to be insured in Indonesia. This regulation is aimed at preventing foreign exchange from going out to pay insurance premiums abroad.

After three years, a national private company was established engaged in Dutch and British reinsurance in Indonesia. This causes foreign exchange to come out to pay reinsurance premiums abroad also still remains large.  In order to overcome this foreign exchange problem, in 1954 the Indonesian government established a professional reinsurance company, namely PT Reasuransi Umum Indonesia which received support from government banks.  All foreign insurance companies are also required to use Indonesia's General Reinsurance services. In 1963, Indonesia's General Reinsurance activities were expanded with life reinsurance by establishing PT Reasuransi Jiwa Umum which triggered the emergence of national loss insurance companies.

In the 1960s, during the struggle for the liberation of West Irian to the recognition of the Republic of Indonesia and the malaysian confrantation events, the Indonesian government nationalized Dutch and British-owned insurance companies. Two well-known nationalization events are the nationalization of the Dutch insurance company NV Assurantie Maatschappij de Nederlandern and Bloom Vander EE into PT Asuransi Bendasraya and the nationalization of the insurance company De Nederlanden Van (1845) into PT Asuransi Jiwasraya.

PT Asuransi Bendasraya was then merged with PT Umum Internasional Underwriters (PT UIU) into PT Asuransi Jasa Indonesia or familiarly known as Jasindo Insurance. In addition to the nationalization and merger of insurance companies, the Indonesian government also formed social insurance companies in order to improve the welfare of the people, namely Perum Asabri, Perum Astek (Jamsostek), Perum Taspen, and Raharja Service Insurance.  This social insurance company was established to carry out activities mandated by the Law, namely:

    1.        Jasa Raharja implements the passenger accident law and the Traffic Accident Fund.

    2.        Perum Taspen, who organizes savings and insurance for civil servants. Founded in 1964, which at that time became the only state-owned company that specialized in the determination of insurance in foreign exchange.

    3.        Perum Asabri, a member of the Bersenjata Force of the Republic of Indonesia.

    4.        Perum Astek, implemented PP No. 33 of 1977, namely labor social insurance (Astek), which is accident insurance for private government work (jamsostek).

Then in the 1980s, modern insurance companies began to emerge in Indonesia, both national insurance companies and joint venture insurance  companies  such as Allianz, AIA, Cigna, Avrist, AXA, Sinar Mas Insurance, and Prudential.  Insurance products that are marketed are now not only protection but also wrapped with investment or unit-link.

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