Circular Letter of the Financial Services Authority Number 21/SEOJK.05/2015 on the Determination of Premium or Contribution Rates for Property Insurance and Motor Vehicle Insurance Lines in 2015

To:

1. The Board of Directors of General Insurance Companies; and
2. The Board of Directors of Sharia General Insurance Companies,
   At your place.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 21/SEOJK.05/2015

ON

THE DETERMINATION OF PREMIUM OR CONTRIBUTION RATES FOR PROPERTY INSURANCE AND MOTOR VEHICLE INSURANCE LINES FOR THE YEAR 2015

In relation to the mandate of Article 5 paragraph (5) of Financial Services Authority Regulation Number 2/POJK.05/2015 concerning the Maintenance and Reporting of Insurance Risk Data and the Application of Premium and Contribution Rates for Property Insurance and Motor Vehicle Insurance Lines (State Gazette of the Republic of Indonesia Year 2015 Number 71, Supplement to the State Gazette of the Republic of Indonesia Number 5684), it is necessary to regulate premium or contribution rates for property insurance and motor vehicle insurance lines in 2015 in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

In this Financial Services Authority Circular Letter, the following terms are meant:

1. Company means a company that conducts general insurance and/or Sharia general insurance business as referred to in the insurance law.
2. General Insurance Company means a company that conducts general insurance business as referred to in the insurance law.
3. Sharia General Insurance Company means a company that conducts Sharia general insurance business as referred to in the insurance law.
4. Insurance Brokerage Company means a company that conducts insurance brokerage business as referred to in the insurance law.
5. Insurance Agent means an insurance agent as referred to in the insurance law.
6. Premium means premium as referred to in the insurance law.
7. Contribution means contribution as referred to in the insurance law.
8. Property Insurance is insurance that covers property against risks of fire, lightning, explosion, aircraft impact or objects falling from aircraft, and smoke (FLEXAS - Fire, Lightning, Explosion, Aircraft Impact, and Smoke) guaranteed under the Indonesia Standard Fire Insurance Policy (PSAKI) issued by the Indonesia General Insurance Association (AAUI), including but not limited to Industrial All Risks (IAR) Munich Re wording, Property All Risks (PAR) Munich Re wording, Commercial All Risks, manuscript wording, Association of British Insurers (ABI) wording, Mark IV/V, including Comprehensive Machinery Insurance, Electronic Equipment Insurance, and other property policies that cover FLEXAS risks.
9. Motor Vehicle Insurance is insurance that protects the insured from risks of loss that may arise in connection with the ownership and use of motor vehicles.
10. Earthquake Insurance is insurance that covers loss or damage to property and/or insured interests directly caused by the hazard of earthquakes, volcanic eruptions, fires and explosions following earthquakes and/or volcanic eruptions, and tsunamis.
11. Indonesia Standard Earthquake Insurance Policy, hereinafter abbreviated as PSAGBI, is the policy used to cover special risks for Earthquake Insurance for the Property Insurance line.
12. Deductible is the amount of loss that must be borne by the insured for each incident of an approved claim.
13. Full Value is the actual value or sound value of an insured object immediately before a loss or damage occurs, calculated based on the cost of obtaining/repairing the insured object to a new condition minus technical depreciation.
14. Loss Limit is the maximum claim limit set as the insured value where the insured value is smaller than the Full Value and prorata (average) provisions apply when a claim occurs.

II. APPLICATION OF PREMIUM OR CONTRIBUTION RATES

1. Companies marketing products in the Property Insurance line and/or the Motor Vehicle Insurance line are required to apply Premium or Contribution rates.
2. The Premium or Contribution rates referred to in item 1 include pure Premium or Contribution, administrative and other general costs, acquisition costs, and profits.
3. The Premium or Contribution rates referred to in item 2 are the Premium or Contribution rates established by the OJK.

III. PREMIUM AND CONTRIBUTION RATES FOR PROPERTY INSURANCE LINES

1. The Premium or Contribution rates for the Property Insurance line are the Premium or Contribution rates as listed in Appendix I Table I.A which is an inseparable part of this Financial Services Authority Circular Letter.
2. The Premium or Contribution rates for the Property Insurance line as listed in Appendix I Table I.A which is an inseparable part of this Financial Services Authority Circular Letter:
   a. are Premium or Contribution rates for an insurance period of 12 (twelve) months; and b. do not include Premium or Contribution rates for machinery breakdown coverage for insured values for physical damage (material damage) below USD 300,000,000.00 (three hundred million US dollars) at each location and risk.
3. Companies marketing Property Insurance for FLEXAS risk coverage with an insurance period of less than or more than 12 (twelve) months apply Premium or Contribution rates proportionally based on the Premium or Contribution rates as listed in Appendix I Table I.A which is an inseparable part of this Financial Services Authority Circular Letter.
4. Companies marketing Property Insurance for FLEXAS risk coverage may apply insured values using the Loss Limit method.
5. Companies marketing Property Insurance using Loss Limit as referred to in item 4 apply Premium or Contribution rates as listed in Appendix I Table I.B which is an inseparable part of this Financial Services Authority Circular Letter.
6. Companies marketing Property Insurance for FLEXAS risk coverage may add benefits in the form of risk coverage extensions.
7. Additional Premium or Contribution rates for Companies marketing Property Insurance with added benefits in the form of risk coverage extensions are:
   a. additional Premium or Contribution rates as regulated; and/or b. fair additional Premium or Contribution rates for each coverage extension not yet regulated, in Appendix I Table I.C, Appendix II Table II.A, Table II.C, and Table II.D, and Appendix III Table III.A, Table III.B, and Table III.C which are inseparable parts of this Financial Services Authority Circular Letter.
8. Companies, based on professional underwriter considerations, may provide Premium or Contribution rate discounts with the following provisions:
   a. For coverage with risks in one location, without Earthquake Insurance:
   1. For coverage with an insured value of less than USD 100,000,000.00 (one hundred million US dollars), no Premium or Contribution rate discount is given.
   2. For coverage with an insured value from USD 100,000,000.00 (one hundred million US dollars) up to USD 200,000,000.00 (two hundred million US dollars), a Premium or Contribution rate discount of up to 10% (ten percent) may be given.
   3. For coverage with an insured value above USD 200,000,000.00 (two hundred million US dollars) up to USD 300,000,000.00 (three hundred million US dollars), a Premium or Contribution rate discount of up to 20% (twenty percent) may be given.
   4. For coverage with an insured value above USD 300,000,000.00 (three hundred million US dollars) up to USD 1,000,000,000.00 (one billion US dollars), a Premium or Contribution rate discount of up to 50% (fifty percent) may be given.
   5. For coverage with an insured value above USD 1,000,000,000.00 (one billion US dollars), it follows the international market mechanism.
      b. For coverage with risks in one location, with Earthquake Insurance, no Premium or Contribution rate discount is given;
      c. For multi-location coverage, without Earthquake Insurance:
   6. The covered risks are risks accumulated in one policy for one insured company or group of companies.
   7. For coverage with an insured value of less than USD 100,000,000.00 (one hundred million US dollars), no Premium or Contribution rate discount is given.
   8. For coverage with an insured value from USD 100,000,000.00 (one hundred million US dollars) up to USD 300,000,000.00 (three hundred million US dollars), a Premium or Contribution rate discount of up to 10% (ten percent) may be given.
   9. For coverage with an insured value above USD 300,000,000.00 (three hundred million US dollars) up to USD 1,000,000,000.00 (one billion US dollars), a Premium or Contribution rate discount of up to 30% (thirty percent) may be given.
   10. For coverage with an insured value above USD 1,000,000,000.00 (one billion US dollars), it follows the international market mechanism.
       d. For multi-location coverage, with Earthquake Insurance:
   11. For coverage with an insured value up to USD 1,000,000,000.00 (one billion US dollars), no Premium or Contribution rate discount is given.
   12. For coverage with an insured value above USD 1,000,000,000.00 (one billion US dollars), it follows the international market mechanism.
9. Companies marketing Property Insurance apply Premium or Contribution rates as listed in Appendix I Table I.A which is an inseparable part of this Financial Services Authority Circular Letter with the following provisions:
   a. The applied Premium or Contribution rates are rates from the lower limit to the upper limit, considering the risk profile of the insured object. b. The applied Premium or Contribution rates are rates according to occupation type.
   c. The applied Premium or Contribution rates are rates according to construction class, with the following provisions:
   1. Construction Class 1
      A building is said to be of Construction Class 1 (one) if its walls, floors, all supporting structural components, and roof covering are made entirely and completely of non-combustible materials. Windows and/or doors and their frames, partition walls, and floor coverings may be ignored.
   2. Construction Class 2
      A building is said to be of Construction Class 2 (two) if its criteria are the same as those mentioned for Construction Class 1 (one), with the allowance that the roof covering may be made of hard wood shingles, walls may contain combustible materials up to a maximum of 20% (twenty percent) of the wall area, and floors and supporting structures may be made of wood.
   3. Construction Class 3
      All buildings other than those mentioned in Construction Class 1 (one) and Construction Class 2 (two). d. Premium or Contribution rates may be applied below the lower limit if the Company provides Premium or Contribution rate discounts as referred to in item 8. e. Premium or Contribution rates may be applied above the upper limit if the Company adds additional Premium or Contribution rates for risk coverage extensions.
10. Companies marketing Property Insurance may apply a single Premium or Contribution rate for multi-location coverage with similar risks and having the same risk characteristics with the following provisions:
    a. The number of insured objects must be spread across at least 100 (one hundred) locations throughout the territory of Indonesia. b. For FLEXAS risks, the majority occupation code is followed.
    c. For insured objects spread across at least 100 (one hundred) locations, Premium or Contribution rate discounts as referred to in item 8 above may be given against the single Premium or Contribution rate used.
11. Companies apply a minimum Deductible for each incident of an approved claim with the following provisions:
    a. For occupation types with minimum time excess as listed in Appendix I Table I.D which is an inseparable part of this Financial Services Authority Circular Letter, the minimum Deductible for physical damage (material damage) is 5% (five percent) of the approved loss value or 0.1% (zero point one percent) of the total insured value for each risk and each location (declared value any one risk at any one location), whichever is greater. b. For business interruption losses, the minimum time excess provisions as listed in Appendix I Table I.D which is an inseparable part of this Financial Services Authority Circular Letter apply.
    c. For occupation types not listed in Appendix I Table I.D which is an inseparable part of this Financial Services Authority Circular Letter, the minimum Deductible is established based on professional underwriter considerations.

IV. PREMIUM OR CONTRIBUTION RATES FOR MOTOR VEHICLE INSURANCE LINES

1. The Premium or Contribution rates for the Motor Vehicle Insurance line are the Premium or Contribution rates as listed in Appendix IV Table IV.A which is an inseparable part of this Financial Services Authority Circular Letter.
2. The Premium or Contribution rates as listed in Appendix IV Table IV.A which is an inseparable part of this Financial Services Authority Circular Letter are:
   a. Premium or Contribution rates for an insurance period of 12 (twelve) months; and b. Premium or Contribution rates for motor vehicles with an age of up to 5 (five) years.
3. Companies marketing Motor Vehicle Insurance with an insurance period:
   a. 12 (twelve) months apply Premium or Contribution rates as listed in Appendix IV Table IV.A which is an inseparable part of this Financial Services Authority Circular Letter; b. more than 12 (twelve) months apply Premium or Contribution rates for long-term (multiyears) as listed in Appendix IV Table IV.A which is an inseparable part of this Financial Services Authority Circular Letter each year;
   c. less than 12 (twelve) months apply Premium or Contribution rates for short-term as listed in Appendix IV Table IV.A which is an inseparable part of this Financial Services Authority Circular Letter at least proportionally.
4. For vehicle ages above 5 (five) years, Companies may:
   a. charge an additional Premium or Contribution rate of at least 5% (five percent) of the annual Premium or Contribution rate for comprehensive coverage types; or b. increase the Deductible to Rp 500,000.00 (five hundred thousand Rupiah) for comprehensive coverage types.
5. Companies marketing Motor Vehicle Insurance as referred to in item 1 may add benefits in the form of risk coverage extensions and other additional service features.
6. Risk coverage extensions as referred to in item 5 include among others:
   a. flood including typhoons; b. earthquakes and tsunamis;
   c. strikes, riots, and civil commotion (SRCC – Strike, Riot, and Civil Commotion);
   d. terrorism and sabotage; e. legal liability to third parties (passenger vehicles and motorcycles); f. legal liability to third parties (commercial vehicles, trucks, and buses); g. personal accident for the driver; h. personal accident for passengers; and
   i. legal liability to passengers.
7. Additional Premium or Contribution rates for Companies marketing Motor Vehicle Insurance with added benefits in the form of risk coverage extensions are the Premium or Contribution rates as listed in Appendix IV Table IV.B which is an inseparable part of this Financial Services Authority Circular Letter.
8. Additional service features as referred to in item 5 include among others emergency road assistance, replacement vehicles, use of authorized workshops, and use of more expensive specialized workshops.
9. Additional Premium or Contribution rates for Companies marketing Motor Vehicle Insurance with added benefits in the form of additional service features are additional Premium or Contribution rates established fairly according to the additional services agreed upon.
10. Companies may provide Premium or Contribution rate discounts of up to 10% (ten percent) for coverage with at least 100 (one hundred) motor vehicle units. The provisions for giving Premium or Contribution rate discounts are as follows:
    a. Premium or Contribution rate discounts are given against the total Premium or Contribution value before acquisition costs; b. Premium or Contribution rate discounts are applied to motor vehicle coverage owned by one individual or corporation and are not objects within vehicle ownership financing or credit agreements; and
    c. Premium or Contribution rate discounts may be given for policies that renew (renewal) for the same insured object.
11. The application of Premium or Contribution rates for Companies marketing Motor Vehicle Insurance as listed in Appendix IV Table IV.A which is an inseparable part of this Financial Services Authority Circular Letter is done with the following provisions:
    a. the applied Premium or Contribution rates are rates from the lower limit to the upper limit, considering the risk profile of the insured object; b. the applied Premium or Contribution rates are rates according to the regional zone where the insured object is registered, marked with the Motor Vehicle Number Plate (TNKB);
    c. Premium or Contribution rates may be applied below the lower limit if the Company provides Premium or Contribution rate discounts as referred to in item 10; and
    d. Premium or Contribution rates may be applied above the upper limit if the Company adds additional Premium or Contribution rates for motor vehicles above 5 (five) years of age, adds risk coverage extensions, and/or adds additional service features.
12. Companies apply a Deductible for each incident of an approved claim with an amount as listed in Appendix IV which is an inseparable part of this Financial Services Authority Circular Letter.

V. PREMIUM OR CONTRIBUTION RATES FOR SPECIAL FLOOD RISKS FOR PROPERTY INSURANCE AND MOTOR VEHICLE INSURANCE LINES

1. Companies marketing special flood risk coverage in the Property Insurance line apply Premium or Contribution rates as listed in Appendix II Table II.A which is an inseparable part of this Financial Services Authority Circular Letter.
2. Companies marketing special flood risk coverage in the Motor Vehicle Insurance line apply Premium or Contribution rates as listed in Appendix II Table II.B which is an inseparable part of this Financial Services Authority Circular Letter.
3. Companies marketing special flood risk coverage in the Property Insurance line using Loss Limit apply Premium or Contribution rates as listed in Appendix II Table II.C which is an inseparable part of this Financial Services Authority Circular Letter.
4. Companies marketing risk coverage extensions for business interruption in the Property Insurance line apply Premium or Contribution rates as listed in Appendix II Table II.D which is an inseparable part of this Financial Services Authority Circular Letter.
5. Companies marketing special flood risk coverage extensions in Property Insurance may apply a single Premium or Contribution rate for multi-location coverage with similar risks and having the same risk characteristics with the following provisions:
   a. The number of insured objects must be spread across at least 100 (one hundred) locations throughout the territory of Indonesia. b. The applied Premium or Contribution rates are rates based on the zone where the majority of insured objects are located. If it cannot be determined the zone where the majority of insured objects are located, a fair single Premium or Contribution rate is applied based on professional underwriter considerations.
6. Companies apply minimum Deductible provisions for special flood risk coverage as follows:
   a. Property Insurance Line
   1. For physical damage (material damage) losses of 10% (ten percent) of the approved claim amount.
   2. For business interruption losses, a time excess of 7 (seven) days.
      b. Motor Vehicle Insurance Line
      10% (ten percent) of the approved claim amount, at least Rp 500,000.00 (five hundred thousand Rupiah) per incident.

VI. PREMIUM OR CONTRIBUTION RATES FOR SPECIAL EARTHQUAKE RISKS FOR PROPERTY INSURANCE AND MOTOR VEHICLE INSURANCE LINES

1. Earthquake Insurance for Property Insurance Lines
   a. Companies may set insured values for both physical damage and business interruption based on:
   1. full value basis, or
   2. first loss/sub limit basis.
      b. If the insured value is based on the first loss/sub limit basis, the Company obtains a declared value from the insured that is equal to the actual value for the insured object.
      c. If at the time of loss, the declared value is smaller than the actual value, the Company may apply provisions for under-insurance.
      d. Companies marketing Earthquake Insurance for the Property Insurance line apply Premium or Contribution rates and Earthquake Insurance zones as listed in Appendix III Table III.A.1, Table III.A.2 and Table III.D...

III.D which is an integral part of this Financial Services Authority Circular.

e. Companies marketing the expansion of Earthquake Insurance coverage in Property Insurance may apply a single Premium or Contribution tariff for multi-location coverage with similar risks and identical risk characteristics, subject to the following provisions:

1. The number of insured objects must be distributed across at least 100 (one hundred) locations throughout the territory of Indonesia.
2. The applied Premium or Contribution tariff is the tariff according to the provisions of each zone, following the number of floors (≤9 (less than or equal to nine) floors or >9 (greater than nine) floors) of the majority.

2. Earthquake Insurance for the Motor Vehicle Insurance Line
   a. Companies marketing Earthquake Insurance for the Motor Vehicle Insurance line must apply the Earthquake Insurance Premium or Contribution tariffs as stated in Appendix III Table III.E, which is an integral part of this Financial Services Authority Circular. b. Companies marketing Earthquake Insurance for the Motor Vehicle Insurance line must implement a Deductible (Risiko Sendiri) provision of 10% (ten percent) of the approved indemnity value, or a minimum of Rp500,000.00 (five hundred thousand rupiah) per incident.

VII. ACQUISITION COSTS

1. Companies may provide a portion of the Premium or Contribution tariff in the form of acquisition costs as commissions, discounts, and/or other forms to Insurance Brokerage Companies, Insurance Agents, and/or other third parties related to the acquisition of insurance business, including to the insured or policyholder.
2. The acquisition costs referred to in item 1 cumulatively apply:
   a. for Property Insurance at a maximum of 15% (fifteen percent) of the Premium or Contribution tariff; or b. for Motor Vehicle Insurance at a maximum of 25% (twenty-five percent) of the Premium or Contribution tariff.
3. The acquisition costs referred to in item 1 do not yet account for applicable taxes.
4. For coverage with specific values that are eligible for Premium or Contribution tariff discounts, the acquisition costs are calculated from the Premium or Contribution tariff after the tariff discount.

VIII. OTHERS

1. Provisions regarding Premium or Contribution tariffs in this Financial Services Authority Circular apply to the marketing of Property Insurance and Motor Vehicle Insurance products marketed directly by Companies or through third parties.
2. Provisions regarding Premium or Contribution tariffs in the Appendix of this Financial Services Authority Circular do not apply to micro-insurance products.

IX. CLOSING

1. The provisions in this Financial Services Authority Circular shall take effect on the date of determination.
2. Upon the entry into force of this Financial Services Authority Circular:
   a. Regulation of the Head of the Capital Market and Financial Institution Supervisory Board Number PER-07/BL/2012 concerning Reference of Pure Premium Elements and Other Administrative and General Cost Elements in the Motor Vehicle Insurance Line in 2013; and b. Circular Letter Number SE-06/D.05/2013 concerning the Determination of Premium Tariffs and Acquisition Cost Provisions in the Motor Vehicle Insurance and Property Insurance Lines and Special Risk Types Including Flood, Earthquake, Volcanic Eruption, and Tsunami in 2014, are repealed and declared invalid.
3. To ensure that everyone is aware, this Financial Services Authority Circular is ordered to be published by placing it in the State News Bulletin of the Republic of Indonesia.

Determined in Jakarta on 30 June 2015
EXECUTIVE HEAD OF INSURANCE, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
SUPERVISOR
FINANCIAL SERVICES AUTHORITY,
Signed,
FIRDAUS DJAELANI
STATE NEWS BULLETIN YEAR NUMBER
Copy in accordance with the original
Director of Legal Affairs I
Legal Department,
Signed,
Sudarmaji