Before choosing, let’s first know what insurance is
Insurance penetration in 2018 decreased compared to the previous year. Based on data from the Indonesian Life Insurance Association (AAJI), life insurance penetration in 2018 only reached 1.3 percent.

The small number of insurance penetration above may indicate that there are still many people who do not understand the importance of having insurance. Providing information, education and facts could be the solution. Well, hopefully this article can add to your understanding of insurance, let’s start with the history and definition of insurance.

Quoted from the page, the history of insurance in Indonesia dates back to the 1840s. Bataviaasche Zee en Brand-Assurantie Maatschappij is the first insurance company in Indonesia, established on January 18, 1843 and located in Kali Besar Timur, Batavia.

Initially, this insurance was widely used by shipping companies to protect the goods they carried from the risk of spoilage, piracy, fire or waves. In other words, the first insurance company in Indonesia is a general insurance company. Then some time there was a life insurance company under the name Nederlansch Indische Levensverzekering en Lijfrente Maatschappij or abbreviated as NILLMIJ.

Starting from concern for the lives of Indonesian teachers, Dwidjosewojo, a teacher in Magelang who is also a member of Boedi Oetomo, proposed the establishment of a joint life insurance agency at the meeting of the Dutch East Indies Association of Goeroe (PGHB). Onderlinge Levensverzekering Maatschappij PGHB or abbreviated as OL Mij PGHB, the first insurance purely owned by domestic children was finally realized in Magelang on February 12, 1912.

The definition of insurance
According to Big Indonesian Dictionary (KBBI), insurance is the coverage (an agreement between two parties, one party is obliged to pay the fee and the other party is obliged to give assurance entirely to paying dues in case something happened to the first party or his belongings in accordance with the agreement which are made).

Meanwhile, according to the definition of the Financial Services Authority (OJK) contained in Law Number 40 of 2014 concerning Insurance, insurance is an agreement between an insurance company and a policy holder which is the basis for receiving premiums by insurance companies as compensation. The
compensation referred to is to: 1. Provide compensation to the insured or policy holder due to loss, damage, costs incurred, loss of profit, or legal liability to third parties that may be suffered by the insured or policy holder due to uncertain events.
2. Providing payment based on the death or life of the insured with benefits whose amount has been determined and or based on the results of fund management.
Insurance business is a business activity engaged in:
1. Insurance services or risk management.
2. Risk reinsurance.
3. Marketing and distribution of insurance products or sharia insurance products.
4. Consultation and intermediary for insurance, sharia insurance, reinsurance or sharia reinsurance.
5. Assessor of loss of insurance or sharia insurance.

So simply, the way insurance works is like gotong royong or cross subsidies. This is because insurance companies actually collect funds from customers. Then, the funds are processed in such a way. When one of the customers experiences a risk in the form of certain financial losses that are included in the agreement, the insurance company will provide some of the funds. In other words, insurance is very useful because it exists to protect everyone from financial losses caused by risks in life.

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