Insurance Premium Determination Model and Innovation for Economic Recovery Due to Natural Disasters in Indonesia

Abstract

Climate change that occurs causes the risk of natural disasters to continue to increase throughout the world. Economic losses are unavoidable, leading to the need for continuous innovation in post-disaster economic recovery efforts. Insurance is one of the offers in providing funding for the economic recovery that occurs. This study aimed to develop innovations and models for determining natural disaster insurance premiums with a subsidy and tax system. In addition, the developed model considers the disaster risk index in the form of the level of risk distribution, the frequency of events, and economic losses. In this study, the data used were the frequency of events and economic losses obtained from the Indonesian National Disaster Management Agency. The data used were 20 database periods from 2000 to 2019. This study used the collective risk method from the index of natural disaster risk parameters. From the results of the analysis, it was found that the level of distribution of disaster risk affected the determination of insurance premiums. The amount of insurance premiums is increasing along with the increase in the magnitude of the spread of disaster risk. In addition, if taxes and subsidies are reduced, then for high-risk areas, there will be a decrease in the burden of insurance premiums, and for low-risk areas, there will be an increase in the premium burden that must be paid. On the basis of the results of the analysis on the insurance model, it was found that the insurance premiums in each province varied. The results of this study are expected to be a reference for the government and private companies in implementing disaster insurance in Indonesia. In addition, the results of this study can be a means of developing innovations for disaster risk management that occurs.