Insurance Knowledge

What is Insurance?

Insurance is a form of risk control by transferring risk from the first party to another party, in this case an insurance company. This transfer is based on universally recognized legal standards and principles respected by the first party and other parties involved.

Article 246 of the Indonesian Code of Commercial Law (KUHD) states that:

“Insurance or coverage is an agreement in which an insurer commits itself to an insured party, by receiving a premium, to provide compensation to the insured party for damage or loss of expected profits that it might suffer due to an unexpected event.”

What are the basic principles of insurance?

There are six basic principles that must be fulfilled in the world of insurance: insurable interest, utmost good faith, proximate cause, indemnity, subrogation, and contribution.

1. Insurable interest

The right to insure, which arises from a legally recognized financial relationship between you and the object that is insured.

2. Utmost good faith

The act of fully and accurately disclosing all material facts regarding an object that is ensured, whether requested or not. For example: Adira Insurance must honestly and clearly explain the extent of all terms and conditions of the insurance, and you must also provide clear and truthful information about the object or interest that is being insured.

3. Proximate cause

An active cause that effectively sets in course a chain of events leading to a consequence without an intervention that actively starts from a new and independent source.

4.       Indemnity

A mechanism whereby Adira Insurance provides financial compensation in its effort to place you in the same financial position as before the loss occurred (KUHD articles 252, 253 and confirmed in article 278).

5. Subrogation
   Transfer of the right to sue from you to Adira Insurance once the claim has been paid.

6.       Contribution

Adira Insurance’s right to invite another insurance company to provide coverage jointly, but not necessarily with the same obligation to you in providing indemnity.

Why do we need insurance?

The main benefit of insurance is that it places the insured party (customer) in the same financial position as before the loss occurred. Beyond that, insurance can also reduce the uncertainties of risk, reduce financial burdens arising from sudden, unexpected losses, and provide peace of mind in work, as well as many other benefits.

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