Assessing Road Accident Fund in Indonesia

Abstract

This paper explores the accident insurance system in Indonesia in which the fund is collected through compulsory contribution from vehicle owners to cover victims of traffic accidents. It criticizes the system for being outdated in concept and contains a serious common cost phenomenon. The determination of the rate of compensation and hence the contribution is arguably low which practically has little effect on the safety consciousness among road users. Institutionally, Jasa Raharja, a state owned company, has become a less responsive organization for being the only party managing the fund on a monopoly basis. The study suggests to reform the above system into a third party-insurance scheme as applied in many countries so that a more accountable system can be created. Higher value of compensation leading to high premium would suggest the drivers to drive more carefully, and more funding can likely be made available.