The Importance of Revenue and Claim Expense Recognition in the Insurance Industry

Oct 13, 2025 by recoveryshake.com 146 views

The Importance of Revenue and Claim Expense Recognition in the Insurance Industry

The insurance industry, especially general insurance, experiences rapid growth along with the economic improvement of the community and the development of the business world. Insurance is one of the keys to minimizing the risk of losses that may occur. PT. Insurance Adira Dinamika Regional Operation IV Medan is one of the players in the general insurance industry that offers various products, one of which is motor vehicle insurance known as Autocillin. The company's main income comes from insurance premiums, while the main expenses come from claims submitted by customers.

The insurance transaction process tends to be complex because revenue can be calculated clearly, while the claim expense is uncertain both in terms of time and amount. Therefore, the recognition of income and claim expenses in this company is based on the accrual principle. This principle requires companies to recognize revenue and expenses when they are earned or incurred, regardless of when the cash is received or paid.

Revenue Recognition

Revenue is recognized when the transaction occurs, although there has been no cash receipts. In the context of PT. Adira Dinamika Insurance, Revenue is recognized when the insurance policy starts to apply (inforce). This means that even though the premium has not been paid in full, income has been recorded and recognized as part of the company's financial statements. Thus, this revenue recognition reflects the company's commitment to provide insurance protection to its customers.

Revenue recognition is an important aspect of financial reporting, as it provides users of financial statements with a clear picture of a company's financial performance. In the case of PT. Adira Dinamika Insurance, revenue recognition is critical in ensuring that the company's financial statements accurately reflect its income and expenses.

Recognition of Claim Loads

Conversely, the recognition of claims occurs when the company has an obligation to bear the claims submitted by the customer. This means that the burden of new claims is recognized in the financial statements when there is a valid claim, which creates an obligation for the company to pay. This process reflects the principle of caution in financial statements, where companies must be prepared to overcome the obligations that may arise due to claims.

Claim recognition is an important aspect of financial reporting, as it provides users of financial statements with a clear picture of a company's potential liabilities. In the case of PT. Adira Dinamika Insurance, claim recognition is critical in ensuring that the company's financial statements accurately reflect its potential liabilities and obligations.

Impact on Financial Statements

Recognition of income and claim expenses in accordance with PSAK No. 28 has a significant impact on the financial statements of PT. Adira Dinamika Insurance. With the right recording, the company can provide an accurate picture of its financial performance. In the long run, this will affect investor investment decisions and trust in the company.

In addition, appropriate recognition also ensures that the company has sufficient reserves to cover the obligations of claims that may arise in the future. This is critical in maintaining the company's financial stability and ensuring that it can meet its obligations to its customers and investors.

Conclusion

In an increasingly developed insurance industry, it is important for companies such as PT. Adira Dinamika Insurance to follow the Revenue Recognition and Claim Recognition Standards stipulated in PSAK No. 28. The systematic and accurate approach in this recognition does not only contribute to the transparency and accountability of financial statements, but also increases customer and investor confidence in the company.

Thus, companies can continue to grow and develop in this competitive market. By following the standards and guidelines set forth in PSAK No. 28, companies can ensure that their financial statements accurately reflect their financial performance and provide a clear picture of their potential liabilities and obligations.

Recommendations

Based on the analysis of the revenue recognition and claim recognition standards stipulated in PSAK No. 28, the following recommendations are made:

PT. Adira Dinamika Insurance should continue to follow the revenue recognition and claim recognition standards stipulated in PSAK No. 28.
The company should ensure that its financial statements accurately reflect its financial performance and provide a clear picture of its potential liabilities and obligations.
The company should maintain sufficient reserves to cover the obligations of claims that may arise in the future.
The company should continue to develop and improve its financial reporting practices to ensure that they are in line with the standards and guidelines set forth in PSAK No. 28.

By following these recommendations, PT. Adira Dinamika Insurance can ensure that its financial statements accurately reflect its financial performance and provide a clear picture of its potential liabilities and obligations. This will increase customer and investor confidence in the company and enable it to continue to grow and develop in this competitive market.

Q1: What is the purpose of revenue recognition in the insurance industry?

A1: The purpose of revenue recognition in the insurance industry is to provide a clear picture of a company's financial performance by recognizing revenue when it is earned, regardless of when the cash is received. This ensures that the company's financial statements accurately reflect its income and expenses.

Q2: When is revenue recognized in the context of PT. Adira Dinamika Insurance?

A2: Revenue is recognized when the insurance policy starts to apply (inforce). This means that even though the premium has not been paid in full, income has been recorded and recognized as part of the company's financial statements.

Q3: What is the principle of caution in financial statements?

A3: The principle of caution in financial statements requires companies to recognize potential liabilities and obligations, even if they have not yet been incurred. This ensures that the company's financial statements accurately reflect its potential liabilities and obligations.

Q4: When is a claim recognized in the context of PT. Adira Dinamika Insurance?

A4: A claim is recognized when the company has an obligation to bear the claims submitted by the customer. This means that the burden of new claims is recognized in the financial statements when there is a valid claim, which creates an obligation for the company to pay.

Q5: What is the impact of revenue and claim expense recognition on financial statements?

A5: Recognition of income and claim expenses in accordance with PSAK No. 28 has a significant impact on the financial statements of PT. Adira Dinamika Insurance. With the right recording, the company can provide an accurate picture of its financial performance. In the long run, this will affect investor investment decisions and trust in the company.

Q6: Why is it important for PT. Adira Dinamika Insurance to follow the revenue recognition and claim recognition standards stipulated in PSAK No. 28?

A6: It is important for PT. Adira Dinamika Insurance to follow the revenue recognition and claim recognition standards stipulated in PSAK No. 28 because it ensures that the company's financial statements accurately reflect its financial performance and provide a clear picture of its potential liabilities and obligations. This will increase customer and investor confidence in the company and enable it to continue to grow and develop in this competitive market.

Q7: What are the benefits of following the revenue recognition and claim recognition standards stipulated in PSAK No. 28?

A7: The benefits of following the revenue recognition and claim recognition standards stipulated in PSAK No. 28 include:

Accurate financial reporting
Increased customer and investor confidence
Improved financial stability
Enhanced competitiveness in the market

Q8: What are the consequences of not following the revenue recognition and claim recognition standards stipulated in PSAK No. 28?

A8: The consequences of not following the revenue recognition and claim recognition standards stipulated in PSAK No. 28 include:

Inaccurate financial reporting
Decreased customer and investor confidence
Reduced financial stability
Decreased competitiveness in the market

Q9: How can PT. Adira Dinamika Insurance ensure that it is following the revenue recognition and claim recognition standards stipulated in PSAK No. 28?

A9: PT. Adira Dinamika Insurance can ensure that it is following the revenue recognition and claim recognition standards stipulated in PSAK No. 28 by:

Implementing a robust financial reporting system
Providing regular training to employees on revenue recognition and claim recognition
Conducting regular audits to ensure compliance with PSAK No. 28
Seeking guidance from external experts if needed

Q10: What is the role of PSAK No. 28 in the insurance industry?

A10: PSAK No. 28 plays a critical role in the insurance industry by providing a framework for revenue recognition and claim recognition. It ensures that companies accurately report their financial performance and provide a clear picture of their potential liabilities and obligations. This helps to maintain transparency and accountability in the industry and promotes investor confidence.