This article was published on Kompas 2/11/21 with the title “Asuransi Bermasalah Marak, Kepercayan Publik Rendah”
Liga Asuransi – Revocation of insurance permits and stern actions from relevant authorities appear to be insufficient, as the public requires assurance and legal certainty.
A series of revocations of insurance company permits by the Financial Services Authority (OJK) indicates the vulnerability of the public to insurance products. Therefore, aspects of assurance, default mechanisms, and the improvement of financial literacy and inclusion become crucial for stakeholders to consider amidst the public’s diminishing trust in the insurance industry.
OJK has revoked permits for several insurance companies as part of the revitalization effort, such as PT Asuransi Recapital, PT Asuransi Parolamas, PT Asuransi Jiwa Adisarana Wanaartha (Wanaartha Life), PT Asuransi Cigna, and PT Asuransi Jiwa Kresna Life. Recently, OJK revoked the permit of PT Asuransi Jiwa Prolife Indonesia (Indosurya Sukses) on Thursday (11/2/2023).
Irvan Rahardjo, an insurance analyst, states that the health of insurance companies is measured using the capital ratio derived from various risks (Risk-Based Capital/RBC). Insurance companies are considered healthy if they have an RBC of at least 120 percent. Currently, ten insurance companies fall into the problematic category and are under OJK’s special supervision for not meeting RBC requirements.
“The public’s awareness is still low due to the loss of trust caused by unresolved insurance payment failure cases, such as Jiwasraya, Bumiputera, Kresnalife, Wanaarta Life, and Prolife. Despite high literacy, the level of inclusion or the public’s willingness is low due to disappointment from payment failure cases, resulting in a lack of willingness to buy, even though the knowledge is there,” he said.
Irvan evaluates that OJK’s actions of reprimands and permit revocation are much better than before. However, these efforts are insufficient if the past payment failure cases are not adequately resolved, leaving trust issues among the public.
“Most importantly now is the return of funds to the public that cannot be paid by insurance companies. The liquidation process will take a long time, so OJK must allow the public to file for bankruptcy and PKPU (postponement of debt payment obligations). Filing for bankruptcy and PKPU at least provides certainty to the public within 270 days,” he said.
In Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector or UU P2SK, OJK has full authority regarding bankruptcy and PKPU applications from the public. However, bankruptcy and PKPU applications have been consistently rejected by OJK, citing potential systemic impacts.
On the other hand, the roadmap for the insurance industry launched by OJK and stakeholders has not included some crucial aspects. One of them is the establishment of the insurance guarantee institution as mandated by UU P2SK. Additionally, mechanisms for insurance company defaults and efforts to promote financial literacy and inclusion have not been addressed in the roadmap.
Executive Director of Insurance, Guarantee, and Pension Fund Supervision of the Financial Services Authority (OJK), Ogi Prastomiyono, presented the developments in insurance, guarantee, and pension funds during the OJK Commissioner Meeting in October 2023, held online on Monday (30/10/2023).
CEO of PT Asuransi Jiwa Indosurya Sukses, Lucky Siahaan, confirmed the revocation of the business permit by OJK when contacted from Jakarta on Monday (6/11/2023). He stated that the financial ratios of the company are not in good condition, leading to the company being under special supervision and obliged to submit a financial recovery plan for improvement.
OJK revokes business permits as part of consistent and firm implementation of regulations to maintain health, trust, and consumer protection in the insurance industry. OJK has also issued a written order to the controlling shareholder of Prolife, Henry Surya, to compensate for the company’s losses.
On an industry level, insurance premium revenue for January- September 2023 reached IDR 228.51 trillion, experiencing a contraction of 1.57 percent compared to the same period the previous year. The capitalization of the life and general insurance industry is maintained, with RBC at 451.23 percent and 308.97 percent, respectively, far above the minimum requirement of 120 percent.
Ogi Prastomiyono, Executive Director of Insurance, Guarantee, and Pension Fund Supervision of OJK, mentioned progress in resolving problematic insurance company cases, including Jiwasraya. The policyholder rescue scheme of Jiwasraya has received approval from shareholders, namely the Ministry of State-Owned Enterprises (BUMN). Policyholders are given the option to participate in the restructuring program or remain with Jiwasraya under deficit financial conditions.
Policyholders agreeing to the restructuring until August 31, 2023, reached 99 percent of total policyholders. Jiwasraya is re-offering restructuring to policyholders who have not made a choice, including those who rejected the initial proposal. In the policy transfer, the restructuring is transferred to IFG Life (PT Bahana Pembinaan Usaha Indonesia/BPUI), including plans for additional capital and BPUI fundraising to expedite the policy transfer. As of September 2023, liabilities of IDR 31.14 trillion, or 90.99 percent of the approved transfer, have been transferred.
Despite a 7.93 percent annual contraction, cumulative growth in life insurance premiums improved to IDR 132.0 trillion by September 2023. This is driven by the normalization of premium income performance in the Investment-Linked Insurance Product (PAYDI) business line.
In response to the surge in problematic insurance cases in Indonesia, the establishment of the Insurance Guarantee Institution (LPP) is crucial to restore public trust in the insurance industry. Although the Financial Services Authority (OJK) has revoked permits for several problematic insurance companies, permit revocation alone is insufficient to build public trust. The formation of LPP, as mandated by Insurance Law No. 40 of 2014, becomes a critical solution to provide assurance and legal certainty to the public.
Problematic cases, such as Jiwasraya, Bumiputera, Kresnalife, Wanaarta Life, and Prolife, have resulted in low public trust. Low levels of financial literacy and inclusion, coupled with disappointment due to insurance payment failures, hinder public willingness to purchase insurance products. The establishment of LPP is expected to enhance transparency, and industry health, and provide optimal protection for policyholders.
Although OJK has taken reprimand and permit revocation measures, the resolution of problematic cases must be comprehensive to restore public trust. The recovery of unpaid policyholder funds needs to be a priority, and OJK should provide an opportunity for the public to file for bankruptcy and postpone debt payment obligations. Overall, the establishment of LPP is a strategic step to ensure the sustainability and security of the Indonesian insurance industry, providing positive confidence to all stakeholders.
This article is part of the book “BANGKITNYA ASURANSI KAMI” with keynote speaker Professor Muhammad Eddi Purnawan, a Member of the OJK Supervisory Board. February 2024. ISBN, IPB Press Publishers.
The price of this book is IDR 155,000 and can be ordered through ligasuransi.com.
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Irvan Rahardjo
Lebih dari 40 tahun berkecimpung di dunia asuransi dimulai dari asuransi joint venture hingga pernah menjadi Direksi Asuransi BUMN ; Komisaris Independen AJB Bumiputera 1912 dan Asuransi SOMPO Indonesia. Saat ini menjabat sebagai Komisaris Utama di L&G Risk Insurance Broker.
