Liga Asuransi – Hello risk takers, in the first week of April 2024 we will once again discuss developments and events in the world of insurance in Indonesia in the last week, because as we all know, the object of insurance is not only vehicles, life, health or property, but also The scope of objects that can be insured is very wide, especially in the business sector. Almost all business processes from A to Z can be protected by insurance. In this edition, as usual, we have again collected 7 selected news related to insurance that are good for you to know.
As always, if you are interested in this article, please share it with your colleagues so they can understand it as well as you.
PT Zurich General Takaful Indonesia’s perspective, the need for insurance protection for sukuk
PT Zurich General Takaful Indonesia responded to a proposal from the Indonesian Sharia Insurance Association (AASI) which encouraged the adoption of regulations to require insurance protection for the underlying in the issuance of sharia debt securities or sukuk. Dian Wibowo, Chief Operating Officer of PT Zurich General Takaful Indonesia, considers this proposal as a positive step to strengthen the sharia insurance industry in Indonesia and advance the sharia economy as a whole. However, he stated that Zurich Syariah would carry out a thorough evaluation of any risks and opportunities that might exist, considering that they do not yet have a guarantee product portfolio.
Wahyudin Rahman, a risk management practitioner and General Chair of the Indonesian Insurance Writers Community (Kupasi), also supports the proposal. He considers it important that sukuk, especially Government Sharia Securities (SBSN), can be guaranteed by sharia insurance, considering that so far the dominance of guarantees is still held by conventional insurance. Wahyudin also highlighted the lack of share of sharia insurance in underwriting sukuk, and saw opportunities to increase sharia insurance penetration if there were regulations requiring this.
Even though there is support for the proposal, Wahyudin is also aware of obstacles, such as government support and commitment as well as preparation of the necessary regulations. He emphasized the importance of preparation from industry players, including preparation of product and capacity permits. Previously, the General Chair of AASI, Rudy Kamdani, had voiced the importance of support from regulators for the development of sharia insurance, with one form of support being the issuance of regulations that require collateral or underlying assets for sukuk to use sharia insurance. Rudy believes that such regulations can strengthen the development of sharia insurance without competing directly with conventional insurance.
Financial Services Authority (OJK) Finds 9 Insurance Companies with Equity Exceeding IDR 500 Billion
The Financial Services Authority (OJK) has just revealed encouraging news: there are 9 sharia business unit (UUS) insurance companies that have obtained extraordinary equity exceeding IDR 500 billion. This indicates that they have met the requirements to be included in the Equity Based Insurance Group (KPPE), a proud achievement. OJK Deputy Commissioner for Supervision of Insurance, Guarantees and Pension Funds, Iwan Pasila, expressed his satisfaction with this achievement in a recent webinar entitled “Sharia Insurance Minimum Capital Increases, So Spin-Off or Waving Hands?” on Tuesday (26/3/2024).
According to Iwan, OJK plans to encourage companies to spin-off UUS, with the hope that this can be done no later than 2026. This step was taken to optimize capital conditions and strengthen the insurance sector as a whole. Iwan also emphasized the importance of consolidating sharia insurance and reinsurance companies to build public trust in this sector.
The latest data from OJK reveals that as of December 2023, there are 16 sharia insurance and reinsurance companies operating fully (full-fledged), and 42 sharia business units, with total industrial assets of sharia companies reaching IDR 44 trillion. Despite this, the sharia insurance industry’s contribution experienced a contraction of around 9% on an annual basis (year-on-year/yoy), reaching IDR 25 trillion, with total claims of IDR 19.6 trillion. This shows that there is still large room for growth in the sharia insurance industry in Indonesia.
Apart from strengthening capital, Iwan also highlighted the importance of developing innovative products and utilizing technology in increasing public access to sharia insurance. He emphasized that these efforts must be supported by the principles of good governance and effective risk management. Apart from that, Iwan also emphasized the importance of synergy between sharia insurance industry players and the sharia insurance ecosystem as a whole, to create sustainable growth through collaboration with halal business players and developing more inclusive products.
Optimism Grows in the Sharia Insurance Industry: 32 Companies Prepare to Spin-Off
The Financial Services Authority (OJK) has announced that as many as 32 sharia business units (UUS) from insurance and reinsurance companies will undergo separation from their parent companies (spin-off), a condition that signals optimism in the sharia insurance industry. This is the result of OJK Regulation Number 11 of 2023 (POJK 11/2023) concerning the Separation of Sharia Units of Insurance and Reinsurance Companies, which requires insurance companies that have UUS to carry out a spin-off no later than 31 December 2026. Deputy Commissioner for Insurance Supervision , Guarantee and Pension Fund OJK, Iwan Pasila, stated that based on the work plan for the separation of sharia business units (RKPUS), 32 of the 42 sharia insurance and reinsurance business units plan to continue as sharia insurance or reinsurance companies. Iwan believes that this step reflects the high optimism of industry players.
However, there are also 10 UUS players who have decided not to continue sharia business in the insurance industry. Despite this, Iwan still sees high trust among industry players, with the majority of the 42 sharia insurance and reinsurance business unit players choosing to continue their business. OJK also noted that since the enactment of POJK 11/2023, there will be no opening of new sharia insurance or reinsurance business units. Furthermore, OJK will continue to encourage and strengthen this industry in accordance with the mandate of the Financial Sector Development and Strengthening Law (UU PPSK), with the hope that these companies can grow effectively, efficiently and provide added value to the economy.
OJK’s Deputy Director of Sharia Life Insurance Supervision, Asep Hikayat, explained that several reasons behind the 10 companies’ decision not to continue sharia business included focusing on conventional business, insufficient equity, and lack of adequate markets. These companies will transfer their portfolios to sharia companies, including company funds, tabarru funds and participant investment funds. The process will involve discussions between the actuary of the transferring insurance company and the actuary of the receiving company to ensure that the relevant risks are adequately covered.
Mega Insurance is optimistic that the health insurance business will improve amidst increasing claims and telemedicine strategies
PT Asuransi General Mega, which is owned by Chairul Tanjung alias CT, is confident that the health insurance business will experience an increase in 2024 after experiencing a claims ratio of 95% in the previous year. According to the President Director of Mega Insurance, Tomy Ferdiansah, the increase in claims is in line with the post-Covid-19 pandemic situation which has caused a surge in hospital visits by the public. Tomy explained that Mega Insurance had tried to be careful in managing health insurance claims, even though it acknowledged that there had been an increase in claims related to symptoms of acute respiratory infections (ARI).
In an effort to overcome the surge in claims, Mega Insurance has collaborated with telemedicine services to reduce costs. Tomy hopes that the health insurance claims situation can improve this year, especially with the strategies implemented by the company, including collaboration with digital health services. The company hopes that customers will switch to telemedicine because of its convenience, where customers can consult a doctor from home and receive prescriptions and medication more easily.
Previously, the Financial Services Authority (OJK) reported that total health insurance claims would reach IDR 25.6 trillion during 2023. Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervisor, Ogi Prastomiyono, stated that the insurance industry needed to make improvements following the high claim ratio. OJK is also integrating claims into one platform owned by the Ministry of Health as part of the digital transformation of health services.
General Insurance Industry Continues to Face Market Hardening Challenges: Strategy and Adaptation Required
The general insurance industry is still facing challenges in the form of difficult market conditions (hardening market). This situation is predicted to continue as long as there is no improvement in setting premium rates by the regulator. Currently, OJK regulates premium rates for vehicle insurance and property insurance. Nicolaus Prawiro, Deputy President Director of Asuransi Cakrawala Proteksi, explained that the hardening market can be seen from the increase in reinsurance and retrocession rates. However, he emphasized that the key factor is the company’s internal management principles, including accepting business carefully, applying prudent underwriting principles, and looking for cost efficiencies and new business opportunities.
Even so, Nico revealed that the company’s premium rates have not changed significantly in recent years due to the impact of regulations. However, the impact of the hardening market is predicted to erode insurance company profits due to tight premium competition and difficulty in getting support from reinsurance.
In facing this condition, Asuransi Cakrawala Proteksi needs to adjust its strategy, starting from price adjustments to searching for potential new market gaps. They will continue to drive business portfolio improvements with a focus on covenant balance, pricing and combined ratios. Nico hopes that the insurance industry can return to better market conditions, but with better and more prudent performance. However, he realizes that the hardening market will probably continue as long as there is no improvement in setting premium rates by the regulator. Overall, Nico emphasized the importance of adjustments in various aspects of policy and risk management for insurance and reinsurance companies.
Kate Middleton Reveals Cancer: Is Insurance Needed to Protect Against a Similar Threat?
Kate Middleton, Prince William’s wife, was in the spotlight after revealing that she had cancer after previously disappearing from the public. Abdominal surgery he underwent last January was not initially linked to cancer, but follow-up tests confirmed the diagnosis, prompting him to start preventive chemotherapy. Kate Middleton’s story is a reminder that cancer can attack anyone, at any time, and treatment requires significant costs. The question arises, can insurance provide protection against cancer?
CEO of PT Asuransi Jiwa Generali Indonesia, Edy Tuhirman, explained that cancer can be covered by insurance, including Generali, with certain terms and conditions. Protection against critical illnesses such as cancer is provided if the patient is diagnosed after having the policy or during the active policy period. However, protection does not apply if a cancer diagnosis existed before having the policy, which is known as pre-existing conditions.
Edy emphasized that these rules have been stated in the policy provisions, and customers are reminded to properly understand the provisions of their policy regarding critical illness insurance. He also acknowledged that the risk of illness, including critical illness diagnoses, is increasing with the development of various types of diseases, including emerging infectious diseases (EIDs), which can increase rapidly and have the potential to have a major impact on the human population.
In response to health developments, Generali Indonesia offers the MCI Pro product which provides protection against critical illnesses with an organ system concept. This product protects the body’s seven organ systems, including the cardiovascular, liver, kidney, respiratory, digestive, sensory, and nervous and neuromuscular systems. Apart from that, this product also covers other critical illnesses such as stroke, heart attack and terminal illnesses.
Challenges to Settle the Bankruptcy of PT Asuransi Bumi Asih Jaya, Call for Revision of the Bankruptcy Law
PT Asuransi Bumi Asih Jaya’s bankruptcy resolution continues to experience problems, especially in terms of the capacity of the curator who has changed several times. Wahyudin Rahman, a risk management practitioner and General Chair of the Indonesian Insurance Writers Community (Kupasi), stated that ambiguity in Law (UU) Number 37 of 2004 concerning Bankruptcy and Postponement of Debt Payment Obligations (PKPU) was one of the causes. Wahyudin considers that revision of these regulations is very necessary.
One example taken by Wahyudin is article 17 of the Bankruptcy Law and PKPU relating to curator fees. He highlighted the need for a more detailed explanation and adjustments to terms that are no longer relevant, especially because now bankruptcy is no longer filed by the Ministry of Finance, but by the OJK. However, Wahyudin realizes that the revision of the Bankruptcy Law and PKPU will take time.
During the revision process, Wahyudin suggested that parallel follow-up should be carried out, such as re-election or replacement of curators and supervisory judges who have relevant experience in handling bankruptcy cases. He also said that the problems arising from the Bumi Asih Jaya case must be resolved immediately, especially because it has become the main concern of the Ministry of Law and Human Rights of the Republic of Indonesia (Kemenkumham) and the OJK.
Previously, Minister of Law and Human Rights Yasonna Laoly had revealed his meeting with Chairman of the OJK Board of Commissioners Mahendra Siregar, where they discussed the Bumi Asih Insurance bankruptcy case which was still unresolved. Yasonna also asked for OJK’s views regarding the revision of the Bankruptcy Law and PKPU, which according to him really needed to be revised.
This article is brought to you by L&G Insurance Broker, insurance broker Indonesia..
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