Liga Asuransi – In the third week of December 2023, we talk again about the world of insurance because insurance is not only limited to vehicles and life, especially for business protection coverage, insurance still has a very wide reach. In the third week of December 2023, we are again collecting 7 selected news related to insurance that are good for you to know.
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OJK Reveals Plans to Establish KUPA in the Insurance Industry and Fulfillment of Minimum Equity
The Financial Services Authority (OJK) provides the latest update regarding the minimum equity requirements that must be met by the insurance industry, as well as plans to form an insurance business group (KUPA) which is similar to the banking industry. Ogi Prastomiyono, Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervision, revealed that the OJK has mapped insurance companies based on the equity groups (own capital) they own. However, to date no insurance company has officially stated its intention to become the parent of KUPA.
“Until now, no insurance company has declared that it will become the parent of KUPA,” said Ogi in his written statement.
OJK has also prepared a Draft Financial Services Authority Regulation (RPOJK) regarding business licensing and institutions for insurance companies, sharia insurance companies, reinsurance companies and sharia reinsurance companies. The draft is currently in the harmonization stage by the Ministry of Law and Human Rights, with a target of being established and promulgated by the end of 2023.
The division of insurance companies based on equity is scheduled to be carried out in stages. In the first stage, insurance companies must meet certain equity by 31 December 2026. Meanwhile in the second stage, the deadline is 31 December 2028. OJK also noted that the majority of insurance companies as of 30 November 2023 have fulfilled the equity requirements of the first stage.
With the equity mapping plan and the formation of KUPA, the insurance industry is expected to be able to optimize its financial structure to provide better services to the community. Fulfilling these equity requirements is also considered a step towards the stability and health of the insurance industry in Indonesia.
OJK Designs New Regulations to Address Increase in Credit Insurance Claims in the Midst of the Pandemic
The Financial Services Authority (OJK) identified the pressure experienced by the general insurance and reinsurance industry due to increasing claims in the credit insurance business line, especially since the Covid-19 pandemic. Credit insurance claims soared rapidly, reaching growth of 21.2% year on year (yoy) in the third quarter of 2023, reaching IDR 9.82 trillion from IDR 27.41 trillion to IDR 30.77 trillion. This product is the third largest after property and motor vehicle insurance. OJK, aware of this condition, has completed the preparation of the Draft Financial Services Authority Regulation (RPOJK) regarding credit insurance. The RPOJK is targeted to be established and promulgated at the end of 2023 after it has been harmonized by the Ministry of Law and Human Rights.
The general insurance and reinsurance industry is facing serious challenges due to increasing claims on credit insurance business lines, especially since the Covid-19 pandemic. In the third quarter of 2023, general insurance claims jumped 12.2% year on year (yoy), reaching IDR 30.77 trillion from IDR 27.41 trillion. One of the factors supporting this growth is credit insurance claims which increased 21.2% yoy, reaching IDR 9.82 trillion. The Financial Services Authority (OJK) recognizes that credit insurance is the third largest product after property and motor vehicle insurance.
Responding to this situation, OJK is trying to improve the credit insurance business line by preparing a new Draft Financial Services Authority Regulation (RPOJK). The Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervision, Ogi Prastomiyono, said that the RPOJK related to credit insurance has been completed and is currently in the harmonization stage by the Ministry of Law and Human Rights. OJK is targeting this RPOJK to be established and promulgated by the end of 2023.
Ogi Prastomiyono also discussed several substances related to RPOJK credit insurance. One of them is the obligation to share risks (risk sharing) between creditors and insurance companies. This risk sharing is at least 25% for creditors and 75% for insurance companies. This step is expected to increase the sustainability of the credit insurance industry and reduce the risks faced by insurance companies.
Growing 15% Year-on-Year, Tugu Insurance Records Gross Premiums of IDR 5.5 Trillion in September 2023
PT Asuransi Tugu Pratama Indonesia Tbk. (TUGU), or known as Tugu Insurance, achieved a brilliant achievement by recording gross premiums of IDR 5.5 trillion in the consolidated financial report in September 2023. This figure shows an increase of 15% compared to the same period in the previous year, namely IDR 4.7 trillion. Tugu Insurance’s Director of Finance & Corporate Services, Emil Hakim, stated that the largest contribution to gross premiums came from the fire, engineering and shipbuilding business segments.
Along with the increase in gross premiums, net premium income also experienced significant growth, reaching IDR 1.3 trillion in September 2023. This growth reached 30% compared to the same period in the previous year, namely IDR 1 trillion. This increase was supported by positive underwriting results, growth in investment income and other operating income.
The increase in profits achieved by both subsidiaries and parent companies also contributed significantly to the increase in consolidated profits for the year, which reached 334% to IDR 1.14 trillion in September 2023. The company’s total assets also increased by 15%, from IDR 20.8 trillion. trillion to IDR 23.9 trillion in that period. This increase was mainly due to growth in total investment and reinsurance assets.
With extraordinary growth, Tugu Insurance’s total equity also increased by 12%, from IDR 9.1 trillion to IDR 10.2 trillion. This increase was mainly due to an increase in retained earnings for the year, the use of which has not yet been determined. In terms of finances, the health of Tugu Insurance can be seen from the Risk Based Capital (RCB) indicator in September 2023, which remains maintained at the level of 570%. This figure far exceeds the requirements set by the Financial Services Authority (OJK) of 120%. Even more encouraging, this figure has increased significantly compared to September 2022 which only reached 407%.
Consumer Complaints in the World of Indonesian Life Insurance, Claims and Policies That Have Not Been Received Are in the Spotlight
The Indonesian Life Insurance Association (AAJI) is facing a series of consumer complaints regarding insurance problems that have emerged from the public. Budi Tampubolon, Chairman of the AAJI Management Board, revealed that some of the most common complaints include pending claims, as well as insurance policies that have not been received by the holder. “Unpaid claims and policies that have not been received, along with several customer requests that are considered slow in handling, are the main focus of complaints,” he said in an interview with Bisnis in Menteng, Jakarta, which was reported on Sunday (10/12/2023) .
Budi said that this trend of consumer complaints has been going on since last year and is still continuing. “But the two most significant types of consumer complaints are usually related to claims that have not been processed and policies that have not been received,” he added. Previously, the Financial Services Authority (OJK) also noted that difficulties in insurance claims remained a major issue in the insurance sector.
OJK Consumer Education and Protection, Friderica Widyasari Dewi, stated that more than 50% of consumer complaints are related to insurance, especially regarding claims difficulties. Apart from that, several other complaints involve products that do not match the explanation when offered to potential consumers, problems related to premiums, policies that consumers do not understand, and issues when canceling or closing policies. “The claims process is the main focus of complaints submitted by consumers,” said Kiki at the November 2023 OJK Monthly Board of Commissioners (RDK) press conference.
Various problems with insurance claims are mainly caused by pre-existing conditions, where consumers do not disclose material facts related to their health or disease history. These conditions are often the cause of claim rejection. Another issue that contributes to the claims problem is mis-selling, where consumers or agents are involved in dishonest acts, lack of product understanding, and fraud by agents to achieve sales targets.
It is important for consumers and insurance companies to increase transparency, education and deeper understanding of the products offered. Through joint efforts, it is hoped that a fairer and more sustainable insurance environment can be created for all parties involved.
OJK sues insurance companies for failure to pay, assets going abroad are investigated
The Financial Services Authority (OJK) has taken firm steps to trace the assets of insurance companies that have failed to pay and ultimately had their business licenses revoked. In its efforts to protect consumers and society, OJK, under the leadership of the Chief Executive for Supervising the Conduct of Financial Services Business Actors, Education and Consumer Protection, Friderica Widyasari Dewi, is even preparing to trace insurance company assets overseas.
Friderica, who is familiarly called Kiki, stated that this was part of OJK’s efforts to protect consumer interests, as well as a form of protection for the community. “According to OJK Law Number 21/2011, OJK has the right to carry out civil lawsuits to represent consumers’ interests. We are currently carrying out this step, although the process takes quite a long time,” said Kiki after the launch of the Roadmap for Monitoring the Behavior of Financial Services, Education and Business Actors. Consumer Protection 2023–2027 in Jakarta on Tuesday (12/12/2023).
Apart from that, Kiki revealed that the OJK collaborated with the Attorney General’s Office (Kejagung) to trace the assets of insurance companies, especially those located abroad. “And, God willing, when all the infrastructure is ready, we will carry out the civil lawsuit,” he continued. This step was taken to provide a deterrent effect to insurance companies and emphasize that the company remains responsible for fulfilling its duties and obligations, not only because its business license has been revoked.
“We will pursue fulfilling the company’s obligations to its policyholders,” said Kiki. It is known that if an insurance company has its business license revoked, the company must form a liquidation team (TL). OJK continues to monitor the rights of policy holders, although in general a company’s liabilities after its business license is revoked are greater than its assets.
Based on Bisnis data, OJK has revoked the business licenses of four insurance companies throughout 2023, including PT Asuransi Jiwa Adisarana Wanaartha (Wanaartha Life/PT WAL), PT Asuransi Jiwa Kresna (Kresna Life), PT Asuransi Jiwa ProLife Indonesia (formerly PT Asuransi Jiwa Indosurya Sukses/Indosurya Life), and most recently, PT Asuransi Purna Artanugraha (Aspan).
OJK revoked Aspan Insurance’s business license because the company was unable to meet the minimum requirements for solvency ratio (risk-based capital/RBC), equity and investment adequacy ratio. OJK also imposed previous Business Activity Restriction (PKU) sanctions because PT Aspan was unable to meet the minimum requirements for solvency, equity and investment adequacy ratios. Even though the OJK gave the company sufficient time to prepare a capital improvement plan, the final decision to revoke the business license was taken after finding indications of irregularities in Aspan’s insurance management. OJK continues to ensure that the interests of policyholders and the public are protected through strict supervisory measures. With the revocation of a business license, the insurance company concerned is required to dissolve the legal entity and form a liquidation team within 30 days.
PT Asuransi Allianz Life Indonesia Describes the Challenges and Opportunities of the Insurance Industry in the Midst of Economic Uncertainty in 2024
PT Asuransi Allianz Life Indonesia (Allianz Life Indonesia) describes the challenges and opportunities facing the insurance industry in 2024. Even though the world economy is still influenced by global inflation and Indonesia is entering a political year, Chief Investment Officer Allianz Life Indonesia, Ni Made Daryanti, is optimistic about the impact will not be significant. In the discussion session “Economic and Investment Outlook 2024 Discussion” held by Allianz Indonesia on Thursday (14/12/2023), Ni Made stated that the public’s need for insurance protection solutions will remain high.
However, Ni Made highlighted the low level of insurance penetration and the gap between the level of insurance literacy and inclusion in Indonesia. “The conditions currently facing the insurance industry require collaboration from various parties, especially to overcome the low levels of insurance literacy and penetration,” he said.
Based on the Roadmap for Development and Strengthening Indonesian Insurance 2023-2027 issued by the Financial Services Authority (OJK), the level of insurance penetration in Indonesia in 2022 will still be low, namely 2.27%. This figure is much lower compared to several countries in Southeast Asia. The OJK National Survey of Financial Literacy and Inclusion (SNLIK) in 2022 also shows the insurance sector literacy level at 31.7%, with an inclusion rate of around 16.6%.
Ni Made said that Allianz is committed to increasing financial literacy and insurance penetration through various initiatives. As of November 2023, Allianz has held 613 financial literacy events which have been attended by more than 635 thousand participants. “We continue to provide access for the public to get insurance protection according to their needs, in accordance with Allianz’s commitment to support government programs to increase insurance literacy and penetration,” said Ni Made.
In addition, Ni Made noted the economic slowdown which might affect investment performance, especially in unit-linked life insurance sub-funds. Despite a shift in public interest towards traditional insurance, Ni Made is optimistic that unit-linked life insurance products are still needed by some people because they offer customizable protection with various additional benefits and flexibility.
On the opportunity side, Ni Made sees the diversity of layers of society in Indonesia as a challenge and opportunity to increase insurance penetration through innovation and various solutions. He also highlighted the growing number of young people as an opportunity for the insurance industry. The younger generation tends to be dynamic, likes convenience and speed, and is very skilled in using digital technology. Therefore, insurance players need to provide inclusive solutions and easily accessible services.
Finally, Ni Made emphasized that the development of the sharia economy and halal lifestyle are also the background for creating market demand for sharia insurance. Sharia insurance offers universal values and a spirit of sharing goodness among others, in accordance with the preferences of the Indonesian people.
New Tax Initiatives and Economic Growth Potential: Latest Business News Highlights
The government provides positive encouragement for business actors by providing incentives in the form of land and building tax (PBB) discounts in five industrial sectors. Even in the midst of challenging national economic prospects that tend to be difficult, this step is recognized as an effort to maintain the resilience of the business world and ease financial burdens. Minister of Finance Regulation (PMK) No. 129/2023, which was promulgated on 30 November 2023, details these incentives, which cover the plantation, forestry, mineral or coal mining, geothermal, and sectors outside of capture fisheries and fish cultivation that have production results.
- The Two Edges of Fiscal Incentives:
PMK No. 129/2023 offers PBB exemption of up to 75%, even reaching 100% with several conditions. However, limits are imposed on companies that experience commercial losses and liquidity difficulties for two consecutive years. While recognized as a proactive measure to support businesses, there are concerns that overly generous tax incentives could put additional pressure on already ambitious state revenues.
- Millennial Domination in the Property Market 2024:
Property market trends are predicted to increase in 2024, especially in the residential segment for the millennial generation. It is estimated that the millennial residential market has great potential, especially in Jabodetabek, where 15 million millennials have an average income of IDR 8.5 million per month. Realizing this potential, millennials can be a driver of growth in the property sector, which can be seen from their increased interest in purchasing property.
- Travel Insurance Business Opportunities in Christmas Moments:
The health insurance business has a great opportunity to increase contributions through travel insurance products during the 2024 Christmas and New Year holiday season. With the normalization of mobility and a significant increase in travel estimated at 107.63 million people, travel insurance becomes more relevant. The Indonesian General Insurance Association (AAUI) sees the normalization of mobility as driving real sector business performance and increasing demand for general insurance, especially travel insurance.
- Digital Bank Cheap Funds Report:
Competition among digital banks is getting tighter, especially in capturing the share of low-cost funds (CASA). Despite efforts to increase the share of low-cost funds, data shows that many digital banks have CASA ratios below the industry average. This ratio is the focus because it is considered to be able to increase bank profitability by detailing banking interest expenses and maintaining net interest margins.
- Medco Energi: New Steps in Oman’s Oil and Gas Sector:
PT Medco Energi Internasional Tbk. completed the acquisition of 20% ownership of two Exploration and Production Sharing Agreements (EPSA) OQ Exploration & Production LLC (OQEP) in Oman. Block 60 and Block 48, which are located on land near the Saudi Arabian border, are now part of Medco Energi’s portfolio. In this context, Medco Energi’s steps to explore the potential in Oman’s oil and gas sector are seen as a smart strategy to face international market dynamics.
This article is brought to you by L&G Insurance Broker, an insurance broker in Indonesia.
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