Liga Asuransi – The development of the insurance industry is still interesting to follow, and in the fourth week of October 2023 we are again collecting 7 selected news related to insurance that are good for you to know.
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AAUI Responds to OJK’s Initiative Regarding the Formation of KUPA with an Interesting Title
The general insurance industry in Indonesia will experience a major transformation with the Financial Services Authority (OJK) plan to open up the option for insurance companies to form an Insurance Company Business Group (KUPA). This grouping scheme is reminiscent of the consolidation process that occurred in the banking sector, especially Regional Development Banks (BPD), which consolidated to form Bank Business Groups (KUB).
The Indonesian General Insurance Association (AAUI) responded enthusiastically to this plan, expressing their support for all efforts made by the regulator, including the formation of KUPA. They believe that this will be an important step in strengthening and healthy the insurance industry in Indonesia.
AAUI Executive Director, Bern Dwiyanto, is actively involved in all discussions related to the main issues of the insurance industry today. At the 27th AAUI Indonesia Rendezvous event held in Bali recently, OJK revealed that the plan to increase the minimum capital will soon be finalized. The plan is that general insurance companies must have a minimum capital of IDR 500 billion in 2026, and this will be increased to IDR 1 trillion in 2028.
According to Bern, in 2028, there will be a classification into Tier I and Tier II. Insurance companies that reach capital of IDR 1 trillion will enter the Tier II category, while those that have not reached that amount will enter Tier I. Bern explained that insurance products included in the Tier I and Tier II classifications will still be discussed further, and associations will be invited to participate in this discussion.
Meanwhile, Tier II businesses will have greater diversity and can include more complex products, while Tier I will focus on simpler products. The KUPA scheme aims to enable insurance companies to survive in an increasingly changing environment or merge with larger insurance companies.
However, Bern also acknowledged that the number of members who will join KUPA cannot be confirmed until 2028. OJK is considering further regulations, and further discussions between OJK, associations and industry players are still needed.
Although this plan is still in the development stage, AAUI considers it important to immediately improve market conditions in the general insurance industry to make it more conducive. They believe that with improved market conditions, the general insurance industry will be able to generate greater profits, which in turn will increase the equity of each insurance company. With improving market conditions, it is hoped that this industry can grow and develop more healthily in the future.
OJK Encourages Insurance Companies to Have a Guarantee Fund of 20% of Paid-In Capital: What Does This Mean for the Insurance Industry?
The Financial Services Authority (OJK) has issued a significant request to insurance companies in Indonesia. They are required to have a guarantee fund of at least 20% of their paid-up capital as a precautionary measure if an insurance company faces liquidation.
This statement was conveyed by the Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervisor, Ogi Prastomiyono, at the launch of the Roadmap for Development and Strengthening of the Insurance Industry for the 2023–2027 Period in Jakarta. OJK explained that the guarantee funds would be retained by the regulator and could be used in situations of insurance company liquidation. Even though it is important, the amount of this guarantee fund is still relatively small compared to the value of insurance claims which often reach significant amounts.
The new OJK regulation, namely OJK Regulation (POJK) Number 5 of 2023 concerning the Second Amendment to POJK Number 71/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies, explains that guarantee funds are the final asset used to protect the interests of shareholders. policy, insured, or participant if the insurance or reinsurance company goes into liquidation.
Article 36 of the regulation requires that insurance companies establish a minimum guarantee fund of 20% of the specified minimum equity. The amount of this guarantee fund must be adjusted to the company’s business growth. This rule also has special provisions for life insurance companies and general insurance.
This affects life insurance companies which are required to form a guarantee fund of 2% of reserves for PAYDI plus 5% of premium reserves for products other than PAYDI and reserves for premiums that have not become income. Meanwhile, general insurance and reinsurance companies are required to form a guarantee fund of 1% of net premiums plus 0.25% of reinsurance premiums and 2% of PAYDI reserves.
Previously, AJB Bumiputera 1912 announced plans to pay overdue claims to policyholders using excess guarantee funds of around IDR 262 billion. The management of AJB Bumiputera 1912 has obtained approval from the OJK to disburse the guarantee funds, which they submitted via an official letter in September 2023. This decision will allow AJB Bumiputera 1912, which is the oldest mutual insurance company in Indonesia, to return to paying due claims to holders their police.
This guarantee fund will be released after the sale of government securities (SBN) has been successful, because the funds come from the proceeds from the sale of SBN instruments. With this step, AJB Bumiputera 1912 shows its commitment to fulfilling its claims obligations, ensuring policyholder satisfaction, and maintaining the integrity of the insurance industry in Indonesia.
Vision and Mission of Presidential Candidates 2024: AMIN vs. GAMA, Transformation of the Financial, Economic and Insurance Sectors
The 2024 Presidential Election is approaching, and two presidential candidate pairs, Anies Baswedan – Muhaimin Iskandar (AMIN) and Ganjar Pranowo – Mahfud MD (GAMA), have registered with the General Election Commission (KPU) with a vision and mission that focuses on Indonesia’s future in the next five years.
In their vision and mission, the two couples not only discuss political issues, but also highlight the important role of the financial sector, including banking, the sharia financial industry, as well as the non-bank financial sector such as insurance and capital markets.
The AMIN couple, in their vision and mission document, emphasized the importance of building a strong financial sector. They are committed to improving the ecosystem, including legal certainty in the capital markets, mutual funds, insurance, reinsurance, financing, guarantees and pension funds industries. The pair also plans to encourage banks, especially state-owned banks (BUMN), to increase operational efficiency with the aim of competitive credit interest rates. Apart from that, they also highlighted the need for improvements in the online lending sector and law enforcement against illegal practices in the financial world.
AMIN promised to keep inflation low and stable, as well as competitive banking interest rates, which are expected to drive growth in the real sector and capital markets. They also want to increase the depth and inclusiveness of the Islamic financial sector and make Islamic banks the custodians of cash waqf funds to solve socio-economic problems.
On the other hand, the GAMA pair places greater emphasis on independent economic development based on knowledge and added value. They focus on creating a business environment that supports business growth, especially for the ultra-micro group and micro, small and medium enterprises (MSMEs) as well as businesses that are able to develop consistently. This effort involves structuring regulations and implementation to ensure legal certainty and give priority to the people as the center in business activities. The GAMA couple is also committed to ensuring a minimum banking credit allocation of 35% for cooperatives, MSMEs and start-up companies, as well as providing better training and market access.
With the various visions and missions they offer, these two pairs of presidential candidates offer different approaches in leading Indonesia in a better direction. Although the financial sector is an important aspect of economic development, improving the overall economy and business inclusiveness is also a top priority in efforts to achieve progress and prosperity for the Indonesian people.
Technological Innovation in Insurance: Transformation Through Insurtech in Indonesia
The insurance industry in Indonesia has seen the positive impact of technological innovation, especially through Insurtech (Insurance Technology). The Financial Services Authority (OJK) believes that technology can be an important driver to increase the level of insurance penetration in the country. Digital innovation provides the potential to reach a wider community, which was previously difficult to access by conventional insurance services.
One of the main players in the Insurtech space is Fuse, which actively supports OJK’s efforts to increase insurance penetration in Indonesia. Andy Yeung, Founder & CEO of Fuse, expressed his belief that technological innovation can help overcome the obstacles that have hampered the growth of insurance penetration in Indonesia.
Andy identified several problems that still need to be overcome in the insurance industry, including complicated systems, difficult claims processes, and premium prices that are too high. Fuse is committed to utilizing various aspects of technology to increase insurance penetration. This involves optimizing their digital systems, processes and distribution channels as well as efforts to build customer trust in the insurance ecosystem.
Apart from that, Andy emphasized the importance of literacy in increasing public awareness about the benefits of insurance. According to him, insurance partners, agents and brokers play an important role in educating customers and providing recommendations that suit their needs.
In an effort to facilitate access to insurance, Fuse has developed technology that allows the insurance application process to be more efficient, even in a few hours via the Application Programming Interface (API), compared to conventional methods which take days.
Fuse is also actively exploring the latest technology, such as Artificial Intelligence (AI), blockchain, and big data analysis, to automate the process of submitting insurance policies and claims. They are committed to making technology a tool to help various stakeholders in the insurance ecosystem.
Even though the Insurtech industry in Indonesia has not yet reached its peak, Andy believes that the Insurtech ecosystem will continue to develop. Since its founding in 2017, Fuse has experienced rapid growth, with gross premium income increasing 160-fold. In 2022, they will issue more than 150 million policies with gross premium income reaching more than IDR 3 trillion.
Fuse has collaborated with more than 40 insurance companies and has more than 100 thousand partners, agents and brokers who use the Fuse Pro application to carry out insurance transactions in various regions in Indonesia.
Fuse’s ambition is to continue expanding their product range to meet diverse customer needs. They are also focused on strengthening cooperation with online and offline players to ensure more people in Indonesia and Southeast Asia get the insurance protection they need.
Based on OJK data, the insurance penetration rate in Indonesia in 2022 will still be low, namely around 2.27 percent. In order to achieve a higher penetration level, OJK has set a target in the 2023-2027 Indonesian Insurance Development and Activation Roadmap, which targets insurance penetration to reach 3.2 percent with a more optimal density level. Technological innovation, as demonstrated by players like Fuse, can hopefully help achieve this goal.
The Indonesian Life Insurance Industry Pays Claims and Benefits of IDR 160 Trillion Every Year
The life insurance industry in Indonesia continues to maintain its health and liquidity by paying insurance claims and benefits worth IDR 160 trillion every year. This statement came from the Chairman of the Indonesian Life Insurance Association (AAJI) Management Board, Budi Tampubolon, who emphasized that this figure is proof of the positive performance of this sector.
Every year, around 60 life insurance companies in Indonesia, which are members of AAJI, pay claims and insurance benefits amounting to IDR 160 trillion. This amount could even range between IDR 150 trillion to IDR 170 trillion. Budi explained that the value of these claims and benefits was paid to between 8 and 10 million policy holders or insured persons.
However, Budi also revealed that although the life insurance industry has achieved significant achievements, namely covering 28 million Indonesians, this only reaches around 10% of the country’s total population. He explained that until 2020, the number of individual policies would only reach 20 million. However, when the pandemic hit, the number of insured increased to 20 million and has now reached 28 million insured.
Budi emphasized the importance of continuing efforts to increase life insurance penetration in Indonesia, especially for people who are not yet protected. Even though the life insurance industry has made progress, there are still 90% of people who have not been reached by life insurance. Budi believes that bringing insurance protection to those who need it could be an important step in Indonesia’s efforts to achieve sustainable economic growth.
According to him, life insurance has a key role in maintaining the welfare of Indonesian families when they are faced with disaster. Budi expressed his belief that this sector can continue to contribute to maintaining the financial stability of the Indonesian people and support the country’s growth vision towards a “Golden Indonesia.” With joint efforts from insurance companies and the government, it is hoped that life insurance penetration in Indonesia can continue to increase to serve more people who need financial protection.
Tap Insure and Shinhan EZ General Insurance Bring Together Steps for Digital Automotive Insurance
Digital insurance company, PT Asuransi For All (Tap Insure), has entered into an interesting strategic partnership with Shinhan EZ General Insurance, a leading financial conglomerate group from South Korea. The main goal of this collaboration is to provide practical and efficient digital automotive insurance solutions, from product purchasing to the claims process.
Cleosent Randing, Director of Operations and Marketing at Tap Insure, explained that this step aims to overcome a number of challenges that are often associated with automotive insurance, which is often confusing and time consuming. In his words, “We see that this car is something whose product is sometimes complicated. So we see that Shinhan EZ is very strong in this business.”
This collaboration, which includes the development of Extended Warranty products for used and new cars, targets young customers, such as millennials and generation Z. This product provides protection against unexpected repair costs, covering various vital components such as the engine, transmission, steering system, brake systems, as well as air conditioning and heating equipment.
One thing that stands out from this collaboration is the fast settlement of claims, which can be done within 2 hours. Even though this process is very fast, Tap Insure still prioritizes security by using fraud detection to mitigate risks related to claims.
Apart from expanding insurance penetration in Indonesia, this collaboration also aims to increase public financial literacy. “This strategic partnership is key in our expansion plans in Indonesia, and it will position us as a leading platform for managing everyday risks and helping customers overcome everyday financial challenges,” said ByoungKwan Kang, CEO of Shinhan EZ General Insurance, who is part of Shinhan Financial Group.
With the synergy between technology and a strong understanding of the industry, the hope is that this digital automotive insurance will bring policyholders closer to the protection they need and help ensure that their claims process is easier and more efficient.
The Association Gives a Positive Response to the 2023-2027 Insurance Development Plan
The Indonesian insurance industry warmly welcomes the Roadmap for Development and Strengthening of the Insurance Industry for the Period 2023-2027 which was recently launched. This roadmap is not only a guide, but also a shared goal for stakeholders in this industry to form better business strategies.
Budi Tampubolon, Chairman of the Indonesian Life Insurance Management Board (AAJI), stated that this roadmap is a historic milestone that will help the Indonesian life insurance industry grow and provide added value to society. He also appreciated the Financial Services Authority (OJK) for involving all insurance associations in the preparation and launch of this road map.
General Chair of the Indonesian General Insurance Association (AAUI), Budi Herawan, highlighted the importance of the clear direction set by this roadmap for insurance companies. He hopes that this roadmap will strengthen the Indonesian insurance industry and help achieve sustainable growth.
Rudy Kamdani, General Chair of the Indonesian Insurance Council (DAI), expressed the commitment of all associations to implement the action plan stated in the road map. The main focus is to create an insurance industry that is healthier, more efficient and has integrity. This includes stronger consumer protection, support for economic growth through market expansion, and increased financial inclusion and stability.
Rudy believes that collaboration between all parties in this industry, including associations, government and related institutions, will encourage innovation, transparency and professionalism. All of this aims to create a more favorable environment for consumers and provide better financial protection for the Indonesian people.
As General Chair of the Indonesian Sharia Insurance Association (AASI), Rudy also hopes that the insurance roadmap will help the sharia insurance industry face challenges and maximize the potential of sharia insurance protection. By committing to implementing this roadmap, he hopes that public trust in sharia insurance products will increase.
All associations in this industry are united in the spirit of mutual help, togetherness and commitment to implementing this insurance roadmap. Together they hope that this will help form a more advanced insurance industry, bless and benefit the Indonesian people. With strong determination, they will try to realize this vision towards a prosperous Indonesia.
This article is brought to you by L&G Insurance Broker.
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