The new management of life insurance mutual AJB Bumiputera 1912, the oldest insurance company in Indonesia, has stated that claim payments are its top priority.
“But we need time to improve," said the mutual's new managing director Sutikno Sjarif in a statement. He was appointed along with four others to the board of the insurer on 1 November.
The new board of directors replaces the statutory manager who was appointed in October 2016 to manage AJB Bumiputera.
Meanwhile, the Indonesian Life Insurance Association (AAJI) has said that AJB Bumiputera must sell assets to pay customer claims, CNN Indonesia reported.
Executive Director of the Indonesian Life Insurance Association (AAJI) Togar Pasaribu said that as a life insurance company, AJB Bumiputera is obliged to ensure payment of claims to policyholders. Payment of claims should be the priority of AJB Bumiputera's new management. Thus, the mutual must take steps to settle arrears of claim payments, including the sale of assets, he said.
In a response, Mr Sjarif said that he was reviewing a plan that had previously been drawn up by the statutory manager. From January to mid-October 2018 AJB Bumiputera had paid claims totalling IDR3.3trn ($229m).
In an article on the CNN Indonesia website, AJB Bumiputera said that a 2004 decree (Number 504) issued by the Minister of Finance set out that one measure for assessing the health of insurance companies was current assets (deposits, shares, bonds, etc.). However, AJB Bumiputera's assets are mostly in the form of property. The mutual life insurer was established in 1912 before existing insurance laws came into force.
Thus, under Decree 504, the insurer was deemed as not having sufficient current assets. It had difficulties complying with the provisions. For this reason, in October 2016, the Financial Services Authority (OJK) appointed a statutory manager to help Bumiputera meet the existing provisions. Supervision of the insurance industry was transferred from the Ministry of Finance to the OJK in 2011.
Improvements have been introduced at the insurer, including making its organisational structure leaner. For example, the administration and finance functions were consolidated. Premium collection has been made cashless, freeing agents to focus on sales instead of having to spend time to pick up premium payments from customers.