The insurance industry is awaiting legislation that would provide policyholders protection against the failure of insurance companies. A Policy Guarantee Bill is currently being drafted.
Public confidence in the insurance industry has been eroded, one reason being the case of life insurer Asuransi Jiwasraya which has failed to repay policyholders investment related policy benefits. The insurer is facing a liquidity problem and has postponed the payment of matured policies that were marketed through various banks. Asuransi Jiwasraya has tried to resolve overdue policy benefit payments by offering advance payments of interest to policyholders who roll over their policies on maturity, reported Bisnis. This offer has been made since 2016 but a number of customers were disappointed because after rolling over that year, they still have not managed to withdraw the matured policy funds.
The proposed Policy Guarantee Act will become the basis for the establishment of a Policy Guarantee Agency to protect and guarantee the funds of policyholders managed by insurance companies, reported Kontan.
Ms Rista Qatrini Manurung, director of Law, Compliance and Risk of AIA Financial, said that the policyholder protection law is an urgent matter, to dispel policyholders' doubts about investment money with insurers.
"The concept of this rule is good, to provide protection to policyholders. It includes prevention and supervision in the event of incidents that affect the business continuity of insurance companies," Ms Rista said.
The Indonesian General Insurance Association (AAUI) has said that when the Agency is formed, it hopes that the terms and conditions and the guarantee premiums to be paid by insurers will not be a burden on insurance companies. This expectation has been conveyed to the Financial Services Authority (OJK), as input from the industry on the policy guarantee fund.
However, details have yet to be decided. There is a question about whether the proposed Policy Guarantee Agency will be under the auspices of the OJK or join the Deposit Insurance Corporation (LPS) which currently operates in the banking industry
To date, the Policy Guarantee Bill has not been included in the 2019 national priority legislation programme. The draft Bill is still being reviewed by the Ministry of Finance's Fiscal Policy Agency (BKF) and discussions are held between the Ministry, the OJK and insurance associations.
The proposed Policy Guarantee Act is mandated by the 2014 Insurance Law which states that insurance companies and shariah insurers must be participants of the policy guarantee programme. The enactment of the policyholder protection legislation is overdue as the Insurance Act stipulates that the implementation of the policy guarantee law should take place no later than three years after the insurance law is promulgated, that is, by October 2017.