The Indonesian regulator, Financial Services Authority (OJK), has highlighted rampant fraud in the disbursement of life insurance claims in various parts of the country.
OJK head of Insurance and Support Services Supervision Department Sumarjono told online news portal Indonesiawatch.id that the fraud cases are suspected to have been carried out in an organised manner.
"We received information that the rampant cases of fraud are allegedly carried out by organised parties. This is suspected based on claim documents, which are almost uniform with almost identical claim details and carried out in certain areas."
The regulator treats this as a serious problem as it not only harms insurance companies but also threatens public trust and upsets the stability of the life insurance industry as a whole.
"OJK views seriously the increase in various forms of fraud in the life insurance industry, whether carried out by employees, agents, consumers, and external parties," said Mr Sumarjono.
In recent years, the OJK has found various modes of crime involving life insurance claims. They range from embezzlement of premiums by agents and the falsification of claim and death documents to extreme cases such as premeditated murder.”
No separate data is, however, available on the number of fraudulent life insurance claims detected each year. The OJK continues to monitor the situation.
OJK has said that many policyholders are not fully conversant with the policy provisions, claim procedures, and consumer rights and obligations, which also aggravates the problem. Other contributing factors are weak governance and internal controls in some insurance companies, as well as the use of technology that has not been backed by adequate security systems.
In addition, the rising trend in digital fraud shows that fraudsters are increasingly taking advantage of technological gaps.
OJK has strengthened its regulatory and supervisory framework, including the issuance of the regulation, "Implementation of Anti-Fraud Strategies for Financial Services Institutions" in 2024. This regulation requires life insurance companies to have a comprehensive anti-fraud strategy, strictly verify claims, and report indications of fraud to the OJK.