JAKARTA (TheInsiderStories) – The Financial Services Authority (FSA) plans to limit bancassurance products marketed by banks. The policy was taken followed the state-owned insurance firms, PT Asuransi Jiwasraya and PT ASABRI case.
As reported, the two insurances companies has losses almost Rp24 trillion (US$1.71 billion) after transact the insurance products with unusual scheme. The cases involved famous name like president director of developer firm PT Hanson International Tbk (IDX: MYRX), Benny Tjokrosaputro and president commissioner of miner, PT Trada Alam Mineral Tbk (IDX: TRAM), Heru Hidayat.
According to chairman of FSA, Wimboh Santoso, the regulator not remove the products but requested the provider to changed the scheme to non guaranteed return. The original protection products still allowed to be sold through banking, he adds.
The potential loss at the stated companies arises because of actions that violate the principles of corporate governance through the savings plan insurance program. These products offer high interest rates of up to 13 percent.
Followed, the announcement, the Indonesian Life Insurance Association asked the FSA to explain the specific plans of the new policy. The executive director, Togar Pasaribu said, that the sales channel through banks is one of the biggest premium contributors to the industry.
Instead of limiting sales, authorities should provide additional stimulus so that the insurance industry continues to grow in the country, he asserted. The organization also urged the authorities to socialize the draft restrictions.
The association announced, in the third quarter of 2019, total life insurance premium in Indonesia reached of Rp143.7 trillion (US$10.26 billion). The amount rose 2 percent from same period in 2018 of Rp140.9 trillion.
According to chairman of Indonesia Life Insurance Association, Budi Tampubolon, the growth was supported by new customer, which increased 0.5 percent to Rp89.9 trillion and by renewal premium with total amount of Rp53.7 trillion or climbed 4.7 percent from previous year.
“In term of marketing channel, bancassurance contributed by 41.8 percent and agent by 39.9 percent,” he said by adding the premium impacted to total revenue of the companies, which increased 14.7 percent from Rp149.8 trillion to Rp171.8 trillion.
Unlike premium, the investment return, he said, grew significantly by 1,456 percent to Rp19.9 trillion. Tampubolon asserted the increased was caused by public who more literate to insurance as investment instrument.
While for claim, it has been paid of Rp104.3 trillion or increased 17.4 percent from Rp88.8 trillion in last year. Total asset of the industry also edged up by 6.8 percent to Rp548.7 trillion, he adds.
Despite low growth in 3Q of 2019, the association estimated life insurance premium will grow by 10 to 14 percent in 2020. It will be supported by new and renewal premium which will grow 12.9 percent and 9.7 percent, respectively.
Head of Department Life Insurance Association Yanes Matulatuwa added, the mutual funds and stocks have been preferred instrument by the contribution of 34.59 percent and 31.14 percent in 3Q of 2019.
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