The Financial Services Authority (OJK) currently faces two big challenges in the insurance industry which must be resolved at the same time, according to Mr Ogi Prastomiyono, the regulatory agency's chief executive of Insurance, Guarantee and Pension Fund Supervision.
Resolving current issues in the insurance industry is one main challenge. Many insurance companies are facing problems ranging from liquidity to poor risk management, said Mr Ogi. He was speaking during a webinar organised last week by the Indonesian Economic Scholars Association (ISEI) and the Deposit Insurance Corporation (LPS).
“The OJK is also challenged to develop the insurance sector that has extraordinary opportunities,” he said.
"To overcome these problems, OJK is taking firm and objective action to provide legal certainty, while still paying attention to consumer protection," he said.
Mr Ogi added that the 2023-2027 Roadmap for the Development and Strengthening of Indonesian Insurance, unveiled in October 2023, is an effort to reform the national insurance industry. The insurance industry has not carried out any significant reforms since the 1997-1998 Asia financial crisis.
3 phases
He said that the implementation of the roadmap is divided into several stages. The first phase, now being implemented (2023-2024), is to strengthen the industrial foundation and correct various existing deficiencies so as not to hinder the implementation of the roadmap.
The second phase in 2025-2026 consists of efforts to consolidate the industry, equalise insurance services, as well as synergise commercial insurance, social insurance and mandatory insurance.
He said that in the second phase, there is also a deadline for industry players to start implementing several new regulations, such as Financial Accounting Standard (PSAK) 117 relating to Insurance Contracts by 1 January 2025 and the spin-off of takaful windows by the end of 2026.
The third phase, relating to adjustment and growth, includes expanding penetration and density, as well as synergies in the insurance ecosystem.
Consumer confidence
Aside from the roadmap, Mr Ogi said that strengthening the insurance industry needs to involve increasing consumer confidence by strengthening insurance literacy.
He said that it is important for consumers to understand the benefits and risks of the products they buy. So now there is a new campaign in the insurance industry with the slogan "Understand and Own Insurance".
One of the reform efforts being undertaken is to simplify regulations related to licensing new insurance products. Mr Ogi said that now only certain and complex products such as unit-linked plans and credit insurance products, require the prior approval of the OJK, while others only need to be reported to this institution.
"Even though permission from the OJK is not required, the reported insurance product must have the internal approval of the company, including the approval of the product committee which every insurance company must form," he added.