The National Sharia Council, a quasi-government body that oversees the implementation of sharia economics, has given the green light for a set of standards proposed by the Indonesian Sharia Insurance Association (ASII) that will guide best practices in the life insurance sector.
ASII deputy chairman Srikandi Utami said the standards, which aim to harmonize practices that cover a variety of life insurance products, would be available for implementation as early as next month.
“For example, the standards will guide how a company should treat the tabarru funds [premiums] – whether they can be returned or not, whether a dispute settlement should be taken to the religious courts, and how underwriting surpluses are distributed,” Srikandi told reporters last week.
One thing the standards would not regulate was the price of sharia insurance premiums, according to ASII chairman Muhammad Saifie.
“The important thing is to make sure that sharia insurance companies behave appropriately by administering ideal prices, and not to slap them with a fixed price. That is why it is important to have actuaries,” he said, adding that all insurance companies should have their own actuaries by 2015.
The implementation of the standards would require all sharia insurance agents to pass a standardized test formulated by ASII in cooperation with the Indonesian Life Insurance Association (AJII) to increase the competency of sharia insurance agents in Indonesia.
According to Saifie, there are currently many conventional insurance agents who sell sharia insurance products, despite the vast differences between the two products.
He added that a lack of quality human resources was the main obstacle to sharia insurance’s growth in Indonesia, as well as a lack of public awareness and a lack of standardization among sharia insurance companies.
Indonesia is one of the world’s fastest growing sharia insurance markets, with gross premiums of Rp 4.97 trillion (US$536.76 million)last year, up tenfold from Rp 499 billion in 2006. Gross premiums are expected to grow by 30 percent this year.
The Capital Market and Financial Services Supervisory Agency (Bapepam-LK) is expecting sharia insurance market penetration to increase to 5 percent this year, up from 3.8 percent last year.
“AASI itself is aiming for a 5 percent market share by 2015, but since there are many companies wanting to enter the sharia insurance market this year, hopefully that target can be achieved much sooner,” said Bapepam-LK insurance bureau head Isa Rachmatarwata.
The Finance Ministry also issued PMK No. 11/2011 requiring sharia insurance companies to have risk-based capital of 15 percent this year, up from last year’s 5 percent minimum requirement. The minimum requirement will be upped again to 30 percent by the end of 2014. (han)
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