Friday, October 6, 2023

Indonesia Unit-linked Policy Or Scam-linked Policy

The insurance industry is again in turmoil because customers are protesting asking for refunds from insurance company PT Prudential Life Assurance (Prudential Indonesia) on Tuesday (22/8/2023). 

Prudential Insurance Victims - The demonstration was carried out by four people who are members of the Prudential Indonesia Unit Link Insurance Victim Community, AIA, and AXA Mandiri. in front of the Kota Kasablanka Mall a number of mall security officers blocked them from entering and asked them to leave the location.

However, they refused to leave the place. The protesters also shouted and refused to leave. The confrontation between security and the protesters was intense, with security even dragging them out of the location.

Rita, one of those who claimed to be a victim wanted to go to the Prudential office to ask about her and her late husband's insurance policy claim which had not been disbursed. Combined, the value of Rita and her husband's insurance deposits is IDR 50 million. Therefore, Rita felt she had the right to enter the Prudential office to ask about her rights. He had tried to enter Kota Kasablanka twice but was always thrown out.

Prudential Indonesia's Chief Customer & Marketing Officer Karin Zulkarnaen clarified that his party had taken persuasive steps to the group of protesters so that they could carry out dialogue using official channels.

The latest news is that Rita reported this case to the Tebet Police. He has also made a police report regarding the treatment he received, namely a criminal act in accordance with Law Number 1 of 1946 concerning the Criminal Code, Article 351 of the Criminal Code. The legal process is still ongoing to explore how to resolve this case.

Apart from the Prudential insurance problem, it is still unknown where the error came from. However, the reality is that a number of risky insurance cases leading to failure to pay have become commonplace.

It's very unfortunate, what should be meant as protection is actually a disaster. Insurance as a product to transfer risk has been proven to exist, many people have been greatly helped by insurance.

However, the mistake that often occurs is that people don't understand the policy they are taking or buy a product that doesn't match what they need, resulting in the insurance not being able to be claimed. Or worse, it is the insurance company's fault for not having integrity, because there have been several cases that prove the company embezzled customers' policies.

PT Kresna Life Insurance (Kresna Life)The most recent case of failure to pay was PT Asuransi Jiwa Kresna or Kresna Life. Kresna's case adds to the series of cases of life insurance failure to pay in Indonesia after previously being experienced by customers of PT Asuransi Jiwasraya (Persero).

Kresna Life experienced default on two of its insurance products, namely Kresna Link Investa (K-LITA) and Protecto Investa Kresna (PIK).

"On February 20, Kresna gave a letter to extend the policy unilaterally for 6 months until August. But after that, on May 14, the benefits stopped, so from May 20, the benefits were actually still there [until August]," said one Kresna Life customer.

Due to the Kresna Life inspection, the OJK also issued a Business Activity Restrictions (PKU) sanction to Kresna Life which was deemed to have violated the provisions regarding the implementation of recommendations based on the results of the previous inspection.

Sanctions were determined through OJK letter number S - 342/NB.2/2020 dated 3 August 2020, as conveyed by OJK Deputy Commissioner for Public Relations and Logistics Anto Prabowo in an official statement, Friday (14/8/2020).

"After the imposition of this sanction, Kresna Life Insurance is prohibited from carrying out new coverage closing activities for all business lines for the insurance company from August 3 2020 until the recommendations from the OJK inspection are fulfilled,".

Previously, OJK had carried out an inspection for the 2019 period which was carried out in February 2020. During this inspection, OJK found a number of violations committed by Kresna Life, especially regarding K-LITA products.

Based on these violations, OJK took supervisory actions, including requiring Kresna Life to pay claims submitted by policy holders.Apart from that, the OJK also ordered Kresna Life to prepare a financial restructuring plan which includes steps for the Company's financial restructuring, the commitment of the Controlling Shareholders/Controllers to overcome Kresna Life's problems, as well as a detailed claim payment plan.

In February 2020, to prevent the risk of difficulties in paying claims for maturing policies and protect the interests of policy holders, OJK ordered Kresna Life to discontinue the K-LITA product.

OJK continues to ask the management and controlling shareholders of Kresna Life Insurance to be responsible for their obligations to policyholders because this is an agreement or civil bond between Kresna Life Insurance and policyholders.

PT Asuransi Jiwasraya (Persero) - Jiwasraya first announced that it was in default in October 2018. In that announcement, Jiwasraya was unable to pay off customer policy claims amounting to IDR 802 billion. Then the number of defaults on JS Saving Plan products continues to increase. Jiwasraya's new management also confirmed that it would not be able to pay customers' JS Saving Plan policies worth IDR 12.4 trillion which mature in October-December 2019.

In the Jiwasraya Health Period document, it is stated that the Jiwasraya health period is divided into five periods, namely Period I 2006-2008, Period II 2009-2010, Period III 2011-2012, Period IV 2013-2017, and Period V 2018- Now.

In Period I, it was revealed that the first deficit that occurred as of December 31 2006 was IDR 3.29 trillion.

The company's main issue is a deficit caused by the company's assets being much lower than its liabilities. In 2006, it was discovered that the company's deficit reached IDR 3.29 trillion. 
Jiwasraya's deficit is getting bigger every year. In 2008, the internal deficit was calculated at IDR 5.7 trillion, this is below the figure provided by independent actuaries who estimated the deficit in 2008 to reach IDR 8-10 trillion.

The Jiwasraya case is currently leading to allegations of corruption and is currently being tried.

The Financial Audit Agency (BPK) also released a calculation of state losses (PKN) due to the Jiwasraya mega scandal case. As a result, the amount of PKN calculated by the BPK reached IDR 16.81 trillion. This amount consists of stock investments of IDR 4.65 trillion and state losses due to mutual fund investments of IDR 12.16 trillion. The amount is slightly different from the Attorney General's initial projection of IDR 17 trillion.

PT Asuransi Bumi Asih Jaya - OJK revoked the business license in the insurance sector for PT Asuransi Jiwa Bumi Asih Jaya (BAJ) on 18 October 2013 which was no longer able to comply with provisions related to financial health (Risk Based Capital) and the ratio of investment balance to technical reserves and claims debt.

In its journey after being revoked, Bumi Asih Jaya has not been able to carry out its obligations, so OJK filed a bankruptcy lawsuit with the Central Jakarta Commercial Court.

Bumiputera Life Insurance 1912 - Problems with Bumiputera are more focused on miss management or mistakes in managing the company. In January 2018 the company admitted that it experienced delays in claim payments of 1 - 2 months due to the minimal premiums generated by the company.

At the end of 2018, the company experienced solvency problems of IDR 20.72 trillion, where the recorded assets were only IDR 10.279 trillion but the company's liabilities reached IDR 31.008 trillion.

As of semester I-2019, Bumiputera's RBC ratio was minus 628.4%, while its investment adequacy ratio was only 22.4%, and its liquidity ratio was 52.4%. The new management of AJB Bumiputera is committed and working hard to resolve the 2020 claims arrears of IDR 5.3 trillion from as many as 365,000 policy holders throughout Indonesia.

PT Bakrie Life Insurance - The case of default by an insurance company belonging to the Bakrie Group occurred in the Diamond Investa product which is a unit link type (insurance and investment). This product failed to pay in 2008 because the company was too aggressive in investing in the stock market, at that time shares collapsed due to the global crisis which was triggered by the subprime mortgage case in the United States (US).

The Capital Markets and Financial Institutions Supervisory Agency (Bapepam-LK), which has now changed its name to OJK, stated that Diamond Investa's payment default reached IDR 500 billion. To resolve this problem, an agreement was reached that Bakrie Life would pay off its obligations in installments.

However, the installments made by Bakrie Life are problematic. Not all policy holders had their funds returned until finally in 2016, the OJK revoked Bakrie Life's operational permit.

Including Prudential cases and several cases of problems above, they need to be a lesson for the public to be more careful in choosing insurance products that suit their needs, as well as the importance of understanding healthy insurance management companies to avoid the risk of default.

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