OJK Latest Circular - Life Insurance

The Indonesian Financial Services Authority ("OJK") has issued a circular letter on marketing of insurance products.

Under this new circular letter, insurance companies in marketing their products online will have to be registered as electronic system operators in Indonesia. Insurance companies that engage corporate agencies should also formalize their distribution partnerships with the corporate agencies since corporate agencies are now regulated by the OJK.

Notable provisions under Circular Letter No. 19 of 2020

The OJK has issued Circular Letter No. 19 of 2020 on Marketing of Insurance Product ("Circular Letter No. 19 of 2020"), which is an implementing regulation of OJK Regulation No. 23 of 2015 on Insurance Products and Marketing of Insurance Products ("Regulation No. 23 of 2015"). Circular Letter No. 19 of 2020 has come into effect. Insurance companies have one year after 2 October 2020 (i.e., until 2 October 2021) to make their business activities conform with the requirements under this implementing regulation.

Notable provisions under Circular Letter No. 19 of 2020 are as follows:

• Insurance companies must obtain prior approval from the OJK if they wish to enter into any insurance distribution agreements with: (a) banks, (b) branchless banks, or (c) non-bank distribution partners, if the insurance company's insurance products will be distributed through the relevant non-bank distribution partners' digital channels.

With respect to item (c), an insurance company is not required to obtain prior approval from the OJK if its insurance products will only be distributed through the relevant non-bank distribution partners' non-digital channels (e.g., physical branch offices or stores). This requirement clarifies an unclear provision under Regulation No. 23 of 2015 on insurance companies being required to obtain approval from the OJK if insurance companies enter into insurance distribution agreements with non-bank distribution partners.

• Circular Letter No. 19 of 2020 provides broader means for insurance companies to market and promote their insurance products. For example, social media platforms are now explictly included as one of the permitted marketing channels for insurance companies to promote their insurance products.
• Insurance companies that offer and market insurance products through their own websites and/or applications (e.g., mobile apps) must be registered as electronic system operators with the Ministry of Communication and Informatics.
• Circular Letter No. 19 of 2020 explictly mentions telemarketing scripts as one of the available personalized and tailored product offering activities. This is important as, given the social distancing protocols, there are more and more insurance products being offered by way of telemarketing or personalized calls (video calls or audio calls).
• Circular Letter No. 19 of 2020 formalizes requirements on anti-churning, anti-pooling and anti-twisting in the context of agency recruitment (direct marketing through insurance agents). Previously, these requirements were regulated by industry associations.
• Circular Letter No. 19 of 2020 requires insurance companies to clearly mention any commission rates payable to brokers (or other distribution partners) on an insurance product's product summary provided to customers.
• Circular Letter No. 19 of 2020 requires a legal entity that houses or employs insurance agents (i.e., corporate agencies: (a) to be registered with the OJK, (b) to only have a partnership with one insurance company, and (c) not to have another partnership with another insurance company that has the same line of business as the insurance company the corporate agency has a partnership with. These are new requirements. In brief, corporate agencies are now regulated by the OJK.
• On non-bank distribution partners, Circular Letter No. 19 of 2020 now clarifies the parameters of a reference business model (model bisnis referensi), i.e., the non-bank distribution partner: (a) should only provide approved marketing kits to customers, (b) should not provide any information to customers on insurance products' terms and benefits, (c) should not assist in activities relating to premium payment and product underwriting/issuance processes, and (d) should not assist in any insurance claim processes.
• The Indonesian language must be the prevailing language if there is any inconsistency between the Indonesian language and the English language in any insurance distribution agreement (including bancassurance agreements).