Mandatory Motor Insurance

Indonesian government is preparing to require vehicle owners to participate in a mandatory insurance scheme, which many see as part of a larger effort to enlarge the country’s insurance industry. The scheme, called third-party liability (TPL), will provide coverage of vehicle damage caused by accidents.

As of now, the government is preparing the implementing regulations that must be done no more than two years after the law was passed in 2022. It is estimated the mandatory insurance premium could cost Rp 250,000 (US$15.5) per year. The limit [for the coverage] could be around Rp 50 million. The Indonesian General Insurance Association (AAUI) has stated that the premium would not be burdensome for car owners, arguing that those who own a four-wheeler have more than enough purchasing power to afford it.

The plan was stipulated in the 2022 law on financial sector development and strengthening (PPSK). The regulation is expected to apply to both two-wheelers and four-wheelers, but there is not yet clarity on whether the former will have different premium pricing.

Extension - The law also includes other mandatory TPL insurance that could apply to home fires and natural disasters. Similar stipulation is also available for mandating that workers participate in a pension fund.

The OJK defended the policy on Thursday, saying that it would greatly help lighten the financial burden of Indonesians involved in accidents, according to a statement on Thursday.