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LPS to have insurance customers protected in 2015
The Deposit Insurance Corporation (LPS) is looking to expand its coverage to include policy protection for general insurance and life insurance customers in 2015
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he Deposit Insurance Corporation (LPS) is looking to expand its coverage to include policy protection for general insurance and life insurance customers in 2015.
The agency will soon become responsible for managing customers' policies in the event that an insurance firm collapses, is part of the country's future integrated protection scheme (IPS).
Under the IPS, all financial protection schemes ' from the banking industry to insurance ' will be put under one roof.
The LPS is currently carrying out assessments to address three key points in its policy protection tasks, according to LPS executive chairman Kartika 'Tiko' Wirjoatmodjo.
'We will have to decide whether or not to create a new unit in the LPS to specifically handle the policy funds,' he said on the sidelines of the 3rd International Workshop on Integrated Protection Scheme, held by the LPS on Thursday in Nusa Dua, Bali.
'We will also have to determine the protection scope, to what limit we can actually insure the policies and the premium,' he added.
The LPS' two-day workshop, which will run until March 14, is part of the International Association of Deposit Insurers' program.
The LPS hoped to have finished addressing those issues within the next two to three months and to begin implementing the policy protection in 2015, Tiko added.
Ideally, according to Tiko, the government should initially inject capital so the LPS could carry out its new tasks, similar to when the government injected money in 2005 after it established the agency.
According to data from the Indonesian Life Insurance Association (AAJI) and the Association of Indonesian General Insurance Companies (AAUI), there are currently 47 life insurance firms and 80 general insurance companies operating across the country.
Life insurance firms managed policies worth Rp 113.93 trillion (US$10 billion) last year.
Meanwhile, the AAUI recorded a total of Rp 33.9 trillion-worth of policies as of September 2013. It has not published its full 2013 report.
Finance Minister Chatib Basri said the country urgently needed the IPS.
'We suffered from several crises in 1997, 2005, 2008 and 2013. Those crises may trigger various financial instabilities and that's why we need to have our own IPS,' he said after attending the workshop.
Globally, only two countries have fully implemented the protection scheme across all financial sectors; South Korea with its Korea Deposit Insurance Corporation (KDIC) and the United Kingdom with its Financial Services Compensation Scheme.
KDIC senior research fellow Seung-kon Oh said that one of the challenges in implementing the IPS would be gaining approval from the legislative authority.
That approval is what Indonesia is currently awaiting, according to Financial Services Authority (OJK) commissioner Firdaus Djaelani.
'We have included the additional LPS coverage in the Insurance bill, which is under deliberation at the House of Representatives,' he said.
Contacted separately, AAJI executive director Benny Waworuntu said that the association would fully support LPS' new function and that it agreed that protection should be for holders of traditional policies only.
'Investment-related policies should be excluded from the protection scheme because we think customers should have enough knowledge to purchase those policies, unlike traditional ones,' he said.
