T

he Financial Services Authority (OJK) is preparing a new insurance pilot project in several provinces as part of the agency's efforts to promote micro-insurance programs, a senior official has said.

The OJK is currently working with the Association of General Insurance Companies (AAUI) and the Indonesian Life Insurance Association (AAJI) to design four basic microinsurance products, according to OJK director for sharia non-banking financial industry Moch. Muchlasin.

The products would cover four segments, namely personal accident insurance, term life insurance, fire home insurance and business interruption insurance, he said on Friday.

 'It will go for six months and take place in the provinces of Banten, Central Java, East Java, West Java and Yogyakarta. We are collaborating with the TNP2K [the National Team for Accelerating Poverty Allevation] as well to address areas in those provinces that need micro-insurance the most,' Muchlasin added.

The pilot project is a continuation of a micro-insurance blueprint that the OJK introduced last October.

Before launching the project, the OJK will roll out a new regulation that details the 'playing rules' of marketing the microinsurance, the product specification and the marketing channels, which would include post offices and retail chains.

Meanwhile, data from the OJK show there are 67 microinsurance products from 25 insurance firms, both life and general, already being offered on the market. Their premiums vary from Rp 10,000 (88 US cents) to Rp 20,000 per person.

The OJK itself sets the maximum premium price at Rp 50,000 per product and the benefits at Rp 50 million per customer.

However, despite the existing products, there are still around 77 million Indonesians out of the total population of 240 million that have no insurance to cover their daily activities.

Muchlasin said that the financial superbody would wait for the pilot project to conclude before deciding whether or not it would be compulsory for all insurance firms to market microinsurance products.

If micro-insurance becomes compulsory, the OJK will follow in Bank Indonesia's (BI) footsteps when the latter announced in 2012 that all banks must channel at least 20 percent of its loans to micro, small and medium businesses by 2018.

'We are thinking about it, but it will depend on the capacity of the insurance firms. Some say that it will drive them to be more focused in marketing microinsurance, while some say that they don't have the capacity to do it,' he said.

According to Muchlasin, the OJK will offer several incentives to attract the companies' involvement, such as by providing concessions in their permit requirements and by recalculating their risk-based provisions.

Contacted separately, AAUI executive director Julian Noor said that more than 10 of its members had begun marketing microinsurance products and another 10 were waiting to jump on the bandwagon. The association has a total of 80 members at present.

'We appreciate the OJK's intention to make it easier for us to apply for micro-insurance permits. However, we will also need similar ease in setting up branches or units that specifically deal with the microinsurance products,' he said.