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Insured but not assured
Jiwasraya’s problems had been known since 2006, yet strangely, no stern actions were taken by the government as its shareholder.
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Office of state-owned insurance company PT Asuransi Jiwasraya in Jakarta (kontan.co.id/Cheppy A Muchlis)
V
ery few, if any, of the houses and vehicles ruined in the recent floods were insured. For those who can afford them, basic insurance policies do not cover risks from flood. Indonesians generally do not even trust insurers.
Indonesia’s insurance industry is struggling to achieve higher growth amid low awareness among people who are unable or reluctant to read between the policies’ lines. Those willing to insure their assets, lives and families turn to seemingly credible insurers. But that, again, does not guarantee assurance.
The shock of the fiasco suffered by state-owned insurance company Asuransi Jiwasraya has spread beyond its customers. The 160-year-old insurer failed to pay out holders of maturing policies under the JS Saving Plan, a product that integrates life insurance and investment. The policies that matured in December 2019 were worth Rp 12.4 trillion (US$891 million).
Jiwasraya’s mismanagement was blamed for the failure, which was first announced in October 2018 when matured policies reached Rp 802 billion in value. Jiwasraya recorded a loss of Rp 15.89 trillion in 2018 and Rp 13.74 trillion during the first nine months of 2019.
The Attorney General’s Office (AGO) announced on Wednesday that its corruption investigation into Jiwasraya found “indications of legal violations”. Despite travel bans on 10 unidentified individuals at Jiwasraya and 98 witnesses and 13 mutual fund managers questioned, no suspects have been announced. The Supreme Audit Agency (BPK) estimates that state losses from Jiwasraya’s bad investments exceed Rp 10 trillion.
We appreciate the AGO’s initiative to launch the investigation to shed light on the insurer’s vague investments and financial management. However, the public, mainly customers, will wait for the government to realize its commitment to ensuring full payouts to Jiwasraya customers as it has decided against granting the insurer a bailout. This is important to restore public trust in the industry.
To ensure customers receive their payout, the government is weighing several options. These include establishing an insurance holding company to provide a cash flow for the disbursement and selling parts of Jiwasraya’s low-performing stock portfolio.
Whatever the decision, the customers’ rights must be priority. The government should provide a clear timeline for the planned payouts for public supervision.
Furthermore, a supervision overhaul is needed in the State-Owned Enterprises Ministry and the Financial Services Authority (OJK), which supervises the financial industry, including insurance companies.
Jiwasraya’s problems had been known since 2006, yet strangely, no stern actions were taken by the government as its shareholder.
Without public trust, the life insurance sector will find it hard to attract more customers, which stood at barely 60 million in mid-2019. The government and the OJK must strengthen their supervision and management of the financial sector. No country can achieve stable growth and resilience without a clean, strong and inclusive financial industry.
