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OJK tightens rules on unit-linked insurance
The new rules cover marketing, asset management, transparency and minimum capital requirement.
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The Financial Services Authority (OJK) office in Jakarta is shown in this undated photo. (Kontan/Baihaki)
T
he Financial Services Authority (OJK) has issued a more stringent regulation on unit-linked insurance, following a string of protests from policyholders over the past few months.
OJK circular letter No. 5/2022, which took effect on March 14, replaces a 2006 regulation on unit links. The new regulation lays out new provisions regarding the marketing, asset management, transparency and minimum capital requirements for selling such products, which is a combination of regular insurance with an investment portfolio that fluctuates with the market.
“The new rule will improve consumer protection, governance and risk management in insurance companies so that selling unit-linked products will no longer cause problems in the future,” said OJK commissioner Riswinandi in a statement on Wednesday.
Read also: Indonesians disgruntled over unit link insurance
Unit-links are the bedrock of the insurance industry as they make up more than 60 percent of total premium revenue — but they are also a major source of discontent among consumers. Policyholders are generally uninformed about this more complicated insurance product, and insurance agents often mis-sell it such as by overpromising investment returns.
In early January this year, disgruntled unit-link holders stormed the offices of the OJK and several insurance companies, demanding a full refund, and complaining about having lost their money and being tricked by insurance agents. Those policyholders protested again on Tuesday.
Issuing a statement, the OJK explained that the new regulation required agents to ensure customers understood the features of unit-link products, especially their benefits, fees and investment risks, including the risk of returns reaching zero and negative numbers.
