The Downfall of Insurance Industries in Indonesia

 

The Downfall of Insurance Industries in Indonesia- Demographically, Indonesia is the 4^th World’s largest population. Statistically, based on the World Bank Database in 2021, the population of Indonesia’s people reached 276 million. With these conditions, Indonesia is the potential market in some industries because of the bright opportunity growth in this country.   In macro economics indicators, this country is still in the right ways and entering the rising era. As one of the emerging market economies, some economic indicators showed positive performance with the GDP growth (constant price) of Indonesia reaching 3.69 % in 2021, with GDP Per Capita around $ 4.6 thousand according to the Report from International Monetary Fund (IMF) in 2022.

Relating to economic and demographic conditions, insurance industries can also have positive correlations with economic conditions. The more positive economic growth is, the more people are using insurance products. Unfortunately, it is still in stagnation. compared to the other nations, the insurance industries in these nations still below expectations that have low contribution to the domestic economy. It was reflected in the insurance industry's asset contribution which only reached 5.8% of GDP. In fact, compared to a developed country, insurance contributions reached at least 20% of GDP.

The retardment of Insurance industries in Indonesia is caused by some internal reasons and factors. Basically, these reasons can aggravate the development of insurance industries in Indonesia. Of all the problems, one of the main factors is the trust of consumers to Insurance companies in Indonesia. Some bad habits or misconducts/ mismanagements to its customers makes the goodwill of the insurance industries cannot grow well. Some people will be horrified to use the products of insurance. In fact, some insurance companies have deteriorated the trust of their customers. Some of them cannot repay the funds of their customers for various reasons.   Here are some big cases of Insurance Industries that can be reminded of the rottenness of insurance companies. They have misled their customers and have deteriorated the insurance industry in Indonesia.

1. PT Asuransi Jiwa Kresna (Kresna Life)

The Company's journey began on April 24, 1956, with the establishment of the Company under the name PT Maskapai Asuransi Patriot (Patriot Insurance Society Ltd.). In 1991, the Company was acquired by Kalbe Group and changed its name to PT Asuransi Mitra Maparya. In 2014, Kresna Insurance officially listed its shares on the Indonesia Stock Exchange with the stock code "ASMI".  Following the listing of these shares, the Company's name changed to PT Asuransi Mitra Maparya Tbk.  In 2016, Kresna Insurance began to be known as PT Asuransi Kresna Mitra Tbk, due to a form of consolidation following the company's merger with the Kresna Group.

From all sources, the case of Krisna Life began when this company experienced default on its products, namely Asuransi Jiwa Kresna Link Investa (K-LITA) and Asuransi Jiwa Protecto Investa Kresna (PIK) policies. This problem happened related to investment portfolio liquidity a Covid-19 pandemic in 2020. They feel that the Covid-19 pandemic has influenced their business. Therefore, Kresna Life has finally postponed every policy redemption transaction that will be due from 11 February 2020 to 10 February 2021.Finally, the problem continued because the company also failed to pay its claims.

2. PT Asuransi Jiwasraya (Persero)

PT Asuransi Jiwasraya is an Indonesian state-owned enterprise engaged in the insurance sector. The company was founded on December 31^st, 1859, making it the oldest financial services company (of any kind) in Indonesia. The default case of PT Asuransi Jiwasraya (Persero) began to become a public concern in early October 2018 when the State-Owned Enterprise (BUMN) in the insurance sector sent a letter to partner banks to postpone payment of its insurance products, namely JS Saving Plan product's maturity policy. The results of an investment audit against Jiwasraya in the same month revealed liquidity problems which caused a delay in claim payments of IDR 802 billion in November 2018, which then rose to IDR 12.4 trillion at the end of 2019.

The company case continues until 2021. On August 25, 2021, 6 the defendant was declared to have caused a loss to the company of around IDR 16 trillion. They were convicted of corruption and money laundering cases at PT. Jiwasraya Insurance (Persero) and they were imprisoned by the Supreme Prosecutor General (kejaksaan agung). Furthermore, the convict is commissioner of PT Trada Alam Minera Heru Hidayat, former head of investment division director and finance Jiwasraya Syahwirman, former director of Maxima Integra Joko Hartono, former director of finance Jiwasraya Hary Prasetyo, former managing director of Rahim Hendrisman, and commissioner of PT Hanson International Benny Tjokcrosaputro.

3. PT Asuransi Jiwa Bakrie Life

Bakrie Life is engaged in the life insurance business and The establishment of the Bakrie Life entity came from the acquisition of shares of PT Asuransi Jiwa Centris (Centris Life) on October 24, 1996. Commonly, Bakrie Life had problems in 2008. This case happened befalls policyholders of the Diamond Investa investment-based life insurance product issued by PT Asuransi Jiwa Bakrie (Bakrie Life). The mismanagement of investing is the key problem. The reason was that the company was too aggressive in investing in the capital market. Even though in 2008 the capital market was depressed due to the crisis in the United States (US) which caused the stock price to fall. Bakrie Life's management promised to pay compensation in stages. However, in fact, Bakrie Life was still in arrears to customers of IDR 270 billion until the company's business license was revoked by the Financial Services Authority (Otoritas Jasa Keuangan(OJK)) on 17 April 2017.

4. PT Asuransi Bumi Asih Jaya

This case started when the Financial Services Authority (Otoritas Jasa Keuangan(OJK)), which was formerly known as the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK), imposed a business activity restriction sanction (PKU) on Asuransi Bumi Asih in April 2009. At that time, the company was deemed not to have fulfilled its obligation to increase capital and its solvency ratio under the required conditions of 120 percent. As a result of this alarming condition, the OJK included Bumi Asih Insurance under special supervision to monitor the restructuring process. Unhealthy, OJK also revoked the company's business license. In the decision to revoke the business license, Bumi Asih Insurance is required to settle its obligations to all policyholders. However, this obligation was never implemented, which eventually prompted the OJK to file a bankruptcy lawsuit against Asuransi Bumi Asih up to the accusation level in 2015. The request by the supervisory agency for the financial services sector was granted by the Supreme Court so that Asuransi Bumi Asih officially held the status of bankruptcy and insolvency in August 2015.

5. Asuransi Jiwa Bumiputera 1912

Bumiputera 1912 is  a life insurance company, the first and oldest national property belonging to the Indonesian nation. Founded on date February 12, 1912. This company suffered in the financial crisis because of its inability to pay the polis of its customers. As of its cases, this company promised to fulfil the claim of its customers. PT Asuransi Jiwa Bersama (AJB) Bumiputera 1912 will start paying claims in two stages. The first phase will be carried out in February 2023 and the second phase will be carried out in February 2024. 

6. WanaArtha Life

Adisarana Wanaartha or known as Wanaartha Life is a life insurance company that was founded in 1974 and is headquartered in Jakarta. The company was founded in 1974 under the name Asuransi Jiwa Mahkota Abadi, then changed to Asuransi Jiwa Mahkota Said and a few years later changed to Wanaartha Life in 1998.

The emergence of the Wanaartha case began when the Attorney General's Office (Kejagung) conducted an investigation into the Jiwasraya case in December 2019. The Jiwasraya investigation ultimately led to the blocking of around 800 SRE shares, and confiscation of assets related to the investigation into the Jiwasraya case, which also dragged down Wanaartha Life Is securities account. As a result of this blocking, Wanaartha is unable to pay customer claims. In total there are around 26,000 Wanaartha Life customers with an estimated loss of Rp. 3 trillion due to this chaotic cross.

As for the seven suspects, three of them are company owners, namely Manfred Armin Pietruschka, Evelina Larasati Fadil, and Rezanantha Petruschka. Meanwhile the other two are President Director Yanes Yaneman Matulatuwa, Director Daniel Halim. Apart from the five names above, Bareskrim also named Terry Kesuma and Yosef Meni as suspects. Until now, Wanaartha Life is still being handled by Bareskrim Polri. Most recently, Bareskrim is pursuing the child of a suspect who allegedly fled to the United States.

 Here  are some cases relating to insurance companies in Indonesia. Principally, these cases can influence the futures of insurance industries in the future. It can cause scars to its customers and bring the dilemma to Indonesian people about the performance of insurance companies and industries. Basically, the track record of the insurance company has impacted the trustworthiness of all people in considering using their products of polis. The role of stakeholders in insurance industries in making the rules, code of conduct, and integrity to its companies brings this insurance industry well and increases the people's trust in Insurance industries.

 

Bibliography of The Downfall of Insurance Industries in Indonesia

TheWorldLink. 2022. Population, total - Indonesia. Accessed via https://data.worldbank.org/indicator/SP.POP.TOTL?locations=ID on December 19^th, 2021.

International Monetary Fund. 2022. World Economic Outlook Database. Accessed via https://www.imf.org/en/Publications/WEO/weo-database/2022/April/weo-report?c=536,&s=NGDP_RPCH,NGDPD,PPPGDP,NGDPDPC,PPPPC,PPPSH,NID_NGDP,NGSD_NGDP,LUR,LP,BCA,B