Indonesia:Govt to establish agency to provide guarantees to protect policyholders

The government is preparing to establish an agency that can act as a guarantor of insurance companies, to protect the interests of policyholders, according to deputy finance minister Suahasil Nazara.

Mr Suahasil said that the establishment of such an agency is to be effected by enacting a new law, even though the insurance law, promulgated in 2014, mandates the setting up of a guarantor, reported Tempo.

The need to insure policyholders has resurfaced following the failure of state owned Asuransi Jiwasraya to pay out benefits to customers under its unit linked plan, JS Saving Plan.

Separately, the Indonesian Consumer Protection Foundation (YLKI) welcomes the formation of an agency to guarantee insurance funds. Its chairman Tulus Abadi said that the need for the agency is quite urgent so that similar problems such as those faced by Jiwasraya would not recur.

Mr Tulus said that the insurance industry already has a mechanism through which insurers buy reinsurance that would cover customers for risks of bankruptcy or default by insurers. Unfortunately, such cover was not acquired by Jiwasraya.

Source: Asia Insurance Review