The Regulator s Perspective Moch. Muchlasin Otoritas Jasa Keuangan (IFSA)

Transcription

1 Supporting Market Development: The Regulator s Perspective Moch. Muchlasin Otoritas Jasa Keuangan (IFSA)

2 Agenda Microinsurance: Background and Rational Indonesia Insurance industry at a glance Microinsurance: Current Condition Microinsurance: the Grand Design Microinsurance development: Chalenges and Way Forward 2

3 Microinsurance : background and rationale In 2013, the number of policyholders in Indonesia is only 67 million (10 million individual policyholders and 57 group insurance) World Bank survey revealed that 32% of Indonesians (± 70 million) do not have adequate saving nor insurance to protect against risk. The absence of protection againts financial loss during perils have very negative on low-income household, it often left those affected-family in poorer and desparate condition OJK has promoted financial inclusion as part of national strategy for poor eradication. Microinsurance is one program to broaden access for the disadvantage populations. 3

4 Insurance industry at a glance: Current Development Since its born in mid-19 century, insurance business in Indonesia was operated based on codex commercial law (Wetboek van Koophandel voor Indonesie) enacted in 1847 Indonesian modern insurance era was started in 1992, with the enactment of the first Insurance Act (Law No 2 year 1992) Number of Insurer: 49 Life, 83 Non Life, 4 Reinsurance 4

5 Highlight of Insurance Industry March % 11% Asset of Financial Institutions 3% 2% 78% Banking Finance company Insurance & takaful Pension fund Other financial services 25% 1% Assets of Insurance Company 15% 14% 45% Life Insurance Non Life Insurance Reinsurance Social Ins. & Worker Security Civil Servants & Armed Force Insurance Total assets of insurance as of March 2014 is IDR700.8 trillion or only comprise 11% of total financial institutions assets in Indonesia. Life insurance company dominates insurance industry. Around 45% of total insurance assets are owned by life insurance company 5 5

6 Highlight of Insurance Industry DENSITY & PENETRATION OF INSURANCE 2.16% 2.10% 1.82% 1.79% 1.63% 1.68% * Density (Thousands IDR) Penetration Insurance penetration is remain low. In 2013, people spending on insurance premium only 2.1% or GDP. While average annual spending for insurance premium (density) is only IDR768 thousand Low insurance penetration indicate huge future potential development. 6 6

7 Suporting Inclusive Insurance The OJK Law provide foundation for OJK to promote financial sector which stable and sustainable grow. In addition, National Strategy for Financial Literacy mandate OJK to promote development of financial products which is affordable for all society As stated in the National Strategy for Financial Inclusion, Indonesia Government has strong commitment to broaden access to financial services, include insurance. OJK as regulator and supervisor of insurance industry has strong commitment to promote microinsurance. In 2013, OJK has launched grand design on Indonesia microinsurance. 7

8 Providers and Intermediaries 25 (14 Life and 11 Non Life) Insurance companies are providing Microinsurance product (Term life, PA, Health, Motor Insurance, property) All insurance providers have to be licensed or subject to a registration process Insurance agent, broker, and domestic banks which sell insurance product also subject to a registration process There is an initiative to develop special regulation on Microinsurance 8

9 Description of Microinsurance Product (1) Definition: Microinsurance Indonesia is insurance product specifically provided for low income people which is simple in both features and administration, easy to get or bought, affordable and immediate claim payment Benefit paid in lumpsum, although indemnity might be allowed. Proof of membership in the form of written policy, certificate, scratch-card or SMS notification. Maximum contribution for 3 months coverage is IDR50,000. 9

10 Description of Microinsurance Product (2) Benefit/sum insured capped at IDR50,000,000 max. Up to 2 types of exclusions: ie suicide or death due to criminal acts. Policy written in Bahasa Indonesia, 2 pages A4, 11 font. Maximum 4 claim documents: ie policy, ID card and proof of death Claim should be paid in 10 days. 10

11 The Regulatory Requirement for Insurer Offering Microinsurance Product (1) Current regulations : no differences on the process and requirement for product approval In the draft microinsurance regulation some requirements wil be relaxed such as claim settlement period not more than 10 days, maximum two exclusion,reduced claim documentation. 11

12 The Regulatory Requirement for Insurer Offering Microinsurance Product (2) There is no specific prudential standards for microinsurance Reporting for traditional and inclusive market is not yet segregated. There are no separate reporting requirements for entities who offer microinsurance The same rules and provision to protect microinsurance consumers 12

13 Challenges Public awareness need to be improved Lack of product that meet people needs There is no specific regulation on microinsurance Capacity building on microinsurance practices both for regulators and providers need to be improved 13

14 The Way Forward Microinsurance development is part of financial inclusion programs. It should be linked and interconnected with other initiatives on financial inclusions such as digital payment, branchless banking etc. The need for coordinating forum between OJK, associations, insurance providers/operators and distribution channels as well as communities is a key for product designing, knowledge sharing, joint public awareness campaign The need for coordination among various government agencies to strengthen financial inclusion initiatives 14

15 Thank You