Digital Broking: Everything Everywhere All at Once

A. Executive summary

The Financial Services Authority (OJK) on December 28, 2022, issued the Financial Services Authority Regulation Number 28 of 2022 (POJK 28/2022) stipulating:

guidelines on how a company shall carry out Digital Insurance Brokerage Services ;
human resources and core competencies required to do so; and
activities which may be outsourced to other companies.

B. New regulation on digital broking

The purpose of issuing POJK 28/2022 to keep apace with the commercial practices of insurance brokerage firms, which are continuously evolving in response to changes in the business environment and market demands. The following are the main clauses of POJK 28/2022:

Provisions pertaining to Digital Insurance Brokerage Services or Layanan Pialang Asuransi Digital;
Insurance provider’s responsibility to ensure that Experts working for them will fulfil their obligations;
Joint broker business of an insurance/reinsurance company (co-broking);
Obligation to submit quarterly financial reports; and
Amendment to policies governing administrative sanctions, including fines.

In addition to the foregoing, the main objective of issuing POJK 28/2022 is to optimize the role of insurance brokerage company cooperation in fostering national economic growth, preserving the stability of the financial system, and achieving community financial independence as well as supporting initiatives aimed at fostering equity in development. The changes made by POJK 28/2022, which amends POJK No. 70/POJK.05/2016 on Business Implementation of Insurance Brokerage Companies, Reinsurance Brokerage Companies and Insurance Loss-appraisal Companies are as follows: (i) define digital technology to support the implementation of Digital Insurance Brokerage Services offered by Insurance Brokerage Companies and (ii) set out the editorial rules regarding duties and actions carried out by Experts working for Insurance Brokerage Companies so that they comply not only with the changing business environment and market needs, but also with the applicable laws and regulations. The following table lists a number of such amendments:

No.	POJK 70/2016	POJK 28/2022
1.	This provision is not pre-regulated	Addition of number 22 of Article 1 Electronic System is a series of electronic devices and procedures which function to prepare, collect, process, analyze, store, display, announce, send and/or disseminate electronic information
2.	Idem	Addition of number 23 of Article 1 Digital Insurance Brokerage Service is the organization of Insurance Brokerage Business in which the intermediary service in the closing of conventional insurance or sharia insurance is conducted through Electronic System and internet network which may be used directly by the policeholder, the insured, and/or participant.
3.	Idem	Addition of number 24 of Article 1 Information Technology is a technique to collect, prepare, store, process, announce, analyse and/or disseminate information in the financial services sector.
4.	Idem	Article 2A Insurance Brokerage Companies (the “Companies”) may organize Insurance Brokerage Business in the form of Digital Insurance Brokerage Services or Layanan Pialang Asuransi Digital.
5.	Article 15 paragraph (1) letter (b) Duties of Experts in Companies referred to in Article 14 paragraph (1) is to analyze and improve Insurance Brokerage work processes to keep up with developments in the insurance industry.	Article 15 paragraph (1) letter (b) Duties of Experts in Companies referred to in Article 14 paragraph (1) is to analyse and improve Insurance Brokerage work processes to keep up with developments in the insurance industry and the provisions of laws and regulations.
6.	This provision is not pre-regulated	Article 15 paragraph (3) Experts in the Companies must ensure that they carry out duties as referred to in paragraph (1).
7.	Idem	Article 16 paragraph (2) Other than performing duties under Article16 paragraph (1), Experts working for Companies must carry out responsibilities as referred to in Article 14 paragraph (1).
8.	Article 18 para. (1) letter (b) Experts work for Reinsurance Brokerage Companies in carrying out responsibilities to analyse and improve the work of the Reinsurance Brokerage Companies in accordance with developments in the insurance industry.	Article 18 para. (1) letter (b) Experts work for Reinsurance Brokerage Companies in carrying out responsibilities to analyze and improve the work of the Reinsurance Brokerage Companies in accordance with developments in the insurance industry and the provisions of laws and regulations.

C. Digital Insurance Brokerage Services

The OJK emphasizes that Companies are not permitted to offer Digital Insurance Brokerage Services prior to receiving the OJK approval to do so. Additionally, within 30 calendar days of receiving the OJK approval, Companies that offer Digital Insurance Broker Services are required to submit an application for registration as an Electronic System organizer to the authorized agency (the Minister of Communication and Informatics). The Companies must start providing Digital Insurance Broker Services within 30 calendar days as of the date of registration after becoming an Electronic System organizer.

OJK shall cancel the approval for Digital Insurance Broker Services that has been issued for the Insurance Brokerage Companies if they do not implement Digital Insurance Broker Services within 30 calendar days as of the date of registration as an Electronic System organizer, or do not obtain a registration certificate as an Electronic System organizer within 60 calendar days as of the issuance of the OJK approval.

Other than the above-mentioned approval and registration, the following are highlighted new provisions regarding the Companies that engage in Digital Insurance Brokerage Services under POJK 28/2022:

Insurance Brokerage Companies organizing Digital Insurance Brokerage Services must comply with Information Technology risk management as non-bank financial services institutions in accordance with the OJK regulations governing information technology risk management for non-bank financial services institutions;
Insurance Brokerage Companies organizing Digital Insurance Brokerage Services must have a Human Resource Officer with at least 3 years of experience, and expertise in the field of Information Technology;
Insurance Brokerage Companies organizing Digital Insurance Brokerage Services may cooperate with other parties for the implementation of part of the functions in running their business in the form of:

- cooperation with payment service providers, for the payment of premiums or contributions to Insurance Brokerage Companies and/or Insurance Companies or Sharia Insurance Companies;
- cooperation with Information Technology providers; and/or
- cooperation with other parties in improving the quality of operations and services of Insurance Brokerage Companies.

Contact our firm if you wish to learn more about the guidelines for implementing Joint Insurance Brokerage Business and Digital Insurance Brokerage Services under POJK 28/2022.

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