A. Legal Framework
The Financial Services Authority/Otoritas Jasa Keuangan (“OJK“) is an independent entity free of external interference 1 established under Law Number 21 of 2011 concerning the Financial Services Authority (“OJK Law”). Since December 31, 2012, the OJK has taken over the functions, duties and authorities of the Ministry of Finance and the Capital Market and Financial Institutions Supervisory Agency for regulating and supervising financial activities in the Capital Market, Insurance, Pension Funds, Financing Institutions, and Other Financial Institutions 2.
B. Insurance Companies
The following types of insurance companies are regulated in Indonesian jurisdiction: 11
- Conventional Insurance
- General Insurance Companies, which provide compensation to policyholders or insured parties for losses, damages, incurred costs, loss of profits, or liabilities to third parties that may arise from uncertain events.12 These include (i) Health insurance and personal accident insurance, and (ii) Reinsurance for other general insurance company risks.
- Life Insurance Companies, which provide payments to policyholders, the insured, or other entitled parties in the event of death or survival, or other scheduled payments to policyholders, the insured, or other entitled parties, determined based on an agreement and fund management results, 13 such as annuities, health insurance, and personal accident insurance.
- Reinsurance Companies, which generally provide reinsurance services to insurers, guarantee providers, or other reinsurance companies in order to bear the risks they face. 14
- Sharia Insurance
This type of insurance operates exclusively based on Sharia principles, and typically fall into the following types :
- Sharia General Insurance Companies.
- Sharia Life Insurance Companies, including annuities based on Sharia principles, health insurance based on Sharia principles, and personal accident insurance based on Sharia principles.
- Sharia Reinsurance Companies.
- Insurance Broker
- Insurance brokerage firms are authorized to offer services in insurance or sharia insurance policy placement, to handle claims settlement, and to act on behalf of policyholders, the insured, or participants. 15
- Reinsurance brokerage firms are authorized to provide consultation and intermediation services in reinsurance or sharia reinsurance placement, to handle claims settlement, to act on behalf of insurance companies, sharia insurance companies, guarantee providers, sharia guarantee providers, reinsurance companies, or sharia reinsurance companies involved in reinsurance or sharia reinsurance placement. 16
- Insurance loss adjusters are authorized to provide claim assessment services and/or consultation regarding insurance subjects. 17
C. The Insurance Contract
Typical insurance and reinsurance activities in Indonesia cover underwriting services or risk management, risk reassessment, marketing and distribution of insurance products, insurance consultancy services, and assessment of insurance or sharia-compliant insurance losses. 22
Additionally, the scope of insurance activities includes life and physical insurance, human health, legal liability, properties and services, as well as any other interests that may be lost, damaged, or reduced in value. 23
Insurance Law requires insurance companies to handle claims through a fast, simple, easily accessible, and fair process.32 The payment period for claims or benefits is determined in the insurance policy, which begins at the latest 30 (thirty) days from the agreement between the policyholder, insured, or participant and the insurance company. 33
OJK provides the following basic steps and procedures for filing an insurance claim: 34
- Incident causing financial loss
The event leading to financial loss aligns with the compensation or benefits stated in the insurance policy.
- Reporting the claim to the insurance company
The claim can be made through the provided application or by contacting the official contact center of the insurance company via SMS, email, or phone. In practice, in Indonesia, customers would also report to the insurance agent who handles their insurance, to enable the agent to assist in the claim processing.
- Insurers will request the required documentation
The required documentation includes written statements and other necessary documents, such as:
- Insurance policy;
- Details of the loss;
- Photographs, and;
- Other supporting evidence.
- Complete documents will facilitate a smooth claim process.
- Insurers assess the claim submitted
After the claim is assessed and approved, the policyholder will receive compensation for the claim according to the agreed-upon value of the loss in the agreement or policy.
As a proud member of the Alliot Global Alliance, ADCO Law has released our first set of Insurance Comparative Guidelines. Our guidelines consist of an extensive examination of three different jurisdictions: Indonesia, the Philippines, and Japan.
From the types of insurance companies available and legal frameworks to the regulations that govern insurance contracts and claims, we want to provide valuable insight into how different approaches to insurance regulation can impact businesses and the overall economic landscape.
Disclaimer: The following article is intended for general informational purposes only and should not be interpreted as legal advice by ADCO Law, SKY Law, and Spring Partners, proud members of the Alliott Global Alliance (AGA). The viewpoints expressed herein do not represent the official legal stance of any of these firms. Consequently, the firms cannot be held accountable for any actions taken by individuals who use this article for purposes other than those for which it is intended.
For more information about AGA, please visit https://www.alliottglobal.com/
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