Industry Structure Less Balanced

KOMPAS/PRIYOMBODO

A security guard looks out of a window displaying the PT Asuransi Jiwasraya logo at the office of the state-owned insurance company on Thursday (9/1/2020) in Jakarta. A State Audit Agency (BPK) investigation in 2018 discovered indications that corporate mismanagement at the insurer had cause losses to both the company and the state. The case is being investigated by the Attorney General’s Office.

JAKARTA, KOMPAS — Problems that surround life insurance companies, such as PT Asuransi Jiwasraya, PT Asabri, and Life Insurance with Bumiputera, are not only triggered by poor governance and weak supervision, but also because of the unbalanced structure of the insurance industry. In the future, the insurance industry must focus more on the protection business than on investment.

Jiwasraya, Bumiputera and Asabri allegedly suffered large investment losses. As a result, Jiwasraya failed to pay customer claims of Rp 12.4 trillion, while Bumiputera’s unpaid claims reached Rp 9.6 trillion by the end of 2019. Life insurance companies tend to invest their customers\' premium funds in high-risk instruments in order to pursue large returns. Insurance companies are looking for high investment returns in order to be able to return customers\' investment funds with large returns in order to be attractive. This makes insurance companies more dominant in the investment business rather than protection.