The Indonesia Life Insurance Association (AAJI), the sole association for life insurance companies in Indonesia, has issued a statement urging the government to establish immediatelya Policy Guarantee Institution (LPPP) as mandated in the Insurance Act.
The statement adds this would be in line with the government’s efforts to resolve the Jiwasraya problem so that payments owing to customers can be made immediately.  

The document also says, “AAJI hopes that the government will continue to carry out intensive and effective risk-based supervision as an effort to detect the potential failure of the company in fulfilling its obligations to customers and to take the necessary steps appropriately.

“AAJI is always ready to work together with the government and OJK to create a healthier and more conducive business climate for the life insurance industry, increase customer protection, and implement measurable and sustainable financial literacy and inclusion programmes.”

The statement follows weeks of news about the insolvency of 160-year-old state owned life insurer Asuransi Jiwasraya which failed to pay holders of matured policies under its JS Saving Plan, a product that integrates life insurance and investment. Jiwasraya’s financial mismanagement was blamed for the default which was first announced in October 2018 when matured policies reached IDR802bn (US$58.5m). The insurer reportedly owes customers IDR16.42tn.

Separately, another state-owned insurance firm, Asuransi Sosial Angkatan Bersenjata Republik Indonesia (Asabri), has reportedly chalked up investment losses of IDR10tn. The company said that it would be able to pay policyholders as its losses are temporary.

AAJI says in its statement that it deeply regrets the recent failure by insurers to pay life insurance benefits.

Pointing out that at end-December 2019, there were 60 life insurance companies which were association members. Therefore, it adds, the default by the insurers concerned cannot be used as a benchmark regarding the overall condition of the life insurance industry.

In addition, the life insurance industry in the third quarter of 2019 recorded increases in payments of life insurance benefits as follows:


3Q 2018

IDR tn


IDR tn


Total claims and benefits paid




























Note: Figures above are based on reports submitted by 59 out of 60 AAJI members

The association says that data from members for the third quarter of 2019 show that the life insurance industry has made significant contributions to society and Indonesia’s development as follows:

i. 62,581,600 people have life insurance coverage, an increase of 14.7% compared to the 3Q2018;
ii. The total assets of the life insurance industry amounted to IDR548.72tn, with long-term investment funds of IDR481.40 placed in the government’s infrastructure development programme;
iii. An increase in total claims and benefits payments of 17.4% compared to 3Q2018 with payment totalling IDR104.30tn;
iv. In terms of job creation, there were 622,286 life insurance agents and 21,493 employees in the life insurance industry at 30 September 2019.

Prudential principles

The AAJI also says that the life insurance industry that must be run on the principle of prudence and must uphold the principles of good corporate governance, including ethics in doing business.

Life insurance supervision is conducted in layers, starting from supervision and internal control carried out by the board of commissioners as a corporate organ, internal auditors and committees under the board of directors.

The AAJI says that it believes that if the Insurance Act along with regulations are fully complied with by stakeholders, then the recent developments that occurred in the industry could have been avoided.

Savings plans

AAJI says that savings plans, around which the Jiwasraya scandal revolves, have been known in the life insurance industry in Indonesia since the mid 90s. Similar products are also found in the life insurance industry in many other countries.

A savings plan is an alternative to life insurance products such as personal accident insurance, term life insurance, whole life insurance, endowment insurance, health insurance insurance) and critical illness insurance, available to the community to protect themselves and their families, says AAJI.

Savings plans are useful as they provide protection against life risks while granting additional investment benefits at the end of the insurance contract or if there is a termination of coverage.


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