The revelation that several Indonesian state-owned insurers are on the brink of collapse due to financial irregularities has further highlighted the need for the country’s government to shape up its insurance and finance sector and regulatory agency.
A report by Asia Times said that, aside from Asuransi Jiwasraya, military insurer Asuransi Sosial Angkatan Bersenjata Republik Indonesia (ASABRI) is also in financial trouble, and the two cases seem to be related. The two companies are unable to pay out policies and investments totalling almost US$2 billion.
Experts have called for Jakarta to intervene and implement more stringent measures from the Finance Ministry in supervising the state-owned companies, as well as revamping the regulatory agency Financial Services Authority (OJK).
“This whole thing is a catastrophe, not only for those who are involved directly, but for the already hardly-existing commitment to institutional protection in general,” a former insurance executive was quoted as saying in the report. “The absence of insurance DNA within the Indonesian environment is ultimately what has got us here.”
The former executive noted that due to the low insurance penetration in the country, the regulators do not give much importance to it, and are not interested in applying global standards to the sector. Indonesia’s insurance penetration is at less than 2%, compared to 4.3% in neighbouring Malaysia and 5% in Thailand.
Former Asuransi Jiwasraya president-director Handrisman Rashim and four other suspects have already been arrested on corruption charges. Among the suspects are real estate businessman Benny Tjokrosaputro and Heru Hidayat, president of a shipping and mining firm.
Meanwhile, since ASABRI is under the Defence Ministry, its condition is less known, the report said. State officials have been avoiding inquiries regarding ASABRI’s problems and insisting that the insurer is in a good state.
However, the National Police recently opened an investigation into possible corruption in the company, due to the fact that police officers make up about two-thirds of ASABRI’s 940,000 customers.
Indonesian President Joko Widodo warned that unless the non-banking financial sector implements reforms, people’s trust in it will erode and that would eventually be detrimental to the entire country’s economy.
