The Financial Services Authority (OJK) has taken decisive steps to\nstrengthen the stability of Indonesia\u2019s financial sector through the\nissuance of OJK Regulation (POJK) No.\u00a020 of 2023. This regulation\ngoverns insurance products linked to credit or Islamic financing as well\nas surety products, and represents an important milestone in efforts to\nreform the credit insurance business line, which has long been\nsusceptible to excessive risk, overlapping coverage, and inadequate\nlong-term management.<\/p>\n
One of the most significant provisions in POJK 20\/2023 is the\nlimitation of insurance coverage by insurance companies to a maximum of\n75%. This means that creditors, namely banks or financing institutions,\nmust bear at least 25% of the coverage value in the event of debtor\ndefault. This model transforms the face of credit insurance, which has\npreviously positioned general insurance companies as \u201cabsolute risk\nabsorbers\u201d bearing 100% of the risk burden.<\/p>\n
Now, the risk-sharing scheme requires banks and financing\ninstitutions to be more prudent in assessing and approving credit\neligibility for their debtors, whilst strengthening internal risk\ngovernance.<\/p>\n
In essence, this shift is not merely a matter of risk proportions,\nbut also an effort to change the industry\u2019s mindset so that it no longer\nviews credit insurance as a supplementary loan product, but rather as a\nreliable protection instrument that contributes meaningfully to\nmaintaining the stability of the national financing system.<\/p>\n
However, implementation is not straightforward. In the field,\ninsurance companies still face resistance from partners who have grown\naccustomed to delegating nearly all protection responsibility to\ninsurance providers.<\/p>\n
At this stage, business model adaptation, contract renegotiation, and\nmarket education become unavoidable tasks for insurance companies.\nMoreover, given that credit insurance contributions over the past three\nyears (according to AAUI data) remain one of the mainstays of general\ninsurance premiums at Rp22.3 trillion (2023), Rp17.1 trillion (2024),\nand Rp19 trillion (2025)\u2014substantial premiums second only to property\nand motor vehicle lines\u2014many insurance companies will need to reconsider\ncontinuing the credit insurance business line under this new model.<\/p>\n
Governance Challenges and Industry Readiness<\/p>\n
POJK 20\/2023 also establishes significant minimum equity requirements\nof Rp250 billion for general insurance companies and Rp100 billion for\nIslamic insurance companies. Amidst operational cost pressures, tight\nmarkets, and reinsurance support challenges, many insurance companies\nwill likely need to reconsider whether to continue the credit insurance\nbusiness line under this new pattern.<\/p>\n
Additionally, insurance companies must have information systems\nintegrated with the Financial Information Service System (SLIK) to\nassess debtor eligibility, and must employ credit insurance underwriting\nspecialists with certification and a minimum of three years\u2019 experience.\nImplementation of these provisions will require considerable investment,\nboth in terms of information technology infrastructure and human\nresource development. In simpler terms, improved governance in the\ncredit insurance line is what must currently be addressed.<\/p>\n
This governance improvement and strengthening is inevitable. With\nreliable and integrated IT systems, data transparency can be achieved.\nAll parties involved in credit insurance underwriting\u2014from banks and\nfinancing institutions, insurance brokers, insurance companies,\nreinsurance brokers to reinsurance companies\u2014will be able to access the\nsame debtor data in real time.<\/p>\n
Reserve practices will also become more precise and accurate, so that\nthe risk of massive claims that has long haunted the industry can be\nsuppressed and controlled. This is the vision of credit insurance\ngovernance for the future: governance based on data, transparency,\ncollaboration, and accountability. This practice is expected to reduce\nmassive claims that often become a source of industry liquidity\npressure, particularly on the side of insurance as policy\nunderwriters.<\/p>\n
According to AAUI data, credit insurance claims over the past three\nyears remain very high, at Rp16.8 trillion (2023), Rp15.6 trillion\n(2024), and Rp18.2 trillion (2025). This means that loss ratios over the\npast three years were respectively 75.3% (2023) and 91.2% and 95.7%,\nwhich clearly remain a collective challenge for the industry.<\/p>\n
Ultimately, companies able to adapt to the new provisions will emerge\nas more professional, resilient, and market-trusted players. This\nregulation is truly a call for fundamental improvement, not merely\nadministrative compliance. Governance improvement is a foundation that\ncannot be compromised in building a healthier and more sustainable\ncredit insurance industry.<\/p>\n
Momentum for Change<\/p>\n
Although OJK has granted adjustment periods for general insurance\ncompanies to implement the credit insurance line, adaptive supervision\nand open dialogue between the regulator and industry players will also\nbe key to successful implementation of the regulation in the field.\nConsistent and proportional oversight is essential so that the expected\ntransformation does not merely become formality, but truly brings about\nreal change in the field.<\/p>\n
POJK 20\/2023 is an important opportunity to repair the foundation of\nIndonesia\u2019s credit insurance industry. This transformation challenges\nindustry players to abandon instant business practices and begin\nbuilding protection systems truly based on risk management. Through\nthis, public confidence in credit insurance products can be restored,\nand this sector can contribute more substantially to strengthening the\nresilience of the national financing system.<\/p>\n
Now, what is needed is the willingness and courage to change, not\nonly on the insurance ecosystem side, but also on the banking and\nfinancing institution side.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/restructuring-credit-insurance-1773139986", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }