Insurance Mis-selling Cases Remain High, Indonesian Public Loses Rp 790 Billion

Mis-selling cases remain the largest contributor to consumer complaints in the insurance industry. This situation arises due to differences in understanding between agents’ explanations and the terms of the policy received by customers.

According to data from the doctoral dissertation of Rista Qatrini Manurung, Director of Legal and Compliance at PT AIA Financial, losses reached Rp 790 billion over the past five years from data of five insurance companies. Out of around 5,600 cases, 5,004 were not proven to be mis-selling, while more than 600 cases were proven mis-selling with claim payments of around Rp 160 billion by the companies.

“This means there are still many losses in the hundreds of billions that are not accepted by insurance companies and then who bears the loss? Consumers, right. This, in my opinion, is very dangerous,” Rista explained when met after her open doctoral defence in Jakarta on Monday (30/3/2026).

If the scope is expanded to 58 insurance companies in Indonesia, the loss figure is estimated to be much larger. Rista emphasised the need for consumer protection, but not in an absolute manner, rather relative to maintain a balance of responsibilities.

She explained that if all agents’ mistakes are burdened on the company, efforts to prevent mis-selling would be neglected.

In addition, a full company responsibility scheme also risks triggering moral hazard from insurance agents. Agents tend to chase as much commission as possible without paying attention to sales quality because they feel the risk will be borne by the company.

“The more agents sell, the more commission they get. They don’t need to worry at all about moral hazard. They just sell as much as possible because the complaints will be handled by the insurance company anyway,” she said.

Rista added that moral hazard can also arise from the consumer side who do not read the policy thoroughly. Consumers often only trust the agent’s explanations, especially because agents usually come from close environments such as family or relatives.

With these three assumptions, Rista assessed that the implementation of absolute responsibility that burdens all agents’ mistakes on the insurance company would actually cause negative impacts in practice.

“So, is vicarious liability absolute or relative? This is what (my dissertation focuses on) I researched slowly. I say it should not be absolute,” she stressed.

Thus, Rista proposes a shift to the concept of relative or conditional responsibility. With this, the company’s responsibility is determined based on the efforts that have been made to prevent mis-selling.

In the first stage, the company needs to be tested through 25 parameters, including compliance with regulations, implementation of governance, to the effectiveness of the agent supervision system. If no violations are proven against these parameters, then the responsibility for mis-selling cases can also be burdened on the agent or the public.

From the agent’s side, Rista emphasised the importance of distinguishing between agents’ actions that are still within the company’s authority and actions done for personal interests outside control. Several assessments are deemed able to determine whether the rogue agent intentionally intended to mis-sell to prospective customers.

If the agent is proven not to have the ‘intent’ to mis-sell, then the examination can proceed to the consumer. Rista stressed the importance of checking whether the customer fully understands and comprehends the product they are buying.

With this range of approaches, insurance companies are encouraged to be more active in prevention, rather than dispute resolution.