Credit Insurance Premium Until May 2024 Reaches IDR 9.93 Trillion, Up 20.94 Percent

Illustration (Photo: Doc Antara)

JAKARTA - The Financial Services Authority (OJK) noted that the premium for credit insurance as of May 2024 was IDR 9.93 trillion, an increase of 20.94 percent.

The Chief Executive of the Insurance Supervisory, Guarantee and OJK Pension Fund, Ogi Prastomiyono, said that the increase in premiums was in line with the improvement in the determination of premium rates as an effort to strengthen and restore credit insurance.

"Regarding the strengthening of credit insurance, OJK has issued POJK Number 20 of 2023 which has been effective since December 2023 which essentially contains matters relating to efforts to improve governance and the business process of implementing credit insurance business lines," he said in a written answer, quoted Friday, July 12.

Ogi explained, one of them is related to risk sharing between banks and insurance companies, reducing the cost of acquisition and affirmation of coverage areas that can be covered by general insurance companies and life insurance companies.

According to Ogi, the impact of strengthening governance is expected to increase prudent risk management for both parties so as to provide mutually beneficial business cooperation between insurance companies and bank partners.

In general, he said, credit insurance is an option in managing bank credit risk, so that the increase in bank credit in general will be directly proportional to the increase in the credit insurance business.

"In this case, governance with banks and insurance is a crucial thing to continue to be maintained," he explained.

Ogi explained, with the improvement of credit insurance products through adjustments to POJK 20 of 2023, it will further strengthen the precautionary principle of the Insurance Company in closing the risk of credit insurance.

"Inuransi companies are expected to immediately change cooperation agreements with credit providers (banks, financing and fintech p2p) so that the principles of risk sharing, better T/C and more reasonable premium rates can create a healthy insurance ecosystem," he said.

Ogi said, there are several steps that have been and will be taken by the OJK to support strengthening credit insurance, such as encouraging T/C adjustments and premium rates in accordance with the risk profiles accounted for on the basis of mutually beneficial business cooperation, of course, in accordance with the corridors regulated in POJK 20/2023.

Furthermore, OJK also encourages the development of a host to host information system to facilitate reconciliation and monitoring of credit insurance coverage data and conduct periodic evaluations related to credit insurance performance by asking the Insurance Company to convey credit insurance performance to OJK.

Then, monitor and encourage Insurance Companies to immediately adjust credit insurance products according to POJK 20/2023.

The credit insurance product adjustment can then be applied to changes to the cooperation agreement between the Insurance Company and the credit provider (banking, financing and fintech p2p).

The next step is that the synergy and collaboration continues to be carried out by the OJK, especially in relation to the provisions regarding the application of risk sharing between insurance companies and credit providers.

The application of risk sharing is expected to support growth and financial stability effectively, especially for the insurance and banking industries.

In addition, the OJK has also encouraged the Insurance Company to have a database of the same coverage/portfolio (mirroring) with the Insurance Company.

This is so that Resurance Companies can conduct more optimal pricing and have the same understanding of the risk profile of insurance objects covered.