Trillions Of Losses Created By Jiwasraya For The State And Customers

Illustration. (Photo: Unsplash)

JAKARTA - The PT Asuransi Jiwasraya default scandal case continues to discover several new facts. Most recently, today, Wednesday, January 8, the Supreme Audit Agency (BPK) stated that since 2006 this state-owned insurance company has recorded false profits due to accounting engineering. In fact, according to the BPK, Jiwasraya should have recorded a loss.

Jiwasraya is considered to have failed miserably in its financial management. As reported, the root of the problem in the Jiwasraya case was that they were unable to pay the Rp. 12.4 trillion policy claim for the October-November 2019 period. Jiwasraya Managing Director Hexana Tri Sasongko could not confirm when the payment of the policy claim was due.

Jiwasraya's customers also demand justice. Quoted from cnnindonesia.com, there are several Jiwasraya customers who came to the BUMN Ministry office on December 17, 2019. One of the customers, Haresh, wanted to ask for an explanation from the government, as Jiwasraya's largest shareholder, regarding the settlement of claim payments for JS Saving Plan products.

He admitted that he bought JS Saving Plan products through Standard Chartered Indonesia in 2017. Not alone, two of Haresh's children also bought the insurance product policy.

"Offered by Standard Chartered, he said, the yield is better than deposits. It is said to be good, so buy it, then he said that insurance is free of income tax," he explained.

Furthermore, he stated that the payment of claims in the first year was still smooth. Meanwhile, claims payments began to stall on October 6, 2018.

"Starting to get stuck [payment] October 6, 2018. From then until today there has been no payment," said Haresh at that time.

This case drew more public attention when Attorney General ST Burhanuddin on December 18, 2019 revealed that there were allegations of corruption in the management of the investment fund of PT Asuransi Jiwasraya with a state loss of around Rp. The value of this loss could even increase in line with the results of the AGO investigation.

Burhanuddin said that Jiwasraya management allegedly violated the principles of good corporate governance in managing public funds. Jiwasraya management chooses to invest with high risks in order to pursue big profits.

Jiwasraya's customers were even more outraged. Quoted from Bisnis.com, on January 4, around 50 representatives of Jiwasraya customers came to the DPR building. They represent hundreds of policy owners to collect the settlement of the claim payment problem for the JS Saving Plan product from Jiwasraya.

One of these customers is even the Vice President of PT Samsung Electronics Indonesia, Lee Kang Hyun. According to him, Jiwasraya last paid claims for policies under Rp1 billion on October 6, 2018, and there have been no more claims payments to date.

He said, since Jiwasraya announced a default in October 2018, customers have continued to seek clarity on the fate of the funds they have deposited. At first they tried to communicate with Jiwasraya's management, but to no avail, they have never met.

"Never before has Jiwasraya provided direct information to us, nor has it been through a bank [policy distributor]," said Lee.

They then sought confirmation from the Ministry of BUMN, which at that time was held by Rini Soemarno, as the majority shareholder of Jiwasraya. There are two copies of a letter from the Jiwasraya Bancassurance Policyholder Communication Forum addressed to Rini Soemarno.

The first letter dated December 26, 2018 contains a warning for payment of Jiwasraya's bancassurance policy that has matured. Meanwhile, the second letter dated August 5, 2019 contains a statement of demands and a request for an audience with the Ministry of BUMN.

The letter has yet to produce clarity on the fate of their money, including Lee's Rp. 8.2 billion, which has not returned from his total policy of Rp. 16 billion. They then contacted the Financial Services Authority (OJK) to seek certainty.

Based on a copy of the receipt for sending the letter to the OJK, a letter dated August 5, 2019 from the Jiwasraya policy holder has been received by OJK. However, according to Lee, there has been no response from the OJK to date.

Failed

The culprit for Jiwasraya's poor financial management is the result of one product, namely the saving plan or the JS Saving Plan. JS Saving Plan is a life insurance product as well as investment offered through banking or bancassurance.

In contrast to unit-linked insurance products whose investment risk is borne by policyholders, the JS Saving Plan is a non-unit-linked investment whose risk is fully borne by the insurance company.

Seven banks are selling agents, namely PT Bank Rakyat Indonesia, Standard Chartered Bank, PT Bank Tabungan Negara Tbk, PT Bank QNB Indonesia, PT Bank ANZ Indonesia, PT Bank Victoria International Tbk, and PT Bank KEB Hana.

The JS Saving Plan product was first introduced in 2013. Through this product, Jiwasraya offers protection for five years but has an investment period of one year.

This means that every year there are claims due to be paid, unless the customer requests an extension of the policy or a roll over. After the claim is paid, the personal accident protection period continues until the fifth year.

JS Saving Plan products are labeled with tariffs ranging from Rp. 100 million to Rp. 5 billion for each policy. Customers can buy more than one policy so that they can have a policy value of more than IDR 5 billion. One customer can have more than one policy, it could be in the name of another family.

The product was marketed through the Jiwasraya branch offices. However, management then stopped marketing at the branch office for some reason.

The JS Saving Plan can be said to be the flagship product of Jiwasraya, especially in the 2013–2017 period. These products continued to record premium growth until 2017 became the largest source of premiums from Jiwasraya.

In 2015, the premium for the JS Saving Plan reached IDR 5.15 trillion or 50.3 percent of the total premium at that time. The amount increased in 2016 to IDR 12.57 trillion or 69.5 percent of the total premium.

In 2017, the premium for the JS Saving Plan continued to grow and reached Rp. 16.54 trillion. The premium portion for these products reached 75.3 percent of the Jiwasraya's total premium of IDR 21.91 trillion.

However, in 2018, the premium for the JS Saving Plan shrank to IDR 5.46 trillion. Jiwasraya's premium as a whole also decreased to Rp10.67 trillion, so that the portion of the JS Saving Plan product became 51.1% of the total premium.

The lure of high yields from these products poses a big problem. Through the JS Saving Plan product, Jiwasraya offers guaranteed yields ranging from 9-13 percent during 2013–2018. The yield is greater than the 2018 deposit interest rate of around 5.2-7.0 percent, also greater than the negative 2018 growth of 2.3 percent.

In fact, the returns on the JS Saving Plan can never be covered by investment. The promised yield was effective 13 percent, down to 7 percent, but market conditions were much lower than that, causing losses.

For information, in Jiwasraya's financial statements, assets in the form of shares in December 2017 were recorded at Rp.6.63 trillion, shrinking drastically to Rp.2.48 trillion in September 2019.

The worst was the assets placed in mutual funds, where in December 2017 it was recorded at IDR 19.17 trillion, its value dropped to IDR 6.64 trillion in September 2019.

Meanwhile, other assets placed in corporate bonds and SUN were relatively stable. The stocks that Jiwasraya collects are very volatile, which are said to be included in the category of fried stocks.

On the other hand, the insurance company's assets are also insufficient to cover policy payments. Jiwasraya actually has assets but its value has shrunk to Rp. 2 trillion from Rp. 25 trillion.

Thus, the value of these assets cannot be relied on to pay off payments. This deteriorating investment performance condition made the capital adequacy ratio to minus 805%, far above the 120% minimum capital required by insurance companies as stipulated by the OJK.

The JS Saving Plan product began to show symptoms of problems in 2018, until finally in October 2018 the management announced a failure to pay the JS Saving Plan claim worth Rp802 billion. The announcement is made by the board of directors to the marketing banks.

In October 2018, Jiwasraya also decided to stop selling JS Saving Plan products. Claims due to maturity continue to swell, until the end of 2019 the amount reached IDR 12.4 trillion.

In addition to the lure of high returns, there are violations of governance principles within Jiwasraya. This is especially true in the management of customer funds obtained through the JS Saving Plan product.

Now, as many as 17,403 policy holders depend their hopes on all parties, including the current Jiwasraya management, the Ministry of BUMN, OJK, and the government so that their money can be returned.

The hope of getting the promised fortune through the JS Saving Plan product turned out to be bitter. The product has stopped being marketed, but like a snowball, the problems it causes are now rolling and getting bigger.