Jakarta, CNBC Indonesia – Life insurance, especially unit link products, is in the spotlight of the Financial Services Authority (OJK). This is because there are many complaints from the public regarding the value that is not in accordance with the provisions of the policy, so it is difficult to file a claim for the protection product wrapped in the investment.
This also triggered massive withdrawals of customer funds throughout 2020 or the closing of unit link policies.
From the OJK data recorded, during 2020, a total of 593 complaints were submitted. This figure is also higher than the number of complaints in 2019 which was 230 complaints. In the first quarter of 2021, it has reached 273 complaints.
Insurance observer, Irvan Rahardjo, said that this condition occurred because there were many misperceptions in selling products by insurance agents. This means that many people buy unit link products without being fully educated, including the risks of this product.
“Many agents say that the unit link is a savings account, unfortunately they say it [unit link ini] deposits and provide optimistic projections [soal imbal hasil atau return] but the worst-case scenario is not described. And most of the premiums are for risk payments,” he explained in Investtime, CNBC Indonesia, Wednesday (29/9/2021).
Irvan emphasized that if customers need investment, they should buy an open unit-linked investment product that combines protection and investment. On the other hand, if the customer or the public needs pure insurance protection, then buy insurance, not unit link.
“Don’t get mixed up, because insurance is not a risk manager, don’t buy investment products from insurance companies, it’s clear that there are many cases,” he said.
This is also a problem so that the investment value in unit-linked products does not produce a positive value, because insurance companies do not have the ability to manage investments.
For information, the OJK recorded the number of unit link customers fell from as many as 7 million to only 4.2 million policyholders at the end of last year. This means that almost 3 million customers have closed their policies in the midst of a pandemic.
In fact, OJK explicitly mentions unit link insurance cases published by the media have an impact on the non-bank financial industry.
OJK will soon release detailed rules in a Circular (SE) relating to Investment-Linked Insurance Products aka PAYDI, including unit links.
“We want this regulation to be one of the answers to problems that arise, including consumer protection, the sales process, consumer understanding considering that this product is still an insurance product but there is an investment element,” said Dewi Astuti, Head of the OJK IKNB 1A Supervision Department. to CNBC Indonesia, last Monday (20/9/2021).
This decision was taken due to the large number of complaints about this product to the OJK and in order to minimize problems with this product, considering that the OJK findings indicated that product sales were carried out using the Multi Level Marketing (MLM) mechanism.
However, the Indonesian Life Insurance Association (AAJI) denied the OJK data that there had been unit-linked product policy closures throughout last year, what happened was a decline in unit-linked sales due to the Covid-19 pandemic.
AAJI Executive Director Togar Pasaribu said the Covid-19 pandemic did have a negative impact on insurance sales.
“It’s not a policy closure, but a decrease in sales. Yes, sales will definitely decrease because of the Covid situation,” Togar told CNBC Indonesia, Friday (24/9/2021).
Togar explained, currently the number of individual policies according to AAJI data reaches more than 18 million policies. When combined with group policies, the number reaches more than 60 million.
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