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Attorney Heru Widodo delivering the subjects of the petition in the judicial review hearing of the Insurance Law, Monday (20/1) in the Plenary Courtroom of the Constitutional Court. Photo by Humas MK/Gani.

JAKARTA, Public Relations of the Constitutional Court—The Association of Indonesian General Insurance Companies (AAUI) petitioned Law No. 40 of 2014 on Insurance to the Constitutional Court (MK) on Monday (20/1/2020). The Petitioner of case No. 5/PUU-XVIII/2020 argued that Article 5 paragraph (1) of the Insurance, which reads "The business scope of General Insurance Business and Life Insurance Business as referred to in Article 2 paragraph (1) and paragraph (2) and Sharia General Insurance Business and Sharia Life Insurance Business as referred to in Article 3 paragraph (1) and paragraph (2) can be expanded according to the need of the society," contradicts Article 1 paragraph (3), Article 28C paragraph (2), Article 28D paragraph (1), and Article 33 paragraph (4) of the 1945 Constitution.

Through attorney Heru Widodo the Petitioner argued that the norm does not explicitly state surety business that has been running for 40 years as an innovation product of insurance companies. The business takes over the potential loss risk on the implementation of a contract in the supply of goods or services. This business is experiencing rapid development internationally, whereas in Indonesia, insurance companies since the 1970s have been considered non-banking institutions that can provide surety for development projects.

Public Needs

The legality of surety has been acknowledged by the Government since 1978 through Government Regulation No. 34 of 1978 and the Presidential Decree No. 14A of 1980. Despite clear regulations, ironically surety business is not explicitly regulated in the Insurance Law. Guarantee through surety products is only based on Article 5 paragraph (1) of the Insurance Law, which authorizes the Financial Services Authority (OJK) to expand the insurance business line based on public needs.

"Currently 47 insurance companies have permission to issue this product. However, its status is unclear and its existence is ambiguous and even [could potentially cease] after the enactment of Law Number 1 of 2016 concerning Guarantees," Heru explained in a hearing led by Constitutional Justice Suhartoyo with Constitutional Justices Enny Nurbaningsih and Daniel Yusmic P. Foekh. 

Heru further explained that Law No. 1 of 2016 had resulted in uncertainty in surety business and harm to the Petitioner because insurance companies that previously could provide surety had to adjust within three years of the enactment of the law. As a result, only licensed companies are legally recognized for being able to conduct this business. 

"This cannot happen because insurance companies cannot automatically obtain a business license as an agency or guarantee company. The insurance company’s permit to carry out guarantees in the form of surety is issued by the OJK as an institution that is given attributive authority to issue regulations related to this business permit," Heru explained. 

Constitutionality of Norm

Constitutional Justice Enny elaborated on the parties that may speak/act on behalf of an association in and outside of the court, which the Petitioner could use to establish legal standing in filing the petition. She also requested that the Petitioner state the number of members of the association and the surety business permit of all of them. “Do all members have the surety business permit? Please explain it,” she asked.

Justice Enny also highlighted the Petitioner\'s potential or actual constitutional right that was neglected due to the enactment of the Insurance Law. In the petition, the Petitioner argues that the a quo law is contrary to Article 33 paragraph (4) on the economy. However, she did not find any constitutional violation.

Constitutional Justice Foekh questioned the Petitioner\'s description on the OJK Regulation in the petition, primarily concerning administrative and criminal sanctions. "Does the OJK regulation [specify that] the OJK has the authority to delegate directly or indirectly in the a quo law?" he asked.

Justice Foekh also requested that the Petitioner confirm the number of companies in the association that do surety business. Meanwhile, Constitutional Justice Suhartoyo requested that the Petitioner simplify the petition and remove repetitions.

The Petitioner was given 14 days to revise the petition for 14 days and submit it by Monday, February 3, 2020 at 13:30 WIB to the Registrar\'s Office. (Sri Pujianti/LA)

Translated by: Yuniar Widiastuti

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