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An insurance expert for the Petitioner Kornelius Simanjuntak delivering his expertise virtually at the judicial review hearing of the Insurance Law, Tuesday (20/10). Photo by Humas MK/Ifa.

JAKARTA, Public Relations of the Constitutional Court—Legal vacuum on joint insurance ventures such as Asuransi Jiwa Bersama Bumiputera 1912 (AJB 1912) has led to the lack of foreign investment, said University of Indonesia’s insurance expert Kornelius Simanjuntak presented by the members representative body (BPA) of Asuransi Jiwa Bersama (AJB) Bumiputera 1912 (Petitioner) at the judicial review hearing of Law No. 40 of 2014 on Insurance on Tuesday, October 20, 2020. The hearing had been scheduled to hear the Petitioner’s and the president/Government’s witness’ statements. In the case No. 32/PUU-XVIII/2020, the Petitioner believes Article 6 paragraph (3) of the Insurance Law violates Article 28D paragraph (1) of the 1945 Constitution.

Simanjuntak said there needs to be a strong legal basis, especially regarding joint insurance ventures, as the Government Regulation (PP) No. 87 of 2019 on Joint Insurance Ventures is not strong enough, especially relating to foreign investment. He believed the PP was less convincing for foreign investors to invest in joint insurance ventures in Indonesia.

"The provisions on the implementation and management of joint insurance ventures are under the law. This provide less legal certainty compared to the legal basis for insurance companies in the form of limited liability companies and even cooperatives,” explained Simanjuntak, who once served as chairperson of the Indonesian Insurance Board.

The Constitutional Court through the Decision No. 32/PUU-XI/2013 ordered a special law be made on joint insurance venture. This, Simanjuntak said, reflected support for the legislature to form the law. He also said that the provision of Article 6 paragraph (3) of the Insurance Law couldn’t be interpreted as a ban for the House of Representatives (DPR) and the Government from forming a special law, which other countries had done to promote joint insurance ventures.

Not Prioritized

Simanjuntak admitted that Article 7 paragraph (3) of Law No. 2 of 1992 on Insurance Business ordered the creation of joint insurance ventures. However, the legislature hadn’t followed up on it until the passing of Law No. 40 of 2014 on Insurance. He observed that this law wasn’t a government priority that even after a long period no bill on the matter had been proposed. He also observed that managers of such ventures hadn’t pay attention to the need for the law, when they could have proposed a bill draft to the House by proposing an academic text with the help of legal experts.

“However, managers of AJB 1912 hadn’t done this for 22 years since 1992 to 2014, which was a long time in the development of the insurance industry. Consequently, capital requirements became a hindrance as there is no access to strong and sufficient capital, making it hard for companies to compete. This negatively impacts company’s long-term sustainability,” he said virtually before the bench led by Chief Justice Anwar Usman in the Plenary Courtroom.

He also said that the House and the Government hadn’t carried out the mandate of Article 7 paragraph (3) of Law No. 2 of 1992 on Insurance Business, which means that Law No. 40 of 2014 on Insurance, which responded to the development of insurance business, didn’t provide any provisions on joint insurance ventures. “Did [it] mean a special law or the general insurance law to regulate the status of this joint ventures,” he said. 

Improvement of Regulation and Monitoring 

The president/Government’s witness Director-General of State Assets Isa Rachmatarwata said the background of the revision to the Insurance Law was to revise the regulation and monitoring of the insurance business. He said he witnessed that when the a quo law was drafted, the regulation of insurance in Indonesia should have been improved in order to be on par with that in other countries. Not to mention, he added, at the time Indonesia had entered the era of open economy, which gave opportunities for foreign investment in various sectors.

“This equalization was expected to facilitate investors. Therefore, it was also important to improve the regulation and supervision optimally,” he said virtually.

Isa said that Indonesia couldn’t ban foreign investment, which would mean more capital. However, for equal protection for Indonesian consumers as well as investors, the risk management and organizational structure of join insurance ventures must be improved. To follow up on this, regulators introduced insurance quality levels, especially regarding the assets and obligations of joint insurance ventures, which had also been implemented worldwide. Joint insurance ventures had been given several years to implement a system to assess the imbalance of assets versus obligations.

He added that there hadn’t been any law on joint insurance ventures, which limited investment on this type of companies, compared to that for limited liability insurance companies or insurance cooperatives. The company’s article of association regulates investment in joint insurance ventures in two ways: one, members can deposit money outside of the insurance premium; second, members are willing to reduce the benefits of the policy. Because of this, AJB 1912 had difficulties in making adjustments, particularly in relation to the health of the insurance company, despite being given a transition period.

"In the end, the Government and the House decided that the provisions on joint venture legal entities no longer be regulated in a separate law, but in a government regulation," he said. 

Also read:

Members Representative Body of Mutual Life Insurer Bumiputera Challenges Provision on Insurance

Govt: Regulation of Insurance Business Is Open Legal Policy

House Affirms Review of Govt Regulations Under Purview of Supreme Court

Margarito Kamis: Provisions on Insurance Business Capitalistic 

Nurhasanah, Ibnu Hajar, Maryono, Achmad Jazidie, Habel Melkias Suwae, Gede Sri Darma, Septina Primawati, and Khoerul Huda are the members representative body (BPA) of mutual life insurer Asuransi Jiwa Bersama (AJB) Bumiputera 1912. They challenge Article 6 paragraph (3) of the Insurance Law, as they believe they have suffered constitutional loss because the a quo article is against the substance of the Constitutional Court Decision No. 32/PUU-XI/2013 dated April 3, 2014, in which the Court ordered that the provision on mutual insurance business shall be regulated in a separate law at the latest two years and six months after the ruling was pronounced. They believe the president and the House of Representatives (DPR) has induced a regression by amending Law No. 2 of 1992 on Insurance into Law No. 40 of 2014 on Insurance, especially the a quo article.

Writer: Utami Argawati
Editor: Lulu Anjarsari
PR: Annisa Lestari
Translator: Yuniar Widiastuti (NL)

Translation uploaded on 10/26/2020 16:07 WIB

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian version, the Indonesian version will prevail.

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