Subject

Law No. 40 of 2014 on Insurance (“Insurance Law”)

PPSK Law

Scope of Application

1.       The scope of general insurance and life insurance is expanded according to the needs of the community.

2.       Expanding the scope of the general insurance, life insurance, sharia general insurance, and sharia life insurance can be in the form of additional benefits based on fund management.

1.      Expansion of the scope of the general insurance business and sharia general insurance Business can be in the form of:

a.      Providing benefits related to credit/financing activities between creditors and debtors; and

b.      Suretyship. (refers to a general insurance business line that provides guarantees for the Principal's ability to carry out obligations according to the main agreement between the principal and the obligee)

2.      Carrying out insurance business for third party legal responsibilities in accordance with the requirements set by the Financial Services Authority (“Otoritas Jasa Keuangan” or “OJK”).

Compensation

The Controller or Pengendali shall be responsible for losses of the insurance company, sharia insurance company, reinsurance company, or sharia reinsurance company caused by the party in its control.

There is an emphasis that compensation shall be made if the loss is caused by the actions of the Controller, the influence of the Controller, and/or the actions of the parties in its control.

Bribery

N/A

There is a prohibition for related parties to solicit or accept, permit or agree to receive without the right a reward, commission, additional money, services, money or valuables, for their personal benefit or for their family benefit in order to obtain services, services, business acquisition, investment placement, and/or disbursement of claims from the insurance company.

Embezzlement

N/A

Everyone is prohibited from embezzling assets owned and / or managed by insurance companies, sharia insurance companies, reinsurance companies, or sharia reinsurance companies by transferring, pledging, collateralizing, using wealth, or committing other acts that are detrimental.

Prohibited Actions

Document forgery is prohibited.

Reports, documents, or business activity reports, and/ or transaction or financial reports are prohibited from such actions:

a.      Creating or causing false records;

b.      Removing, not including, or causing records to not be done; and

c.      Change, obscure, remove, hide, or tamper with a record.

Access to certain reports and analysis

Access to certain reports and the results of the analysis of reports cannot be opened by OJK to other parties, except to:

police and prosecutors for the purposes of investigation; judges for the benefit of the judiciary; tax officials for tax purposes; Bank of Indonesia for the implementation of its duties; and other parties based on laws and regulations.

There are additional parties that can be given access, namely the LPS to implement the policy guarantee program.

Premium payment

Premium or contributions may be paid directly by the policyholder or participant to the insurance company or sharia insurance company or paid through the insurance agent. The insurance agent can only receive payment of premiums or contributions from the policyholder or participants after obtaining approval from the insurance company or sharia insurance company.

In the event that the insurance company or sharia insurance company cooperates with other parties in the context of obtaining business, premiums or contributions can be paid directly by the policyholder or participants to the insurance company or sharia insurance company, or paid through other parties who cooperate. Other parties who cooperate only get premium payments when it is mentioned in the cooperation agreement.

Compulsory Insurance

N/A

The government can establish a compulsory insurance program according to needs. The government may require certain groups in the community to participate in the compulsory insurance program.

Bankruptcy and Suspension of Payment

An application for a declaration of bankruptcy against an insurance company, sharia insurance company, reinsurance company, or sharia reinsurance company under this Law can only be filed by OJK.

Also applies to suspension of payment or Penundaan Kewajiban Pembayaran.

Statuter Manager

N/A

In regard to the appointment of statuter manager:

a.       OJK considers the availability of individual personnel who will be appointed as statuter managers.

b.       The determination of the statuter manager by the OJK first goes through eligibility and propriety test.

c.       Statuter managers are required to report every decision and management action that has a material influence on the OJK periodically

Liability of a Statuter Manager

Statuter manager is liable for losses of insurance companies, sharia insurance companies, reinsurance companies, or sharia reinsurance companies and/or third parties if the losses are caused by fraud, dishonesty, or their intentionality to not comply with the provisions of laws and regulations in the insurance industry.

If the loss is not caused by the statuter manager, due to fraud, dishonesty, or intentionally not complying with the provisions of laws and regulations in the field of insurance, the Controller shall be responsible for the losses incurred.

Administrative Sanctions

There are several administrative sanctions provided.

Additional administrative sanctions in the form of a decrease in the level of company health state.

Criminal Activity

N/A

OJK has the authority to determine the start, end, or termination of investigations into insurance crimes.

Criminal Sanctions

N/A

Addition of criminal sanctions to

a.      Controllers who do not carry out their responsibilities in regards to compensation responsibility;

b.      Bribery; and

c.      Embezzlement.

Joint Insurance or Asuransi Usaha Bersama

Is not regulated in the Insurance Law.

Provides a legal basis on joint insurance business. The scope of business includes life insurance.

Policy Guarantee

N/A

The policy guarantee program is organized by LPS. In carrying out its new function, LPS is obliged to apply good governance including investment management, risk allocation, and internal control.