Insurance and Reinsurance – Indonesia

The Legal 500 Insurance & Reinsurance: Indonesia provides a pragmatic overview of the law and practice of insurance and reinsurance law in Indonesia. The guide provides information about the current issues affecting insurance and reinsurance in Indonesia and addresses topics such as contract regulation, licensing, penalties, policyholder protection, and alternative dispute resolution.

Regulation of insurance contracts in Indonesia

In Indonesia, insurance contracts are primarily governed by Law No. 40 of 2014 concerning insurance, which was enacted on October 17, 2014, and most recently amended by Law No. 4 of 2023, dated January 12, 2023 (“Insurance Law“), and its implementing regulations. The Insurance Law and its implementing regulations are implemented in conjunction with the Indonesian Civil Code and the Indonesian Commercial Code. The insurance sector also is regulated and supervised by the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or “OJK”).

An insurance contract, or insurance policy, is defined as a written deed of insurance contract or other documents equivalent to a deed of insurance contract, along with any other documents that form an inseparable part of the insurance contract. These documents contain an agreement between the insurance company or sharia insurance company and the policyholder, insured, or participant.

OJK Regulation No. 23/POJK.05/2015 concerning Insurance Products and Marketing of Insurance Products, dated November 26, 2015 (“OJK Reg. 23”), provides that that an insurance policy must not contain words, phrases, or sentences that could result in different interpretations of the covered risks, the insurance company’s obligations, or the obligations of the policyholder, insured, or participant. OJK Reg. 23 also provides that the wording used in an insurance policy must not create difficulties for the policyholder, insured, or participant in managing their rights.

OJK Reg. 23 further regulates the minimum provisions that must be contained in an insurance policy, such as the effective date of coverage, description of promised benefits, method of premium or contribution payment, and grace period for premium or contribution payment. Different minimum provisions apply for sharia-based insurance contracts.

Regulation of different types of insurers in Indonesia

The Insurance Law regulates different types of insurers differently, such as conventional and sharia insurance companies. Conventional insurers encompass businesses like health insurance and personal accident insurance companies, as well as reinsurance for risks associated with other conventional insurance companies.

Sharia insurance and sharia reinsurance businesses operate based on sharia principles. Each type of insurer is subject to different implementing regulations to which they must adhere. The regulations also vary depending on whether the insurance product is sharia-based.

Excerpted from The Legal 500 Insurance & Reinsurance comparative guide, published by Legalease Ltd.

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