Panacea Policy Guarantee Institution?
Sometime ago, Faisal Basri spread a vlog that the Insurance Law, which was issued ahead of the end of SBY's second presidential term in 2014, mandated the formation of a policy guarantee no later than 2017. In fact, it is a bit unfortunate that the Jiwasraya case goes to the political area that seems to blame each other between the regimes. in power.
This is a corporate problem that should be very simple directed towards solving the corporation, the responsibility of the owner, and the management of the corporation. If the problem comes from corrupt behavior by the manager, they must be brought to court.
Honestly, the Jiwasraya case happened a long time ago. Problems existed long before the issue began. Even the Financial Services Authority (OJK) has clarified the chronology of this insurance problem. The Jiwasraya case could be the result of the 1997/1998 financial crisis, which at that time only recommended repairing the collapsed banking system.
At that time, all parties, including the IMF, put more priority on banking because 85% of our financial system depended on banks. As a result of this choice, massive reform of the financial system, particularly banking, was carried out, from infrastructure, governance, risk management, to the supervisory agency by establishing the OJK.
As a result, the banking system appeared to be quite resilient in the face of the 2008 financial crisis with the explosion of the Century Bank case. The resilience of our financial system, in the midst of the case in the insurance industry, means that the financial services sector in 2019 can still support national economic growth above 5%, which is the second highest growth among the G-20 countries.
The aroma of the mandate for the formation of a policy guarantee when it was entered into the 2014 Insurance Law actually faces the fact that Jiwasraya's condition has been experiencing solvency difficulties since 2004. Actually, the biggest problem at that time was not being decisive in making decisions. The corporate owner is in the same position, between closing insurance companies that already have millions of policy holders or doing bail-in of fresh funds.
Shareholders did not immediately deposit funds to patch up the negative capital from the start. In fact, inviting investors is also hesitant because of the risk of their shares being diluted, given that their financial condition has been bad from the start
This condition is exacerbated because the owner still hopes that this insurance company will continue to run and must sell products. If you don't sell products, it will die by itself. Turn the brains of the owner who pityed the authorities, either at that time, Bapepam LK or the OJK afterward to hope that whatever he did would allow Jiwasraya to continue operating.
At that time the insurance supervisory authority was in a difficult position. The supervisory authority actually tested its guts. When allowing Jiwasraya to continue operating in a negative capital condition, since that point the company has also been running a business to dig holes and cover holes. That is, pumping up bigger problems as we are witnessing now. This is actually recognized by all parties, including owners and authorities. However, the demand for realizing the promise to increase capital is like waiting for the godot alias never to materialize.
The theory teaches, if a business is high-risk, then to attract fresh funds, they must promise to pay high yields in exchange for high risk. In the Jiwasraya case, because they still have to issue products, they sell products that have to promise high returns to convince people to buy. That plus this appendix belongs to the government which will not be closed.
The strangest thing is, Jiwasraya's selling products are JS Saving Plan products, which went on sale in December 2012 and which give permission is still Bapepam LK. If the authorities are prudent, then permission will not be granted because of the high potential risk. Why was the permit granted and carried out before switching supervision to OJK since January 1, 2013? This means that this process should be suspected of violating the principles of governance, aka playing games.
Are you afraid that the new authority will ban products with high risk and high return? Let the BPK and the AGO reveal their motives. However, what is certain is that the extension of the financial report under the reinsurance scheme was rejected by the OJK in January 2013, which then again asked the owner to immediately increase Jiwasraya's capital and also reminded the owner that selling the JS saving plan had a high risk.
Unfortunately, OJK as the new authority cannot perform cherry-picking which is acceptable for monitoring. Everything is taken for granted. Without being able to carry out due diligence all companies in the financial services sector, be it banking, non-bank financial industry, or the capital market received from BI and Bapepam LK. It doesn't matter if you are healthy, sick or have become a zombie company. Fortunately the banking industry has been reformed for a long time and the statutory instruments are more comprehensive. However, what about insurance, finance companies, as well as pension funds and the capital market.
Honestly, the majority of supervisors at OJK are bank supervisors. The implementation of supervision at IKNB and the capital market is definitely different from banking. Fundamental aspects such as the delivery of the report or how the quality of the report is often inconsistent. The situation is exacerbated by its outdated law. Meanwhile OJK and even BI as the central bank do not have the capacity to initiate laws because that is the domain of the government and the DPR. They are only sources. To make matters worse, the fact is that not all former BI and Ministry of Finance supervisors joined the OJK at the end of 2013.
At the end of 2014, the Insurance Law was issued which mandated the guarantee of the policy so that the smell of hope, even if it was formed in 2017, could be used to guarantee that an insurance company was closed by the OJK. Is that a hidden meaning? Of course the authorities don't want to be careless. Moreover, the government has not drafted a policy guarantee law because they really understand that a policy guarantee can create moral hazard.
I agree with Faisal Basri's view that insurance policies are also risky if the industry is not properly organized first. The guarantee institution is not a panacea (panacea), but rather a complementary form of creating a reliable and useful insurance industry. This institution can not just be formed and used to guarantee insurance that is covered and certainly undermines public money from the premiums paid by policyholders and / or using government funds.
It's like chickens and eggs, all guarantee regimes think about that. When the government established LPS for banking, the industry was reformed first, then guaranteeing customer funds would run. Since 2018, OJK has started the process of transforming the regulation and supervision of the non-bank financial industry, including insurance. In fact, OJK promises to accelerate the transformation process to be completed in 2022. A short time when compared to the banking industry reform process which requires a longer time.
After the IKNB transformation is complete, we hope that this industry, including insurance, will grow again and gain public trust, further contributing to the economy and improving people's welfare. The existence of a Policy Guarantee Agency after this stage will certainly complement the ideal insurance industry infrastructure.
Prof. Drs. Ec. Abdul Mongid, M.A., Ph.D.
Economic Observer and Professor STIE Perbanas Surabaya
Published on mediaindonesia.com Friday, February 7, 2020 at 06.10 WIB