Causes of Life Insurance Default | SimulasiKredit.com

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Insurance as one of the financial products is supposed to put a sense of security to customers for the promised coverage. However, what happens if the coverage fee company fails to pay claims based on customers? This happened to PT. Asuransi Jiwasraya (Persero) is the only red plate premium company that is predicted to be able to contribute to state revenue.

In October 2018, the public was shocked to use coverage of Jiwasraya premiums that failed to pay customer claims totaling RP 802 billion. How can SOEs engaged in this insurance sector experience a default that reaches Rp 1 trillion? Although it is unbelievable, but this is the fact.

Chronology of Jiwasraya insurance defaults on claims

Like embers in chaff. That is the saying to describe the condition of Jiwasraya’s dues. As if adem-ayem, it turns out that the management of this red plate coverage dues company cannot be separated based on the problems.

Established since 1859, pt. Life Insurance on managing insurance is certainly mature so there is no need to doubt it. Presumably, tens or even hundreds of years of experience does not make this company more solid in maintaining its financial performance & liquidity. Until October 2018, this company must be accepted as public attention because it defaults on customer claims that are due. Here’s the chronology.Kasus gagal bayar PT. Asuransi Jiwasraya was revealed in October 2018 based on a letter sent to a partner bank to withhold the payment of the policy that was due. One of these policies is a life premium that is packaged in the investment of a “saving plan” in the form of JS Protection Plan products. The reason for the delay in payment is the liquidity pressure experienced by the oldest insurance contribution company in Indonesia.Saving plan products based on Jiwasraya have been circulating to the community since 2013 using a contract duration of 5 years. The premium value is also unmitigated, which is a minimum of Rp 100 million which must be paid personally in front. Understandably, this premium product does target people with priority customer status. Since October 1, 2018, Jiwasraya will no longer be able to pay the policy due.In the case of Jiwasraya’s default, Rini Soemarno as the Minister of SOEs immediately ordered bpk & bpkp to conduct an investigation audit in November 2019. In addition, he also replaced the primary director of Jiwasraya.In May 2019, BPKP has submitted the output of the investigation audit to the Minister of SOEs. Unfortunately, both BPKP and the Minister of SOEs did not open the results of the investigation to the public.

Causes of Jiwasraya insurance default

As the oldest liability fee company, especially including SOEs, it is very surprising when it is spread that PT. Asuransi Jiwasraya has defaulted on the policies of its customers. How can an insurance company that has hundreds of years of experience be able to make such a default? There are quite poly causes of the default of Jiwasraya coverage dues, some of which become the following.Yields or interest that are too high

The yield or interest becomes one of the considerations on determining financial products, both savings, deposits, investments, and saving plan premiums. The lure of high interest rates is often effective to attract many customers. Likewise, what happens in JS Protection Plan insurance products from PT. Jiwasraya Insurance is marketed by 7 partner banks, namely BRI, BTN, Standard Chartered, Bank Victoria, Bank KEB Hana Indonesia, Bank ANZ, & Bank QNB Indonesia.

JS Protection Plan is a premium product with a saving plan system that provides an output or interest yield of 7%. The interest rate offered is obviously greater according to deposit interest. No wonder many customers are interested in ‘buying’ this insurance product. Moreover, Jiwasraya also offers insurance protection of up to 5 years on each customer in sync with the maturity of this insurance product.

The policy embedded in premium products from Jiwasraya is also believed to be too profitable for customers, because customers are allowed to withdraw their funds after a year plus a yield of 7%.Fraud in financial statements

In returning to the success of Jiwasraya insurance products that sell beautifully on the market, it turns out that it is not and is accompanied by using good management. The management of insurance funds using this saving plan system began to occur in the fourth year of its sales. This was revealed using indications of fraud in the 2017 financial statements. In the financial statements that year, the total profit achieved by Jiwasraya reached Rp2.4 trillion, even though the actual profit was only Rp 328.44 billion. The existence of fraud of these financial statements was known after the audit of the PriceWaterhouseCooper (PWC).

Fraud in financial statements and high interest rates cause the company’s finances to get heavier. Because, the company must pay back customer funds as well as interest that is not a little when it is due. Meanwhile, the return on the utilization of customer funds is not in sync using those listed in the company’s official financial statements.Haphazard on investing

The funds obtained on the sale of Jiwasraya premium products are managed in such a way that it makes a profit that can increase the company’s strength financially. Not only that, these benefits are also used to put output returns on customers.

Unfortunately, the management of Jiwasraya premium funds is evaluated less applying prudent principles. Jiwasraya is too haphazard in investing. From the 2017 financial statements, it was revealed that most of the customer’s funds were invested in mutual funds, stocks, and property.

Unfortunately, the investment was less concerned about risk management. Jiwasraya actually poly invests customer funds in illiquid stocks that consistently rise. As a result, the risk of failure and suffering losses always overshadows this insurance company. Sure enough, the shares that Jiwasraya wasted slumped in the financial market, so that the impact in the level of profit obtained was not aporisma, even suffered losses.

Jiwasraya premium rescue efforts

The fight that is being faced by PT. Life Insurance certainly requires more attention, especially according to the government. It takes the perfect solution to save this premium company based on bankruptcy.

Since it was revealed in October 2018, the ranks of pt. Asuransi Jiwasraya and the government, which in this case is the Ministry of SOEs, do not remain silent. They have tried to reach for strategic steps to save Jiwasraya. Here are the efforts that have been made.Extend a policy contract due

The liquidity pressure experienced by Jiwasraya caused the premium company to default on the policy that had matured. The first effort made to save Jiwasraya based on bankruptcy is to use extending a policy contract that is due or roll over.

This policy roll over effort is considered as a win-win solution for both companies and customers. For customers who are willing to roll over, they will be given an advance payment on the interest on the extension of the policy contract earlier. Meanwhile, customers who are not willing to roll over the policy are given effective development interest of 5.75% per year.Issuing debentures

The second effort made to save Jiwasraya is to issue debt securities. The goal is to increase investment so that the company’s balance sheet can be powered again in a faster time.

The debt issued by Jiwasraya is in the form of MTN (Medium Term Note) or medium-term debt securities worth Rp 500 billion. With the debt, it is hoped that Jiwasraya can get funds that can be used to increase investment so that the company’s balance sheet is more powerful.Establishing a subsidiary

Another effort made is to establish a subsidiary called PT. The Soul of the Son. The goal is to increase the company’s business performance to improve the company’s liquidity. How?

The strategy used is to sell new insurance products and unit links. Regarding using it, Jiwasraya collaborated with 4 major SOEs to market their products earlier. The SOEs involved include BTN (State Savings Bank), KAI (Indonesian Railway), Telkomsel, and Pawnshop.

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Such is the article about the cause of the premium of the soul default, hopefully useful for all of you.

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