OJK has regulated insurance premium tariffs as well as general rules in regards to acquisition costs, starting from 24th January 2014 and this recommendation would be effected to Indonesian Insurance Industry as well as end users/ policy holders. This regulation covers all aspects of motor vehicle insurance and properties, as well as special risks regarding flooding, earthquake, volcano eruption and tsunami.
This regulation is in accordance with Chapter 20 of PP No 73 1992 about Operational of Insurance Industry, and following SK MENKEU 422/KMK.06/2003 chapter 19, that premium needs to be calculated based on risk and loss profile of at least a 5 year period. OJK Letter SE-06/D.05/2013 dated 31st December 2013 about Premium Tariffs regulations within motor vehicle and properties insurance, as well as special risks regarding flooding, earthquake, volcano eruption and tsunami effecting from 2014 is based on intensive discussion between insurance associations and players within the industry.
This regulation sets out a lower limit and maximum limits of insurance tariffs, except for earthquake cover. Maximum limits are set out to protect end user from being overcharged. Whilst lower limit protects insurers from inadequate premium accumulations which could lead to insurers inability to play claims.
As a preventive method, OJK has also put out OJK Letter No. S-6/D.05/2014 as a warning not to disregard the regulations. For example, through policy cancellations and re enact a new policy to hinder from the regulation.
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