JAKARTA: Capital Market and Financial Institution watchdog (Bapepam-LK) plans to hold particular financial deregulation merely to boost the growth of domestic micro insurance.
The market authority currently reviews a possibility to issue a more flexible regulation to urge the penetration of industrial players into micro insurance segment, said Bapepam-LK Head Nurhaida.
The regulator will review several incentives, including the attempt to ease the obligation of licensed agent in distributing micro insurance products as well as the regulation in opening new branch offices or representatives.
This aims merely to curb production cost of micro insurance products and in the end the insurer might sell their products at lower prices and rather affordable by low-income society.
“Micro insurance market has high potential yet it has high cost and low premium. Government does not seem to give any subsidies. Thus, the only possible solution is by issuing regulation that will lead to lower prices of insurance products,” he said at a seminar entitled First Microinsurance Marketplace in Indonesia yesterday.
Most insurance companies are centralized in large cities, eyeing middle and high class society. This in fact prompts the low penetration of domestic insurance, reaching around 1.67%.
Regulation on micro insurance is still limited to academic study, said Head of Insurance Bureau at Bapepam-LK Isa Rachmatarwata.
Further he said, pricing will be considered in the regulation. Pricing is an important factor since the appealing factor of micro insurance product lies on the affordability particularly for the low-income families.
“Hopefully we can give the clear description on the direction and substance of micro insurance at early next year so that we can issue the regulation in the first half next year,” he said.
Currently there are two companies proposing license to work on micro insurance. However, Isa declined to reveal the identities of those two companies.
Micro insurance will not overlap any health insurance services provided by Social Security Agency I or pension protection offered by Social Security Agency II. The health protection will start 2014 while pension facility will be distributed by 2016.
The micro insurance development will serve as other alternative for areas that are not covered by Health Social Security and Pension Social Security.
Financial deregulation is an incentive to develop micro insurance segment, said Indonesia’s General Insurance Executive Director Julian Noor. This deregulation will trigger most companies to penetrate micro segment. (T02/NOM)
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