Indonesia - Marketing Channels Of Insurance Products.

Updated: Nov 27, 2020

During the pandemic, Indonesians have become more interested in insurance to mitigate uncertainty regarding their health and personal finances brought about by the pandemic. This is addressed swiftly by the insurance companies or marketers to market their products that are more accessible to their customers. Insurance companies or their marketers have also been using e-commerce platforms to market their products. This marketing strategy makes senses as it cuts the complexity and enhance the customer experience.

In order provide guidelines on how insurance products must be marketed, the Indonesia Financial Services Authority (FSA) recently issued Circular Letter No. 19/SEOJK.05/2020 on Marketing Channels for Insurance Products (“Circular Letter 19”). As the implementing provision of FSA Regulation No. 23/POJK.05/2015 on Insurance Products and the Marketing of Insurance Products, Circular Letter 19 provides guidelines on how insurance companies should market their products.

Guidelines for the Marketing of Insurance Products

Insurance companies may only market their insurance products through the following channels:

  1. direct marketing;

  2. insurance agent;

  3. bancassurance; and/or

  4. non-bank entities.

Insurance companies are responsible for any consequences that arise from an insurance policy and all actions by parties including employees, bank and non-bank entities marketing a company’s insurance products., Marketing kits and product summaries must have been determined and approved by the insurance company before being used to market the products in the field.

All information contained in a kit and summary must be stated or conveyed accurately, honestly, clearly, not misleadingly, and must be in accordance with the insurance policy. The insurance company must also ensure that all information contained in the kit and summary are in accordance with the relevant laws and regulations, including those on consumer protection.

Further, marketing activity by insurance agent, bancassurance and non-bank entities must first be documented into a cooperation agreement (“Cooperation Agreement”). This must be in Indonesian language or can be made in bilingual format with a foreign or local language. Should the Cooperation Agreement be produced in two languages, it must clearly state that in the event of a dispute or inconsistency, the Indonesian language version will prevail.

The Cooperation Agreement must cover at least:

  1. identity of the parties

  2. rights, obligation and responsibilities of the parties;

  3. period of agreement;

  4. requirements and provisions on amendment of the agreement;

  5. statement that underwriting and claims decisions (acceptance, rejection and claim amounts met) are fully within the right and authority of the insurance company;

  6. name and specification of insurance products being marketed;

  7. procedure on insurance closure, premium payment or contribution;

  8. procedure on notification if there are changes to the marketing kit;

  9. the amount in commission paid by the company to parties marketing insurance products;

  10. responsibility of each of the parties in handling complaints from policyholders, the insured, or participants;

  11. insurance agent’s code of conduct that must be satisfied by the party marketing the products;

  12. conditions for termination; and

  13. dispute resolution mechanism between the parties.

‘Know Your Customer’ policy

The Insurance company and party marketing the insurance product must apply a “know your customer” policy in order to match the insurance product offered with the needs of the policy holder, the insured, or the participant, and implement an anti-money-laundering requirements.

Marketing of insurance products via an electronic system (e-marketing)

Given the recent widespread development of e-marketing, Circular 19 also stipulates \provisions on this. The insurance company, insurance agent, bank and non-bank entities may e-market insurance products , whether organized independently or in collaboration with other parties based on a cooperative agreement, including website media, social media, applications, electronic mail (e-mail), or messaging services.

When e-marketing, the parties concerned must ensure they :

  1. have an electronic systems operator registration certificate issued by the competent authority in accordance with the provisions of laws and regulations in the field of electronic information and transactions;

  2. have and implement IT risk management policies, standards and procedures; and

  3. fulfil all the requirements required by the FSA and competent institutions that relate to the operation of electronic systems.

Consumer protection

For consumer protection, Circular 19 provides guidelines to ensure the protection of consumers of insurance products. When marketing insurance products, insurance companies have a responsibility to ensure that:

  1. prospective policyholders, the insured, or participants are given accurate, honest, clear and not misleading information about the products;

  2. prospective policyholders, the insured, or participants have understood the products offered by marketeers;

  3. prospective policyholders have submitted the documents required to validate an application for insurance coverage; and

  4. prospective policyholders, the insured, or participants have completed the insurance application form and it must be in accordance with the documents provided.

With respect to the standard procedures of the company to ensure the protection of consumers, certain requirements must be fulfilled by a company when marketing its products, including:

  1. companies must own, implement and develop policies and procedures for assessing the conformity of insurance products with the needs and profiles of prospective policyholders, the insured, or participants who become marketing targets (customer need and risk profile assessments).

  2. companies must have internal procedures to ensure that prospective policy holders, the insured, or participants are given a complete description of the insurance product as stated in the summary of the product information;

  3. companies must:

  4. provide a medium of communication that is easily accessible to policyholders, the insured, or participants to ensure the continuity of service provision; and

  5. have a consumer complaints service and must take responsibility for handling all consumer complaints.

Author’s note

The issuance of Circular 19 by the FSA responds to the practical problems encountered by insurance companies when marketing their products to the public. In practice, it is often found that disputes occur between insurance companies and their customers. The latter can argue that they were not given sufficient information on their insurance policy. Conversely, insurance companies or their marketeers respond that they give comprehensive explanations on their products.

Further, in responding to the development of marketing through social media or other electronic platforms, Circular 19 provides minimum requirements that insurance companies, insurance agent, bank and non-bank entities must meet to be permitted to market insurance products through social media or other electronic platforms. Therefore, it is expected the marketing of insurance products through social media and other electronic platforms will be done more responsibly.

On the other hand, the Circular provides guidelines and certainty for insurance companies and agents, banks and non-bank entities on how they should market insurance products in social media and other electronic platforms in a manner that complies with the FSA’s standards.

For further information, please contact:

Freddy Karyadi, Partner, ABNR


Novario Hutagalung, ABNR

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