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Indonesia’s Financial Services Authority (OJK) has issued a draft amendment to OJK Regulation No. 70/POJK.05/2016 on Business Implementation of Insurance Brokers, Reinsurance Brokers, and Loss Adjusters for public consultation. This latest draft proposes "digital insurance brokerage services" as a new business model for brokers.
We set out below the key changes proposed in the draft.
- Insurance brokerage services – insurance placement consultancy services and insurance claim consultancy services – can be carried out by licensed brokers via internet-based digital channels (known as Digital Insurance Brokers). Based on the language of the current draft, the term Digital Insurance Broker appears to only cover insurance brokers, and not reinsurance brokers.
- The draft specifies the type of insurance coverage that may be placed and processed through a Digital Insurance Broker, including (among other things) insurance coverage with simple underwriting criteria.
- An existing licensed insurance broker must obtain prior approval from OJK to begin acting as a Digital Insurance Broker. The draft does not specify the form of such approval, but we would expect it to take the form of an approval letter, rather than an amendment to the existing license. This approval process implies that the role of Digital Insurance Broker would be an add-on feature to an existing license, with the licensed insurance broker continuing to act under its existing business model.
- Key requirements in securing OJK approval include:
- the insurance broker should have sufficient corporate resources to act as a Digital Insurance Broker, such as an adequate information technology infrastructure,
- a three-year business case, and
- the insurance broker should have at least IDR 10 billion in equity (an accounting term), although the draft includes a transition period to comply with this requirement.
- This new business model does not affect the fundamental principle that insurance brokers should act for the interests of policyholders, insureds, and participants.
- An insurance broker that has secured OJK approval to act as a Digital Insurance Broker is prohibited from then outsourcing the operation and management of its information technology infrastructure to another party. In the absence of further clarity in the draft, this would likely also prohibit outsourcing to the broker’s affiliates, meaning that this infrastructure would have to be housed by the relevant insurance broker.
Currently, there is no clear indication as to when the draft amendment will be finalised and issued by OJK. We will continue to monitor developments.