MAKSI-PPAk Public Lecture. FEB UI, “House of Cards – a Case Study from Life Insurance Company”
Nino Eka Putra ~ PR of FEB UI
DEPOK – (23/10/2020) The Master of Accounting – Accounting Profession Study Program (MAKSI-PPAk.) FEB UI held a Public Lecture webinar, with the topic “House of Cards – a Case Study from Life Insurance Company”. This event presented Dannif Danusaputro, S.E., MBA, President Director of PT. Mandiri Sekuritas, as a resource person and moderated by Prof. Dr. Budi Frensidy, Ak., CA, Professor of Finance and Capital Market FEB UI, on Friday (23/10/2020). Acting Head of the MAKSI-PPAk Study Program, as well as the Chair of the Accounting Department of FEB UI, Dr. Ancella A. Hermawan opened the discussion.
Dannif Danusaputro explained that Jiwasraya is one of the oldest life insurance companies in Indonesia, fully owned by the government and has extensive experience in its field. Jiwasraya has provided various life insurance products through various distribution networks (branch office systems, bancassurance, corporations). The types of products offered are retail, group, corporate, and financial institution pension funds (DPLK). Jiwasraya’s historical premium income in the last 5 years was Rp. 10.21 trillion (2015), Rp. 18.08 trillion (2016), Rp. 21.92 trillion (2017), Rp. 10.66 trillion (2018), and Rp. 3.19 trillion (2019).
Jiwasraya’s current condition, retail products with 316,094 customers, targeting the general public through distribution channels in the form of agency and captive market through the worksite team; 2.30 million customers of retirees and corporations, with a target pension program and protection through relationship teams; and 17,459 customers of bancassurance, targeting the general public through partner banks. In addition, Jiwasraya is experiencing difficulties in paying payable claims as of August 2020 amounted to Rp. 18.8 trillion and is experiencing an equity deficit (insolvent).
Dannif continued, there were four categories of the root problems faced by Jiwasraya. First, the fundamental problems in the form of Jiwasraya’s liquidity and solvency problems that have occurred since 2008 and have not been resolved, then the window dressing of financial reports due to reinsurance and asset revaluation policies from 2008 to 2017, as well as the issuance of insurance products that are investment in nature and guaranteed high interest to meet liquidity. Second, product mispricing in the form of traditional products with a long-term guarantee scheme (up to 14% net), a business model that is detrimental to the life of the product, and savings plan products offered through bancassurance with a Guaranteed Return of 6% – 10.35% net p.a. during 2008 – 2018 with an annual disbursement period.
Third, reckless investment activities (weak GCG) in the form of 22.4% shares (Rp5.7 trillion) of total financial assets and only 5% of LQ45 shares, 59.1% of mutual funds (Rp14.9 trillion) of total financial assets and only 2 % managed by Top Tier investment managers in Indonesia. Fourth, liquidity pressure from savings plan products in the form of decreased customer confidence in saving plan products, causing increased disbursements and decreased sales, without sufficient backup assets to meet obligations with an investment adequacy ratio of only 28% in 2017, and default.
“This had an impact on Jiwasraya’s financial condition, which experienced a huge decline in assets which was not complemented by an increase in other assets. The reserves that have been recorded in the financial statements do not reflect the value of reserves that should have been recorded. Meanwhile, Jiwasraya has experienced a crisis of trust from policyholders since 2018 which has resulted in a decrease in premiums and an increase in accounts receivable,” said Dannif closing the session. (hjtp)