14 Feb 2025
OJK Reg. 36/2024: What’s Changing for Insurance Operations?

1. Background

On 20 December 2024, the Indonesian Financial Services Authority (OJK) introduced changes to the operations of insurance and reinsurance companies, including Sharia-compliant entities, with the release of OJK Regulation No. 36 of 2024 on Business Operations of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies[1] (“Reg. 36/2024”). 

This new regulation updates OJK Regulation No. 69/POJK.05/2016 (“Reg. 69/2016”) and introduces enhancements in several key areas, including procedures for expanding business scope, improving insurance agent conduct, and regulating digital insurance services. These updates align with amendments to the Insurance Law (Law No. 40 of 2014, revised by Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector).

This newsletter provides an overview of the new provisions introduced by Reg. 36/2024.

2. Key Updates

Business Scope Expansion
 

Pursuant to the Insurance Law, Insurance companies may generally offer general insurance services, reinsurance services, and life insurance, while reinsurance companies are limited to providing reinsurance services. The business scope of general and life insurance companies may, however, be expanded. 

Further details on the scope of this expansion are governed under Reg. 69/2016, which has now been amended by Reg. 36/2024. In general, both regulations stipulate that the scope of expansion may include:

• For general insurance companies: 

  1. investment-linked insurance, a type of insurance product that have life insurance coverage and investment components;

  2. credit insurance, a type of insurance product that protects creditors against the risk of a borrower defaulting;

  3. suretyship, the provision of guarantee towards a principal’s capability in conducting its obligation in an underlying agreement between the principal and an obligee; 

  4. fee-based business, the marketing financial service products, including mutual funds or other products that are financial service institution products licensed by OJK;  or 

  5. other business assigned by the government;

• For life insurance companies, limited only to fee-based business as described above.

Reg. 36/2024 introduces the following changes to Reg. 69/2016:

• Previously under Reg.69/2016, the business of Sharia-compliant general insurance companies may not be expanded to cover credit insurance and suretyship. However, currently under Reg.36/2024 such an expansion is permitted.

• Reg. 36/2024 also limits business expansion based on government assignments, restricting it to assignments that were already issued at the time Reg. 69/2016 was enacted. 

Insurance Agent Requirements

Reg. 36/2024 strengthens the requirements for insurance agents beyond those in Reg. 69/2016, which required a valid agency certification and OJK registration. The new regulation adds the following obligations. The insurance company that uses insurance agents must ensure its agents to :

• have an agency agreement with the insurance company; 

• prohibit agents from using another agent's name when closing insurance policies for personal gain or allowing others to use their name for policies marketed by different agents;

• comply with the code of ethics set by the relevant associations and adhere to applicable insurance regulations; 

• prohibit agents from holding any strategic positions within the agency structure.

Insurance companies must implement strict internal controls to ensure the compliance with regulations, ethical standards and company policies of their agents.  These controls must cover agent selection, risk management, termination procedures, and data security. Insurance companies remain fully accountable for policies that are closed by their agents.

Digital Insurance Services
 

Reg. 36/2024 introduces regulations for Digital Insurance Services, allowing companies to sell insurance products, underwrite policies, and process claims entirely digitally, without face-to-face interaction. Eligible products will be determined by OJK.

In light of these new provisions, Reg. 36/2024 highlights the key changes that insurance companies should be aware of. Before launching digital insurance, insurance companies must first obtain approval from OJK by incorporating digital services into their business plans and submitting relevant documents, such as proof of IT expertise, policies, risk management strategies, and a three-year business development plan. They must also register as electronic system providers, ensuring their systems are dependable, include comprehensive product information, and offer customer service contact points. Additionally, companies are required to employ IT staff with at least three years of experience and adhere to risk management standards.

While companies may collaborate with third parties (e.g., payment providers or IT vendors), they may not outsource the entire digital service or transfer the management of customer data.

ABNR Commentary

Reg. 36/2024 modernizes Indonesia’s insurance and reinsurance sectors, aligning these with recent Insurance Law amendments, and aiming them to enhance operational stability, compliance, and public trust.

The regulation emphasizes IT integration to improve efficiency, service quality, and accessibility through digital insurance services while introducing stricter requirements for insurance agents. These updates are expected to provide greater legal certainty for both industry players and policyholders.

In addition, Reg.36/2024 also introduces several updates to the standards applicable to industry holders, including amendment to the type of business expansion that an insurance company may perform and implementation of stricter requirements for the use and engagement of insurance agents.

However, the regulation’s success relies on effective implementation. Industry players must adapt quickly, invest in IT infrastructure, and align with stricter compliance standards. Meanwhile, OJK’s role in providing clear guidance, consistent monitoring, and enforcing compliance will be crucial to achieving the regulation’s objectives and strengthening the insurance industry.

By partner Mr. Ayik C. Gunadi (agunadi@abnrlaw.com), senior associate Mr. Novario Asca H (nhutagalung@abnrlaw.com), associates Mr. Kenny Poltak (kadrianus@abnrlaw.com) and Ms. Vanessa Nethania (vnethania@abnrlaw.com)

This ABNR News and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.