Academic journal article Journal of Legal, Ethical and Regulatory Issues

Annuitant Legal Protection Associated with Act No 40 of 2014 about Insurance Business

Academic journal article Journal of Legal, Ethical and Regulatory Issues

Annuitant Legal Protection Associated with Act No 40 of 2014 about Insurance Business

Article excerpt


According to the Indonesian Financial Services Authority (OJK) there are 137 insurance companies comprising general insurance, life insurance, reinsurance and social insurance companies. By 30 September 2017, investment in insurance had reached 505.57 trillion rupiahs a 22.42 per cent more than the last year estimating about 183.45 trillion rupiahs as income of the insurance companies (Sshiddiqie, 2010; Herman, 2010). The OJK has been granted the authority under Article 1 of Indonesian Act No. 21 of 2011 on the Financial Services Authority (Indonesian Act 21/2011) to "regulate, supervise, inspect and investigate " insurance matters. However, the business of insurance business is governed under Indonesian Act No. 40 of 2014 (Indonesian Act 40/2014) and is applicable on all insurance companies, shariah insurance companies, reinsurance companies, and shariah reinsurance companies (Sari, 2008; Erwin, 2012).

The definition of an annuitant in insurance jargon is the one who collects the benefits of an annuity or pension, or named in a specialized life insurance contract (Investopedia, 2018). The annuitant becomes eligible for the annuity or pension only when the time duration is complete and a claim is made. In order to determine the annuity, the legal system in Indonesia recognizes both the parties: the insurer and the insured (Lubis & Wajdi, 2012). Filing insurance claims is a problem that is very often found between the annuitant and the insurance company. In most cases, the settlement of annuity takes a very long time after filing a claim. In most cases, the insurance companies do not provide enough information about the safety of the funds payable to the insurer. The annuitant may be only informed about the rate of return at the time of the maturity of the insurance policy and the administrative costs that would be incurred in the settlement of benefits.

The Insurance is a promising business sector. It not only provides a legal protection to the insured but also ensures safety of funds. Law No. 2 of 1992 on insurance business stipulates that every insurance company, at the time of the commencement of an insurance plan, must provide information related to premiums and annuity for each insurance plans, explain the difference between deposits of money in banks and that in insurance, helping the insured individual to compare the benefits of the two (Khoiril & Asuransi, 2007; Hans, 2009). The Law also mandates the insurance company to provide legal protection to annuitants in all types of conventional as well as Islamic insurance claims. The law also binds the insurance companies to set forth the rights of the annuitant in case of any legal situation, especially the rights associated with the funds invested. The insurance companies must also educate the annuitant about the regulations that protected his or her rights in an insurance agreement. Such a step was take keeping in view that many insurance companies were found involved in fraud and embezzlement of funds (Marbun, 2011; Pati, 2013). The Law No. 2 of 1992 on insurance business however provided a penalty of 15 years in prison, if any insurance company is found involved in premium embezzlement or illegal transfer pledge or mortgages of annuitant's property or insurance claims. There was also a provision to impose criminal sanctions under article 21 of Law No. 2 of 1992, if any insurance company was found to be involved in any counterfeiter of documents (Ismatullah, 2011; Kelsen, 2009). After the promulgation of Act 40 of 2014, there was a greater legal protection to the annuitants. Now under the new law, they can sue the insurance company for compensation and claim fees, damages, and interest, besides their annuity (Yovita & Mangestidan, 2014).

Islamic Economy Law

In addition to the Indonesian Laws, there is also the Islamic Economic Law that postulates and educates people about the economic laws implicit in the Qur'an and the Hadith (Abdul, 2007; Adiwarman, 2010; Sunarjo, 2008; Khan & Ahmed, 2008). …

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