Solution for Unpaid Insurance Claims
The polemic regarding the resolution of the problem of failure to pay claims by two insurance companies, Asuransi Jiwa Bersama Bumiputera 1912 and Asuransi Jiwasraya, has not yet ended.
.
The polemic has still not ended regarding a resolution to the unpaid insurance claims of two life insurance companies, Asuransi Jiwa Bersama Bumiputera 1912 and Asuransi Jiwasraya.
Notes the World Bank released a few weeks ago on the impact of global economy risks on the Indonesian economy even prompted a more hectic exchange of views on the two insurers’ problems. Unfortunately, the arguments did not narrow into concrete solutions for the issue.
The parties explored a number of key issues, including: the extent of losses reaching trillions of rupiah borne by policyholders, investment mismanagement, immediately defining the legal umbrella for mutual companies, lack of effort from regulators in solving the problems of the industry, making an effort to find alternative financing sources (like issuing medium-term notes/MTN) or restructuring (like scheduled claims payments) and changes in management.
Through these various discourses, we get an impression as though the actual problem is clear, so all that is needed is the will of all stakeholders to commit for the problem to be resolved more quickly. In fact, what is being presented is only a series of "good ideas" that are communicated simultaneously so that they fail to focus on an effective solution. Each idea provides views and opinions, but without any real boldness in talking about the actual problems openly/transparently, without prejudice or pointing fingers, and with a willingness to make the necessary sacrifices.
Reflection: Classic behavior
The conversation on resolving the insurers’ unpaid claims is indeed a difficult one, for the following three reasons: (1) the value of the unpaid claims is very large; (2) the parties tend to distance themselves from their respective responsibilities/obligations; and (3) no clear and sharp analysis has been made to find constructive, creative and effective options for settlement. Therefore, the polemics are merely the involved parties’ efforts to be seen as "heroes" by the “victims”, without any sincere efforts to help the true victims.
We can simply observe and record the series of classic behaviors the parties resort to when facing unpaid insurance claims.
In fact, several cases of unpaid claims have occurred in the past seven years, ending with the revocation of licenses for four life insurance companies and two property damage insurance companies (excluding the two companies we are currently highlighting). Mentioning the two companies’ names will not help us find better settlement options. Therefore, we should consider for a moment what actions the parties (policyholders, shareholders, regulators, other insurance companies, human resources, etc.) have taken to resolve the issue of unpaid claims and their impact on each.
We can simply observe and record the series of classic behaviors the parties resort to when facing unpaid insurance claims. Some of these behaviors (which do not consist procedural sequences) are that policyholders "chase" insurance companies with their claims and the insurance companies try to find reasons to evade them, eventually ignoring the claims.
Second, regulators carry out an inspection within their supervisory framework, often following up with warnings on sanctions and freezing the insurer’s business activities, up to revoking their licenses. Third, insurance companies attempt to replace their management, increase operational efficiency, liquidate their assets, negotiate with policyholders for scheduling claims payments and/or attempt to cut the value of the claim, and raise funds (by issuing securities, seeking investors, or requesting capital injections from shareholders).
Fourth, policyholders, as the victims of unpaid claims, look for more aggressive ways to obtain payment (by complaining to regulators, hiring lawyers, holding demonstrations, etc.). The insurance companies then usually respond to these aggressive measures by sending their own lawyers to negotiate or meet face-to-face with policyholders, or hold press conferences. Fifth, policyholders and insurance companies mediate before commencing litigation proceedings at court.
Some settlement options have no clear purpose: for example, the option to improve the supervisory quality of the Financial Services Authority (OJK) as the industry regulator.
Sixth, the insurance companies throw in the towel when the regulator finally revokes their business licenses. Policyholders continue to struggle to have the guarantor fulfill their claims as much as possible. Seventh, observers become involved in the polemic in the mass media and on social media, hoping to defend the interests of the policyholders as victims.
From this series of classic behaviors, the efforts to resolve unpaid claims usually end up with either the insurance company making gradual late payments on the claims (either whole or in part) or the insurance companies and the policyholders both "surrender" (the former by losing their business licenses, and the latter by giving up on their claims).
Factors that are always ignored
In the case of the unpaid claims of Asuransi Jiwa Bersama Bumiputera 1912 and Asuransi Jiwasraya, a number of factors are unconsciously being ignored in problem-solving efforts. First, some settlement options have no clear purpose: for example, the option to improve the supervisory quality of the Financial Services Authority (OJK) as the industry regulator. We agree that similar incidents should not reoccur, and therefore the OJK needs to learn from this experience and improve itself. However, it is very clear this step will not solve the problem of the unpaid claims that has occurred and is still occurring.
Second, some settlement options are unrealistic. One illustration is the option to seek investors that possess strong capital and good moral credentials, but without the ability (or will) to provide reliable insurance statistics and/or adequate organizational resources.
What usually happens is that all parties are working upon a mutual assumption (from their own perceptions) and are biased (usually starting with a favorable bias, but which could end up with a negative, emotional bias).
Third, some settlement options place the responsibility on other parties: for example, the option to request a government bailout, especially for non-state enterprises, because this would only provide "incentive" – the excuse that the situation would have a systemic impact without a bailout – for industry players to be similarly "careless" in the future. This kind of assistance will only indirectly burden the general public through the tax system, including the actual policyholders.
Fourth, some settlement options do not have thoroughly detailed steps, thereby leading to potential misunderstandings among the parties. This settlement option is like "lighting the chaff" (leaving a smoldering ember).
Fifth, some settlement options are not communicated well, like the option to inject capital as management might expect, without providing adequate explanations that can be understood by all stakeholders. What usually happens is that all parties are working upon a mutual assumption (from their own perceptions) and are biased (usually starting with a favorable bias, but which could end up with a negative, emotional bias).
Seeking a solution
We must consider three things in commencing our efforts in finding a solution to the claims that the insurance companies have not paid. First, raise awareness that some difficult conversations must take place and cannot be avoided: "heavy" conversations covering topics that may cause hurt, since negative situations tend to be avoided or talked about using veiled language.
Finding a solution is still a necessity, with or without uncontrolled negative emotions.
However, the difficult conversation over the unpaid claims issue is one such conversation that cannot and should not be avoided. Talking openly about this bitter public issue has the potential for hurting each other, but it would be more elegant if we could be mature and deal with the matter with the attitude of a military officer.
Second is synchronizing/harmonizing the parties’ perceptions about the nature and depth of the problem, as well as their individual roles, through the spirit of mutual cooperation (not mutual blame) to solve the problem at hand. To do this, we need time for the related parties to sit down together with a clear mind and clearly defined goals to arrive at realistic solutions that can be executed.
Third, avoiding emotional responses through the mature approach of mutual good faith amidst this very bad situation. All suspicion and prejudice should be conveyed in a clear and concise "communication package" (both orally and in written form) that is both polite and respectful and distributed among the parties. Finding a solution is still a necessity, with or without uncontrolled negative emotions.
We all hope this difficult conversation can begin immediately with inner calm and clarity of mind, so that the solution we are seeking can be found as soon as possible.
Alberto D. Hanani, Lecturer, Master in Management, University of Indonesia
