JAKARTA: Bank Indonesia (BI) tightened the distribution of bancassurance products to mitigate risk along with the rampant product here.The regulation is required by BI circular letter No: 12/35/DPNP on the risk management application to bank that executes marketing cooperation activities with insurance company (bancassurance) per December 23, 2010.BI reason for perfecting the regulation is due to the soaring marketing bancassurance product, supporting financial market development, increasing the application of risk management by bank, protecting customers and harmonizing with Bapepam-LK regulation.On the regulation bancassurance product is classified into three business models, reference product, distribution cooperation, and product integration.Bancassurance is insurance product marketed through the bank service office. The marketing way here is deemed very efficient and mutual given that insurance company is commonly has limited distribution channel.To apply risk management bank should include it among bank and the insurance company on the rights and responsibility of each party when the agreement expires or when there is dispute among the customers.Both parties are also obliged to have clear separation of the relevant risk with the bank product and insurance product so the risk of each party could be identified, measured, monitored, and controlled in addition to the transparence to the customers both written and oral.For unit linked products, both parties should put the special clause stating the bank partner insurance company should record and manage specifically wealth and obligation from product investment.In the agreement here it should also state clearly the management of unit linked product investment fund and it becomes the corporate responsibility of the insurance in the document which provides clarity to customers on the benefit and risk.For unit linked through the distribution cooperation business model, bank is only allowed to market the product with financial market investment strategy and fixed income as required by Bapepam LK No.KEP-104/BL/2006 on the unit linked Product.Besides, bank which is the first having bancassurance should put the bancassurance plan as the new activity in the bank business plan and address the new activities and realization of implementation scheme.Insurance product or bundled product that does not fit with the regulation has given time to stop the sales or adjust with the regulation.Deputy Chairman of the Indonesian General Insurance Association Julian Noor considered BI regulation stipulating the product classification here to restrict the marketing of bancassurance product and change financial report system change."However, we consider the action done by BI is to protect public," said Julian.Head of Treasury of BCA Branko Windoe considered it positive with the new regulation on bancasurance. But he expected the new regulation here could bridge the grey areas among bank and insurance firm."The product has two regulation for monitoring. So far there is always loophole from unscrupulous party to take an advantage of it. So with the new regulation it would hopefully not spark another problem," he said to Bisnis last night.To bank, bancasurance is very necessary to facilitate customers in insurance in addition to generate fee based income from the product selling."As bank it surely expects to have customers in its networks, so when in needs of insurance, it could be served through bancassurance. But the product should ensure all parties risks as it is to bank, insurance or buyers so as to be more transparent," he said. (NOM)
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