Bandung, InfoPublik - Ferdinan D. Purba, Member of the Board of Commissioners for the Policy Guarantee Programme at the Deposit Insurance Corporation (LPS), said that the Policy Guarantee Programme (PPP) is an important instrument in protecting policyholders and helping to maintain the stability of the financial/insurance system.
“For example, in South Korea, Canada, the United Kingdom, and Malaysia, the implementation of the PPP has proven to enhance public confidence, expedite the resolution of failed insurance companies, and strengthen the stability of the insurance sector. These countries have been able to encourage stronger risk management, transparency, and better industry governance," he said at the Chief Operating Officer (COO) Summit 2025 held by the Indonesian Life Insurance Association in Bandung on Thursday (6/11/2025).
He also stated that the existence of PPP is part of a comprehensive recovery and resolution framework to deal with the worst-case scenario or last resort option of insurance company failure, while also serving as part of the national financial safety net to ensure that the insurance company resolution process runs effectively.
This is why PPP is very important to increase public confidence in the insurance industry and help maintain economic stability.
According to Ferdinan, this is similar to the importance of the deposit guarantee programme implemented by the LPS. The existence of the LPS has made the public more confident in the banking system, which has then led to an increase in third-party funds after the LPS began operating. "This can be seen from the average growth of third-party funds, which grew higher after the LPS began operating compared to before the LPS began operating. From 7.7% before the LPS began operating, it increased to 15.3% after the LPS began operating," he explained.
In terms of PPP, for example in Malaysia, the existence of an insurance policy guarantee programme has encouraged an increase in premium income. This can be seen from the average growth in premium income, which grew higher after the activation of the policy guarantee than before. From 5.5 per cent before PPP activation, it increased to 9.7 per cent.
LPS Efforts to Intensify PPP Implementation
Ferdinan then explained that, in accordance with its new mandate, LPS is currently intensifying the implementation of PPP, which is expected to be activated before 2028. According to him, LPS is currently formulating PPP implementation policies and resolution policies for insurance companies and sharia insurance companies. ‘If the prerequisites can be met according to the target time, life insurance and general insurance companies need to be prepared to start registering for PPP participation in the third quarter of 2026. An important factor in the implementation of PPP is close coordination between LPS and OJK, particularly in terms of insurance data exchange,’ he explained.
LPS targets the exchange of insurance data through the Integrated Information Exchange Facility (SAPIT) between the two institutions to go live in 2025.
Meanwhile, the PPP design in Indonesia currently being developed by LPS certainly refers to international best practices and basic principles. LPS also welcomes the ongoing process of amending Law No. 4 of 2023 on Financial Sector Development and Strengthening (P2SK Law) and considers it an opportunity to strengthen the PPP design.
Among other things, regarding its mandate, LPS considers that the mandate as a Risk Minimizer will increase the effectiveness of the guarantee and resolution functions in order to protect policyholders and maintain the stability of the financial/insurance sector.
Furthermore, the coverage and maximum value of PPP guarantees need to be limited to minimise the costs of handling insurance companies and funding requirements, as well as to prevent moral hazard. ‘LPS is reviewing the products or lines of business that will be guaranteed in PPP, taking into account, among other things, product characteristics, loss ratios, and market share,’ he explained.
Furthermore, regarding contributions, based on a survey by The International Forum of Insurance Guarantee Schemes (IFIGS), the majority of policy guarantee authorities apply a fixed or flat premium system, but LPS is currently considering the option of implementing a risk-based or differential premium system in the next few years, as a form of encouragement and incentive for insurance companies that implement good and prudent risk management practices.
In the future, one of the key elements in the implementation of a credible PPP will be the availability of policy data based on policyholders, insured parties and participants. Policy data is defined as comprehensive information that includes details about policyholders, insured parties and reserves, claim values and benefits guaranteed by the LPS in accordance with PPP provisions. ‘The P2SK Law requires insurance companies to submit policy data based on policyholders, insured parties, and/or participants to the LPS. This data will be the basis for the LPS in determining which policies are eligible for coverage or payment,’ he added.
The LPS's serious efforts to intensify the PPP are also followed by close collaboration between the LPS and insurance associations, where on 18 October 2025, LPS signed a Memorandum of Understanding on Cooperation in the Implementation of the Policy Guarantee Programme between LPS and the Indonesian Life Insurance Association (AAJI), the Indonesian General Insurance Association (AAUI), the Indonesian Sharia Insurance Association (AASI), and the Indonesian Insurance Management Experts Association (AAMAI).
The scope of the cooperation will include the provision of experts, cooperation in organising educational activities, socialisation and publication, cooperation in education and training in the field of insurance, as well as cooperation in research related to the insurance industry. ‘LPS believes that with the support of strategic initiatives from the industry, the positive impacts of PPP activation in various countries, such as increased public trust, premium income, and so on, will eventually also be realised in Indonesia with the PPP organised by LPS in the future,’ concluded Ferdinan.