OJK Tightens Unit Linked Product Offers

The Financial Services Authority (OJK) prohibits insurance companies from promising returns or guaranteeing certain returns from insurance products linked to investments (PAYDI/unit-linked), as contained in OJK Circular No. 5/SEOJK.05/2022 stipulated by the Chief Executive of the OJK Non-Bank Financial Industry Supervisor Riswinandi and took effect on March 14.

The rules mentioned that insurance companies could not provide guarantees, particular targets, and/or the like for investment returns or cash value. In addition, the summary of product and service information (RIPLAY) may also not include investment return or cash value targets which can be interpreted that the insurance company guarantees investment results.

OJK also requires insurance companies to illustrate unit-linked coverage or membership using three yield assumptions: negative, zero, and positive investment return scenarios. Previously, OJK Board of Commissioners Chairman Wimboh Santoso said that insurance companies are prohibited from providing guaranteed returns on unit-linked products, especially with an underlying asset in the capital market and securities. "Unit-linked cannot guarantee returns," says Wimboh on March 15.