Investigations Lead to Management Overhaul
The alleged corruption implicating Asuransi Kredit Indonesia (Askrindo) sparked up improvement plans in the parent company of state-owned insurance and underwriting firms. There are problems in the insurance agent business regulations.
THIS March, the Finance and Development Supervisory Agency (BPKP) will launch an investigative audit on Asuransi Kredit Indonesia or Askrindo. The government’s internal auditing agency had just completed the case presentation with Indonesia Financial Group (IFG), the holding company of state-owned insurance and underwriting firms. “We could not have been more transparent in the Jiwasraya and Asabri cases,” said Deputy State-Owned Enterprises (SOEs) Minister Kartika Wirjoatmodjo on Friday, March 5.
The alleged corruption implicating Askrindo adds to a long list of scandals involving state-owned insurance firms. Over the last two years, the nation had been shocked by the alleged embezzlement of investment funds that happened at Asuransi Jiwasraya and Asabri. The Attorney General’s Office (AGO) is still investigating those cases.
The problem is, there is no clarity on how the inquiries on Askrindo’s alleged corruption, even though the case had surfaced among the company’s internal circles, IFG as its holding, as well as the SOEs ministry, since a year ago. Kartika said he had instructed IFG Chief Executive Officer (CEO) Robertus Bilitea and Askrindo’s board of commissioners to follow up on the case. “The BPKP is conducting an investigative audit,” said Kartika, who is also known as Tiko.
According to an official who knows about the investigation process, IFG had requested the BPKP to hold the investigative audit last year. IFG received the internal examination result, which led to suspicions that agents’ fee payments were channeled to Askrindo directors in 2019.
Throughout the year, Askrindo had spent Rp463.053 billion for agency commission fees. About Rp195.9 billion was received by Askrindo Mitra Utama (AMU), Askrindo’s subsidiary that also acted as one of its agents. The problem was, AMU’s profit that same year only amounted to Rp8.98 billion, whereas the company’s operating costs were around Rp52.4 billion.
RSM International public accountant gave a disclaimer opinion on AMU’s 2019 financial statements, due to lack of audit evidence. The audited financial report was released on July 3, 2020. Not long after, a review by the audit committee—encouraged by the Askrindo’s board of commissioners—revealed that much of the fees were returned to a number of the company directors, former directors, and branch office leaders.
On July 16, 2020, the SOEs ministry fired four Askrindo directors: CEO Andrianto Wahyu Adi, finance director Purnomo Sinar Hadi, technical director Muhammad Shaifie Zein, and the director of compliance and human resources Firman Berahima.
The last two, Shaifie and Firman, were mentioned most by the audit committee report as the persons suspected to have received the commission’s share from AMU. The two other officials recorded in the same report—Anton Fadjar Siregar and Dwi Agus Sumarsono—are still working for the company as director of retail operations and director of commercial operations, respectively.
Tempo had contacted Shaifie to ask about the results of the audit committee’s examination. He has given no response yet. Tempo also sent a letter to Jaminan Pembiayaan Askrindo Syariah, a subsidiary of Askrindo, addressed to Firman to ask for clarification. But there is no reply yet. Meanwhile, both Anton and Dwi said they need to consult with the company’s management first before they can issue comments.
It seems that these people’s fates in Askrindo now hang by a thread. An official with knowledge of how the matter is being handled told Tempo that the SOEs ministry is in the process on overhauling Askrindo’s management, including Anton and Dwi’s positions.
Meanwhile, Robertus Bilitea said very little about the issue. He only ensured that the inquiry is still taking place, and an independent auditor is conducting an audit. “We strongly uphold the principle of the presumption of innocence,” he remarked.
ESTABLISHED in April 1971, the government had intended Askrindo to support the growth of the micro, small and medium enterprises (MSME). The company’s main business is to guarantee government financing in the MSME sector, especially through the people’s business credit (KUR) program. The company also develops other businesses including non-KUR credit insurance, reinsurance, and general insurance.
By December 2020, the company claimed to have guaranteed KUR with a value of Rp110 trillion for 4.2 million MSME debtors. This year, the government is targeting Askrindo’s underwriting to reach Rp253 trillion, including the part of the national economic recovery program. However, the company projects underwriting of only around Rp126 trillion.
So far, the KUR underwriting has provided the biggest revenue to the company’s income. In the unaudited 2019 financial report, the company’s underwriting income from the KUR program amounted to Rp1.9 trillion. The combined revenue of all Askrindo businesses reached Rp5.26 trillion, with a current year profit of Rp804 billion after taxes.
Askrindo and eight other companies joint IFG in the end of 2020. IFG is a new brand of Bahana Pembinaan Usaha Indonesia, that was assigned by the SOEs ministry as a holding for SOEs in the insurance and underwriting sector. Beside Askrindo, other members of the holding are Jaminan Kredit Indonesia, Asuransi Jasa Indonesia (Jasindo), Jasa Raharja, Bahana Sekuritas, Bahana TCW Investment Manager, Bahana Artha Ventura, Grahaniaga Tata Utama, and Bahana Kapital Investa. The total of consolidated assets of those companies reached Rp72.5 trillion as March 2020.
Insurance industry observer, Irvan Budiman, said that the provision of fees—the core issue in the alleged corruption implicating Askrindo—is not a new method. He said that the practice of establishing a new company as an agent for an insurance company is an old trick. “The practice of (setting up) fictitious agents has been around for a long time,” he said.
A similar mode of operandi dragged former CEO of Jasindo, Budi Tjahjono, to the Jakarta Corruption Court. It landed him a sentence of seven years in prison and a fine of Rp300 million, or spend three additional months in jail, in April 2019.
Irvan called it ‘fictitious agent’ because the sale of insurance products is actually done by the products’ owner, but the practice makes it seemed as if the agents do it. This way, the product owner can issue an expenditure post for paying agent’s fees, and the budget can be used for the benefit of company management. “The subsidiary only acts as a vehicle to deliver the fees,” Irvan said.
It is for this reason, Irvan argued, that the Financial Services Authority (OJK) must immediately make stricter regulations governing insurance industry agency. So far, he said, the matter of agents services are handled by respective associations. The Indonesian General Insurance Association (AAUI), for example, sets up the standards of practice and code of conduct for Indonesian general insurance agents. Irvan is concerned about the large potential for conflicts of interest in such setting. “How would they (association management), who are executives of insurance companies, take actions against agents that violate ethics, if the company said that these agents are good for them?” he remarked.
Robertus Bilitea ensured that IFG is committed to improving corporate governance within the group. In the future, he said, IFG will make special rules about commissions. The principle is that fees from selling premiums must be recorded as company revenue, not personal income. “If there are individuals generating businesses or premiums, it would be one of the components used to assess employee performance, which correlates to the annual bonus.”
IFG will also change the mechanism for decision making at the level of directors of holding members. He said that decision making—especially about underwriting and investment—would involve a technical director, a risk management director, and a compliance director. Additionally, at the parent level, IFG will form several committees, such as a risk management committee and an investment committee, with members from directors and members of the holding, as decision makers. “They will jointly decide several strategic matters, according to the tiers,” said Robertus.