Indonesia to Implement Mandatory Vehicle Insurance Policy

Jakarta – The Indonesian government, through the Financial Services Authority (OJK), has announced that all vehicles must have third-party liability insurance (TPL) by 2025.

Ogi Prastomiyono, Chief Executive of Insurance, Guarantee, and Pension Fund Supervision at OJK, stated that this requirement is part of the mandate outlined in Law Number 4 of 2023 concerning the Strengthening and Development of the Financial Services Sector.

He explained that the government can establish Mandatory Insurance Programs according to needs, so the scope of these programs is not limited to third-party liability insurance for traffic accidents but can also cover other areas based on government policy and public needs.

"Currently, purchasing motor vehicles on credit already includes the obligation to purchase motor vehicle insurance," Prastomiyono said in a statement some time ago.

Prastomiyono highlighted that OJK is coordinating with the Fiscal Policy Agency (BKF) of the Ministry of Finance to ensure that the Government Regulation (PP) on the Mandatory Insurance Program will be issued by the 2025 target.

"At present, OJK is continually coordinating with BKF, Ministry of Finance as the government representative, to ensure that the drafting of the PP on the Mandatory Insurance Program can be published according to the government's established target," he explained.

However, OJK stated that several steps need to be taken regarding the future implementation of mandatory insurance.

First, there must be policy harmonization among government institutions handling financial matters and those dealing with policies related to mandatory programs like motor vehicles, and adequate public awareness about the Mandatory Insurance Program.

Second, there must be an easy, efficient, and non-burdensome mechanism for implementing the Mandatory Insurance Program.

Third, once the TPL insurance program for traffic accidents is enforced, every motor vehicle owner must add TPL risk coverage when purchasing motor vehicle insurance.

According to POJK 69/2016, the Mandatory Insurance Program must be carried out competitively and can be implemented individually or through a consortium as per government policy coordinated with OJK.

Prastomiyono stated that initially, the PP for the Mandatory Insurance Program will focus on third-party liability insurance (TPL) for motor vehicles.

For its implementation, TPL for vehicles will focus on third-party liability for property damage caused by motor vehicle accidents, including claims for vehicle damage and public facility damage resulting from motor vehicle accidents.