The 9th Meeting for Specific Industry Audit Class discussed auditing in the Insurance industry brought to us by Mr. Susanto as the Head of Clients & Markets Insurance Practice Leader, accompanied by Mr. Abdurrahman Sidik and Mrs. Julianti. The class began with a short questionnaire about the insurance industry so that they could understand the students’ knowledge regarding the industry. Insurance is a business that sells protection services. There are two types of insurance: life insurance and general insurance (which includes 20% driving insurance, 21% credit insurance, 27% property insurance, and so on). 15 of the biggest life insurance companies held 80% of gross insurance premiums, while 15 of the biggest general insurance companies held 65% of gross insurance premiums. As such, regulations were needed to organize and protect all of the parties involved as this industry is all about collecting and managing the funds of citizens (this industry is regulated by the Financial Services Authority, Non-Bank Financial Industry that regulates the insurance industry, law, KMK, POJK, and SEOJK)
The measure of the insurance industry’s safety (Risk Based Capital) is = Solvency Level/Min Risk Based Capital, where Solvency Level = Admitted Assets + Liabilities and Minimum Risk Based Capital = Credit Risk + Liquidity Risk + Market Risk + Insurance Risk + Operational Risk. Minimally, the risk-based capital in the insurance industry should be 100% in an ideal setting. However, the insurance penetration rate in Indonesia is only 3.4% of Indonesia’s GDP, meaning that there is a huge opportunity for the insurance industry to enter the market. Hence, insurance products need to be creative when they are offered to the general public.
The following are PSAKs related to the Insurance Industry: PSAK 13, PSAK 26, PSAK 72, PSAK 71, PSAK 28, and PSAK 62. However, there are a few regulations that need attention with regards to their implementation. After this, the class continued with the explanation of common auditing processes that occur in the insurance industry as well as the risks that could occur on accounts pertaining to insurance companies.