Misguided if you buy a unit link, you can get rich

JAKARTAKOMPAS.com – Financial Fervices Authority (OJK) assessed the existence of a misperception of insurance products associated with investment (PAYDI) or unit linkwhich some people think can add to the coffers of wealth like other investment instruments.

The Chief Executive of the Non-Bank Financial Industry Supervision (IKNB) OJK Riswinandi emphasized that, like other insurance products, unit link has the main function as protection, not investment.

Also read: Through Bareskrim, Unit Link Insurance Victim Community AXA, Prudential, AIA Urges OJK to Hold Hearings

He asserted, in principle, the investment portion in unit-linked insurance is not the same as other investment instruments, which are intended to seek profit.

“There is a misunderstanding that what is associated with this investment (unit link) can increase wealth,” said Riswinandi in his statement, Tuesday (29/3/2022).

Also read: Chaotic Unit Link Dispute, OJK Strictly Asked

Riswinandi further explained that one example of the protection function of unit-linked products is that the return on investment can be used by customers to pay regular premiums if the customer is unable to pay.

“Currently, this unit link or PAYDI seems to add wealth, because there are often words return better investment than deposits. So customers feel as if they get two products. In fact, the priority of investing in unit linked is for protection,” he said.

Also read: Victims of AIA Unit Link Insurance, Prudential, AXA Mandiri Hold Demo, Collect OJK’s Promise

The insurance company must give a thorough explanation

To ensure that prospective policyholders fully understand this matter, OJK asks insurance companies to provide a thorough explanation of unit links in the sales process, not only the potential benefits that can be obtained, but also the risk of loss.

“We ask that the illustrations must be clarified, not only positive ones, but also extreme ones,” he said.

Also read: To Protect Insurance Customers, OJK Releases Circular regarding Unit Links, Here’s Its Contents

The OJK has also strengthened provisions related to the sale of unit-linked products through SEOJK 5/2022 regarding Unit Links, where one of the important points in the regulation is to provide detailed understanding to prospective policyholders before opening unit-linked products.

“SEOJK Number 5 of 2022 is more for a balance of understanding between prospective policy buyers and the company that organizes it,” said Riswinandi.

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