The condition in which there is a possibility

The Characteristics  of  Non-Litigation Resolution

 for  Life Insurance Lawsuit  in  Indonesian



Mokhamad  Khoirul  HUDA

Faculty of Law, Hang Tuah University, Surabaya,

 [email protected]


Agus Yudha HERNOKO

Faculty of Law, Airlangga  University, Surabaya,

[email protected]



Faculty  of  Law,  Islamic 
University  of  Indonesia, Yogyakarta,

[email protected]





study analyzed the characteristics of non-litigation resolution for life
insurance lawsuit in Indonesia. The result found that the non-litigation solution
for life insurance lawsuit in Indonesia must be through Department of Mediation
and Arbitration of Insurance (in Indonesia, known as BMAI). When the mediation
-as the legal action from a costumer- was objected, the lawsuit would proceed
to the adjudication. When the customer won on this adjudication level, the
insurance company was then obligated to do some payment as mentioned on the
insurance policy. Furthermore, when the legal action of a customer was
objected, the customer was then free to do an arbitrage legal action. The
arbitration was final and had fixed legal power. Thus, any appeal, cassation,
or judicial review could not be held. The solution for life insurance lawsuit
through BMAI has several characteristics such as quick in procedures, dynamic,
innovative, cheap, and low budget. In addition, the dispute solution through
BMAI is confidential, quick in time, and supported by some experts on related
types of lawsuit, thus, it may result in fair judgment.


Keywords:  Life Insurance,
Non-Litigation, Characteristic, Lawsuit, Solution, Customer.


Classification: K11, K22, K23, D81,



the future of every human being is unsure, as no one can see any possibility in
their lives. However, as God’s creature, every human is attributed with logical
mind and the five senses as means to seek for solution for their lives. Using
the past experience as guidance, they presume events which may happen and how
to handle those events to prevent any possible risks (Huda, 2007: 53).

Risk is “a
condition in which there is a possibility of an adverse deviation from a
desired outcome that is expected or hoped for” (Vaughan and Therese 2003, 3). One way to manage a risk is through insurance (Huda et al., 2016:
1037). Insurance
enables the whole  society to minimize
the risks caused by some  natural factors
for instance earthquakes, 
hurricanes,  tornados, flood;  some human actions for example theft, fraud,
pollution, terrorism, and  some economic
impacts such as inflation, obsolescence, depressions/recessions (Aqil  2014, 205).

Insurance is also defined as a financial means in relative governance to
encounter any risks of individual’ life such as health, accident, pension time,
and mortality (Greene, 1988: 219). Insurance may cover any risks of uncertain life
(Purba, 1992: 275). Various risks of life make people have a high mental
attitude to insure their life.

The increasing customers of insurance may impact on the dispute of life
insurance. Department of Mediation and Arbitration of Insurance (BMAI) noted
that the claim of life insurance increased significantly in 2012; reaching up
to 138 cases or 158% of the total cases in 2011 that were 48 cases. In 2013,
the total claims were 41 cases consisting of 27 cases of life insurance and 14
cases of other general insurance (Huda, 2016: 6).

In order to provide legal certainty in solving the claim of life
insurance, the government established a Regulation of Financial Services
Authority (in Indonesia known as OJK Regulation) No. 1/POJK.7/2014, particularly to Article 2 subsection (1) that “It is a must for
Financial Services Authority (life insurance company) to solve any plaint that
occurs.” However, Article 2 subsection (2) mentions that “when it does not meet
any solution for lawsuit, the insured and the Financial Services Authority
(insurance company) may solve the case through either litigation or
non-litigation path.” And, this study would analyze the characteristics of
non-litigation solution for life insurance lawsuit in Indonesia.


1.  Solution for Life Insurance Lawsuit through Department of Mediation and
Arbitration of Insurance (BMAI)

The mechanism of solution for life insurance lawsuit
is through BMAI (internal dispute resolution) and judicial department (external
dispute resolution). Resolutions through BMAI has several characteristics
such as quick in procedure, dynamic, innovative, low budget, objective,
relevant, and fair. Furthermore, the dispute solution through BMAI is
confidential, thus, each of the disputing parties may feel more convenient to run
the process. In addition, the process is fast as it is designed to avoid any
procedural and administrative delays, and supported by experts with particular
competence on related case, thus, it may reveal an objective and relevant

BMAI provides services in the form of fair
solution for claims of life insurance through alternative resolutions and
services for the insured in order to increase public trust and interest on
insurance for the sake of prosperous and convenient life. Its goals are professionally
independent and impartial, including helping people solve the claims of life
insurance between an insurance company and an insured through alternative
resolutions, providing information and understanding about insurance and
management of risk to public, and giving suggestions about particular claims
handled to government and insurance businessmen.

BMAI is an accessible department for public
and insurance companies. The process of mediation, adjudication, and
arbitration will help people find solutions for disputed claims, and provide a
comprehensive solution for the insured who have less understanding about the notion
of insurance and less capability to solve a lawsuit judicially, or even to pay
a very high-cost legal aid.

To request for claim on life insurance, it is
a must for the insured to fill a request form of dispute resolution (in
Indonesia, known as FPPS) provided by BMAI and file the form to BMAI as the
base to conduct an investigation on a dispute. The solution of life insurance
lawsuit through BMAI has boundaries on its portion of claims. For the process
of mediation and adjudication, the portion of claims for compensation or the
advantage of the disputed policy is no more than Rp 500,000,000.00 (five
hundred million rupiahs) for each claim of life insurance. Some stages on
dispute solution of life insurance are described as follows.

a.     Mediation

Mediation is a process of negotiating
solutions for a dispute in which there is an externally neutral party helping
to reach a deal for a satisfying negotiation (Bandle, 2011: 30). On the process
of mediation, the client proposes a request of solution for a life insurance
claim to BMAI. The mediator will try to deal with the problem and seek for a
fair solution. The mediator will act as the bridge between the insured and the
insurance company.

The mediator has authority to ask the
disputing parties, and the parties are obligated to provide information and
materials related to the dispute, such as:

(1)     Copy of the policy along with the clause and endorsement, the request of
insurance, and any other related and accepted correspondences up to the
establishment of the insurance policy;

(2)     Form of the
claim and other related reports
(e.g., police,
loss adjuster, doctor, , etc.);

(3)     Evidences  related to the portion
of proposed claim;

(4)     Evidences related to the reason of claim objection;

(5)     Copy of any related correspondences, including the notes or meeting
records, between the disputing parties for the claim settlement process;

(6)     Information from the third party (the insurance agent or the insurance
broker) who facilitates the establishment/the settlement of the insurance.


The mediator will have an interview, when it
is necessary, whether through phone call or direct meeting. If the client is
out of Jakarta, Bogor, Depok, Tangerang, and Bekasi, the mediator may organize
mediation by using communication tools such as telephone, fax, email, or by
visiting the client. Analyzing the request of claim will reveal an initial
conclusion which may lead to a dispute resolution, whether closing the
settlement process or continuing the process into investigation.

If the initial conclusion from the mediator is
not in line with the claim objection, the mediator will immediately contact the
insurance company to discuss the claim and expect to reach a fair solution for
both parties.

If the client cannot fully accept the reason
of the objection but the compensation, the mediator will approach the insurance
company. Furthermore, if the insurance company agrees with the solution, the
dispute is over, however, if it does not reach the agreement from the company,
the dispute will proceed to the adjudication.


b.  Adjudication

A dispute filed to the adjudication is one that has
run mediation but does not reach any solution yet. BMAI Adjudication will bring
solutions in the form of final and conclusive judgments. The basis of
establishing such judgment will be recorded and signed by all panel members.
The judgment will be announced in final proceeding. As the result, if all the
parties agree with the judgment, they will sign it as the agreement of the

If the adjudicator panel judges the claim for
the client’s benefit, it may include some payment to be paid for financial
compensation, and exclude any compensation outside the insurance policy. The
adjudicator panel may act as the part of judgment, providing a necessary
recommendation to the insurance company, although it does not bind the client.

If the clients objects the BMAI’s adjudicatory
judgment, they will be free to do further legal actions, as set in the policy,
to get their rights. Conversely, if the adjudicatory judgment requires the
insurance company to do some payment, the company has to conduct some payment
as set in the insurance policy.

BMAI’s judgment on life insurance dispute is
final and binding for the insurance company. This indicates that if an
insurance company is defeated on the adjudicatory proceeding, the company must
pay the proposed claim. In this case, the company must obey the judgment and
have no right to do any legal action. Thus, it is clear that BMAI is an
independent department, and it is difficult to define BMAI as means for
insurance companies to control their customers. If the process of adjudication
cannot solve the claim or the client objects the adjudicatory result, the
client may seek for other resolution (e.g., arbitration or through court
proceeding). However, all adjudicatory results from BMAI cannot be used as
evidence in judicial proceeding.


c. Arbitration

The definition of arbitration is set under the article
1 subsection (1), Law No. 30/ 1999 about Arbitration and Alternative Solution
for dispute. It mentions that the dispute resolution for civil cases out of
public court is based on an agreement of arbitration made by the disputing
parties. Arbitration is usually defined as a process where a neutral
third party delivers a decision which is final, and binding on both parties (Petrauskas, 2011: 928). In regard to life insurance, it is under the
provision of SK 001/SK-BMAI/09.2014 on Regulation of Arbitration Procedure by
Department of Mediation for Insurance in Indonesia. Furthermore, arbitration is
defined as a dispute solution for civil cases held by BMAI out of the public
court under its regulation and procedures based on the agreement of

The scope of the resolution for insurance
dispute through arbitration in BMAI must be clearly asserted in the agreement
of arbitration, that every dispute that emerges or likely to emerge in that
legal relationship must be solved based on a good faith with cooperative and
non-confronting way by putting aside any dispute resolutions through court or
other alternative departments (Agrawal 2014,67).
A request for arbitration is filed by attaching adequate
copies of warrant for the proceeding. The arbitration must contain:

The complete name and
address or domiciles of the parties;

Brief description about the

Clear content; in addition
to attaching several enclosures such as: copy of evidence, copy of arbitration
agreement, and copy of registration payment.

Investigating the dispute through arbitration
is conducted in writing, while the verbal investigation is conducted in private
between the disputing parties along with their attorneys. Both parties have
equal rights and obligations to express their arguments, present evidence and
witnesses. The applied law for dispute resolution in Indonesia is the recent
arbitration law. The time allowance for investigation is 180 (one hundred and
eighteen) days since the date of establishing a single and/or committee arbitrator.

An arbitrator has an authority to make
decision based on justice and appropriateness, and thus, the legal regulation
can be put aside. In particular case, the law may force (dwigende regels)
to be applied by the arbitrator. The decision of an arbitrator is final with
fixed legal power and considered binding to both parties. Hence, any appeal,
cassation, or judicial review cannot be found.


2.   Challenges for Quick, Cheap, Fair, and Efficient
Settlement of Life Insurance

principles of protecting customers of insurance involve transparency, fair
treatment, reliability, confidentiality, and security of customer’s
data/information, and a simple, cheap, and low-budget dispute resolution.
Article 32 subsection (1) POJK
No. 1/POJK.07/2013 sets that it is a must for businessmen of financial
services (the insurer) to have and do the mechanism of services, and solve
customers’ complaints. Complaint refers to an expression of dissatisfaction by
a customer (the insured) due to financial disadvantages that happen because of
his/her fault or the dereliction of a financial service company (the insurer)
in allocating and utilizing the services and/or products of the financial
service company (Herierri, 2015: 45).

The regulation of Financial Services Authority No. 1/POJK.07/2014 mentions a series of consumer protections including education, services
of information, complaints and settlements. When consumers often disagree with
the settlements of their insurance companies, the dispute will be filed to
BMAI. Some principles of dispute resolution through BMAI are as follow.

a.   Accessibility

This principle indicates that BMAI is easy to access
by customers. Thus, the customer may use it to solve their problem. To easily
access it for settlement, BMAI develops a strategy of communication to improve
consumers’ access on service department of alternative dispute resolution and
to improve their understanding about the process of dispute resolution by BMAI.
With these accessible lines of services for consumers’ dispute resolution; it
is likely to reach the entire area of Indonesia, from Sabang to Merauke.

b.     Independency

BMAI has staff making sure that the settlement has met the requirements to
do its function. In order to support its independency, BMAI is not allowed to
give any right of veto toward its members. BMAI consults with some relevant
stakeholders to establish and alter its regulation before it is applied. In
order to keep its independency, BMAI is supported by adequate sources to do its
function and not depend on other financial service departments.

c.     Fairness

Fairness, in this case, indicates that this department
has regulations for making decisions, and it must provide a written reason for
its objection on a request of dispute resolution filed by consumers and/or
financial service companies under several conditions, including: 1) the
mediator truly acts as a facilitator that bridges the interests of both
disputing parties in order to find solution; 2) the adjudicator and the arbitrator
are not allowed to make decision based on information that the disputing
parties do not know about it; and 3) the adjudicator and the arbitrator must
develop a written reason for each of their decisions.

d.     Efficiency and Effectiveness

BMAI has to solve a dispute in efficient manner, with particular period of
time allowed for resolution and low cost for consumers’ budget. In addition,
effectiveness indicates that BMAI has rules which contain a condition asserting
that its members must obey and apply the rules in each of their judgments and
they must also control the implementation of the judgment. 

In order to improve the service quality of BMAI, Financial Services
Authority in Article 9 POJK No. 1/ 2014 requires BMAI to make six-monthly
report on June and December, with the due date is on 10 of the next month. BMAI
report must contain particular information as follows.

a.       The amount of settlement;;

b.       Demography of the consumer filing a request of settlement;

c.       The amount of settlement objected due to ineligibility (including the
reason behind the objection);

d.       The dispute which is still on-process of settlement;

e.       The period of time needed for settlement;

Type of service and/or product disputed; and

g.       The number of disputes judged and the result of monitoring on the
execution of the intended judgment.

To see the effectiveness of BMAI as a mediator
in a dispute resolution of life insurance lawsuit, some advantages should be
described (Sari, 2007: 107-108) as follow:

Having dispute resolution
through BMAI  is free of charge;

independent, it is not allowed to force any party;

Time spent for dispute
resolution is relatively quick rather than the litigation process due to its
simple procedures;

It keeps a
relationship safe since the judgment is

Although the base office is
in Jakarta, every insured from any regions is still capable to file their
complaints via phone call, letter, fax, or e-mail; and

If both parties are
dissatisfied with the result of mediation, the dispute can be filed to the
litigation area (for further legal action).

Nevertheless, some
disadvantages of BMAI are as follow.

BMAI only
solves disputes which relate to the members of BMAI. This may disadvantage
consumers having disputes with an insurance company that is not a member of
BMAI. Recently, BMAI has 88 insurance companies as its members. among those
number, 41 of them are life insurance companies, 4 of them are social insurance
companies, and 4 others are re-insurance companies;

An insurance company engaged
to the judgment is charged to do some payment for operational cost. This operational payment
implies that the insurance company has a sense of belonging to BMAI and feels
that this department is on its side. As the result, it will lead the
independency of BMAI into question.



A dispute resolution of life insurance lawsuit can
be done through two ways, litigation and non-litigation. In particular to
non-litigation way, Financial Services Authority has built an alternative
department for dispute resolution in financial services sector, especially to
insurances mentioned by BMAI, a department of mediation and arbitration in

Dispute resolution through BMAI can be done in
two stages, mediation and adjudication. The process of dispute resolution in
BMAI involves: Mediation, starting from filing a complaint to BMAI and the case
manage will immediately handle it. Case Manager will take serious
effort to find a fair and good solution for the disputing parties; the consumer
and the insurance company. If the dispute cannot be solved through mediation,
it will be filed to the adjudication level. The adjudicator panel designated by
BMAI will make the judgment. In this stage, if an insurance company is found
guilty, the dispute will be over and the company must pay the claim.
Conversely, if the customer is found guilty, it will lead to the court or
arbitration level.

Resolution reflecting quick, cheap, fair, and
efficient manner has been set under POJK
No. 1/POJK.7/2014. Quick manner implies that the resolution is settled
in short time through mediation, while it needs 60 days through adjudication.
Cheap or low budget implies that the cost for a dispute resolution is
affordable for the customers. Fair manner indicates that the mediator or
adjudicator must be fair in treating both consumers and insurance companies, and
the judgment must be based on a logical reason. Finally, efficient manner
implies that it has non-tortuous procedures and provides a legal certainty for
both parties.



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Bandle,  Anne Laure and  Theurich, Sarah. (2011). Alternative Dispute
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Greene, Mark R. and James S. Trieschmann.1988.  Risk
and Insurance. Seven Editon. West Chicago, South Westhern Publishing

Huda, Mokhamad Khoirul.2016. The Principles of Good Faith in Life
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Huda, Mokhamad Khoirul, Nugraheni Ninis, Kamarudin. 2016. The
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Huda, Mokhamad Khoirul. 2017. An Obligation to Represent and
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in Life Insurance Contract. Mediterranean
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***Act Number  30 of  1999 on Arbitration
and Dispute Resolution out of Litigation Proceeding

***Act Number  21 of  2001 on Financial
Services Authority

***Act Number  40 of  2014 on Insurance

***Regulation of  Financial
Services Authority Number 1 /POJK.07/2013 about Consumer Protection on Financial Services Sector.

***Regulation of  Financial
Services Authority Number 1/POJK.07/2014 about Alternative Department for Dispute Resolution on Financial
Services Sector.


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