Financial Crimes and the Crisis of Public Trust

The rapid growth of domestic investors and policyholders has brought new hope for national financing in Indonesia.

Yet a series of crises in the non-bank financial sector — from Jiwasraya, ASABRI, Wanaartha, Bumiputera and Indosurya to Investree, whose license was revoked by the Financial Services Authority (OJK) and is now under legal proceedings — raises a fundamental question: is public money truly safe?

In the insurance sector, successive failures have driven a shift in public confidence toward foreign joint-venture insurers, which are perceived as more trustworthy.

The government has responded with a plan to merge 15 state-owned insurers into three major entities, but the effectiveness of this consolidation remains to be proven.

Unless old governance patterns are corrected, public confidence in domestic financial institutions will continue to erode.

How well is public money protected?

Over the past five years, domestic investors have grown rapidly, becoming a new backbone of national financing. Yet behind this optimism lie a series of major failures that raise a deeper question: how well is public money truly protected?

The crises at Jiwasraya, the losses at ASABRI, and the scrutiny over Taspen show that even institutions once considered the safest are not immune.

The crisis of trust in the non-bank sector

The Jiwasraya case, with losses amounting to Rp16 trillion, and ASABRI’s Rp22 trillion shortfall have opened the public’s eyes to the fragility of governance.

Taspen, as the pension fund manager for civil servants, has also come under public scrutiny. The unpaid claims of Wanaartha and Bumiputera remain unresolved to this day, revealing a recurring pattern: high-risk investments made without adequate control.

When such failures occur in state-owned enterprises, the impact is even greater — institutions once synonymous with safety have become sources of vulnerability.

Meanwhile, the structure of premium distribution has worsened the situation. Commissions paid to bancassurance and multifinance partners are often larger than the portion of premiums allocated to claim reserves.

The Insurance Quarterly Report IFG Q4/2024 warns of serious risks: in general insurance, the ratio of investment adequacy to technical reserves has fallen below the minimum threshold, while in life insurance, the ratio of premium adequacy to claims has weakened steadily from 2016 to 2024.

In motor insurance, although tariffs are regulated, excessive flexibility without clear sanctions has triggered a price war.

Premiums are undercut, reserves are eroded and claim-paying capacity declines. In such a situation, it is unsurprising that public confidence has shifted toward foreign joint-venture insurers, which are perceived to uphold stronger governance.

Cooperatives: From People’s Institutions to Systemic Risk

Cooperatives are meant to be the backbone of people’s economic empowerment. Yet the Indosurya case, involving a default of Rp15 trillion, exposed weaknesses in eligibility requirements, supervision and regulatory discipline.

The same fundamental principles apply here as in insurance — sound pricing, adequate reserves, liquidity discipline and preventive oversight.

When a cooperative fails, the social and economic impact is broader because it affects ordinary people directly. Instead of serving as vehicles for prosperity, cooperatives can turn into systemic traps.

The government’s plan to develop the Koperasi Desa Merah Putih will face similar risks unless governance standards are strengthened from the outset.

Fintech: Digital processes, traditional problems

The Investree case represents a modern face of old problems. Non-performing loans surged, leading OJK to revoke its business license in 2024.

Early in 2025, Investree challenged the revocation through an administrative court lawsuit in Jakarta. The case escalated when law enforcement authorities pursued allegations of illegal fund collection totaling Rp2.7 trillion — and by September 2025, the company’s top executive was repatriated to Indonesia to face investigation.

This phenomenon demonstrates that technology may evolve, but without disciplined governance and anticipatory supervision, traditional problems will persist — often escalating more rapidly amid heightened public expectations of digital innovation.

The role of regulators and the government

The government’s latest move — to merge 15 state-owned insurers into only three entities — is expected to strengthen capitalisation and governance after a series of industry crises.

Yet the consolidation’s effectiveness and competitiveness will depend heavily on the discipline of supervision and the new entities’ ability to sustain public confidence.

Without this, old risks may reappear on a larger scale.

OJK: The Challenge of Strengthening Public Accountability

The Financial Services Authority (OJK) was established with a broad mandate: to regulate, supervise, and protect consumers. The series of crises from Jiwasraya to fintech lending reflects the challenges of building a more anticipatory supervisory approach — including the development of early warning systems and consistent market discipline.

In the case of Taspen, public scrutiny has intensified given its responsibility for managing the pensions of millions of civil servants. This underscores the need for more transparent and effective oversight to sustain public trust.

The Minister of Finance: Fiscal Guardian and Policy Signal

The Jiwasraya and ASABRI crises show that when supervision fails, the burden ultimately falls on the state budget.

The new Minister of Finance is therefore expected to accelerate the establishment of the Policyholder Protection Institution (LPP), align fiscal policy with financial sector oversight, and send a strong political signal that the state stands with small investors and retail policyholders.

From crisis to confidence

Unless the lessons from Jiwasraya to Investree are turned into the foundation for reform, similar crises will recur under different guises.

Protection for small investors and policyholders must become the core of reform.

Immediate steps include:

1. Accelerating the LPP’s establishment — waiting until 2028 is unwarranted; regulatory frameworks, institutions, and initial funding must be expedited.

2. Digital supervision and market discipline — developing real-time early warning systems and enforcing strict sanctions for pricing violations.

3. Reforming distribution commissions — capping excessive commissions that burden consumers, supported by fair regulation and strong monitoring.

4. Transparency in financial products — clearly disclosing risks, costs, and claim mechanisms in plain language. 5. Product suitability and financial soundness — allowing new products only when aligned with the insurer’s capital strength.

6. Regulatory accountability — conducting comprehensive evaluations to ensure more timely and effective supervision in the future.

7. Public education — treating past failures as national lessons rather than burying them.

8. Strengthening domestic insurers — improving capital strategies, governance, and innovation so they are not overshadowed by foreign joint ventures.

9. Cross-agency coordination — ensuring that the Financial System Stability Committee (KSSK) actively monitors risks in insurance, cooperatives, and fintech, not just banking.

10. The role of the Minister of Finance — using fiscal and political authority to accelerate consumer protection measures. Conclusion Indonesia has paid a high price — from Jiwasraya to Investree.

These crises underline the urgent need for a paradigm shift: from reactive to preventive supervision, and from partial to comprehensive consumer protection.

Trust is the very foundation of money and financial institutions. Without trust, even the most sophisticated innovation — if not grounded in integrity — can magnify risk. In the end, the cost of every crisis inevitably returns to the public.

Author’s Note:

This is a free English translation of my article first published in Kontan on 17 October 2025 under the title “Kejahatan Finansial dan Krisis Kepercayaan.” I have added several subheadings for clarity and to help international readers follow the flow of the discussion, as the published version did not include them. The substance and perspective remain faithful to the original.

Dr. Junaedy Ganie ANZIIF (Fellow) CIP                                                                                                Jakarta, 20 October 2025