The recent push for integrating credit insurance into Peer-to-Peer (P2P) lending platforms has sparked significant debate in Indonesia. Heru Sutadi, Executive Director of the Indonesia ICT Institute, expressed concerns over this regulatory move, emphasizing that the governance of both fintech and insurance sectors remains underdeveloped. The regulation by the Financial Services Authority (OJK), which allows general insurance companies to market credit insurance products via P2P lending platforms, is seen as potentially problematic.

Sutadi argues that this move might complicate an already fragile system. “The regulation could create new complexities, as I see that the governance in both the fintech P2P lending and insurance sectors is still inadequate,” Sutadi explained. He highlighted the risk of turning credit insurance into a form of new debt, which could be difficult for borrowers to repay. “If insurance is integrated into P2P lending, it could add another layer of financial obligation for users,” he added.

The regulation in question, outlined in the OJK Regulation No. 20/2023, enables credit insurance, when marketed as a group policy, to have the premiums paid by the lender on P2P platforms. This model, which might seem like a feasible solution for expanding insurance coverage, has drawn skepticism from industry experts. The concern lies in the fact that insurance premiums, if included as part of P2P loans, would likely be passed on to the borrower in the form of installment payments. Sutadi believes this could add unnecessary financial strain to individuals already facing challenges with loan repayment.

While the OJK sees potential benefits in the integration, including broader insurance coverage and increased penetration in underserved areas, critics like Sutadi caution against ignoring the possible negative impact. “While P2P lending could benefit from the premiums, it’s the borrowers who would ultimately bear the cost, which seems to contradict the principle of offering accessible financial services,” Sutadi commented.

In response, Djonieri, Head of the Department of Insurance Regulation at OJK, defended the regulation, highlighting its potential to drive insurance growth. “Integrating credit insurance into P2P platforms could significantly increase insurance penetration, especially among users who rely on P2P lending for access to financing,” he said. However, the industry remains divided on whether the benefits outweigh the risks.

This ongoing debate underscores the challenges faced by regulators in balancing innovation with consumer protection, as the integration of insurance products into P2P platforms continues to be a controversial topic in Indonesia’s rapidly evolving fintech landscape.

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