Abstract Thisstudy analyzed the characteristics of non-litigation resolution for lifeinsurance lawsuit in Indonesia. The result found that the non-litigation solutionfor life insurance lawsuit in Indonesia must be through Department of Mediationand Arbitration of Insurance (in Indonesia, known as BMAI). When the mediation-as the legal action from a costumer- was objected, the lawsuit would proceedto the adjudication. When the customer won on this adjudication level, theinsurance company was then obligated to do some payment as mentioned on theinsurance policy. Furthermore, when the legal action of a customer wasobjected, the customer was then free to do an arbitrage legal action. Thearbitration was final and had fixed legal power.

Thus, any appeal, cassation,or judicial review could not be held. The solution for life insurance lawsuitthrough BMAI has several characteristics such as quick in procedures, dynamic,innovative, cheap, and low budget. In addition, the dispute solution throughBMAI is confidential, quick in time, and supported by some experts on relatedtypes of lawsuit, thus, it may result in fair judgment.  Keywords:  Life Insurance,Non-Litigation, Characteristic, Lawsuit, Solution, Customer.

 JELClassification: K11, K22, K23, D81,G22. Introduction  Generally,the future of every human being is unsure, as no one can see any possibility intheir lives. However, as God’s creature, every human is attributed with logicalmind and the five senses as means to seek for solution for their lives. Usingthe past experience as guidance, they presume events which may happen and howto handle those events to prevent any possible risks (Huda, 2007: 53).

Risk is “acondition in which there is a possibility of an adverse deviation from adesired 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). Insuranceenables the whole  society to minimizethe risks caused by some  natural factorsfor instance earthquakes, hurricanes,  tornados, flood;  some human actions for example theft, fraud,pollution, terrorism, and  some economicimpacts such as inflation, obsolescence, depressions/recessions (Aqil  2014, 205).Insurance is also defined as a financial means in relative governance toencounter 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 mentalattitude to insure their life.

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The increasing customers of insurance may impact on the dispute of lifeinsurance. Department of Mediation and Arbitration of Insurance (BMAI) notedthat the claim of life insurance increased significantly in 2012; reaching upto 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 14cases of other general insurance (Huda, 2016: 6).

In order to provide legal certainty in solving the claim of lifeinsurance, the government established a Regulation of Financial ServicesAuthority (in Indonesia known as OJK Regulation) No. 1/POJK.7/2014, particularly to Article 2 subsection (1) that “It is a must forFinancial Services Authority (life insurance company) to solve any plaint thatoccurs.

” However, Article 2 subsection (2) mentions that “when it does not meetany solution for lawsuit, the insured and the Financial Services Authority(insurance company) may solve the case through either litigation ornon-litigation path.” And, this study would analyze the characteristics ofnon-litigation solution for life insurance lawsuit in Indonesia. 1.

 Solution for Life Insurance Lawsuit through Department of Mediation andArbitration of Insurance (BMAI)The mechanism of solution for life insurance lawsuitis through BMAI (internal dispute resolution) and judicial department (externaldispute resolution). Resolutions through BMAI has several characteristicssuch as quick in procedure, dynamic, innovative, low budget, objective,relevant, and fair. Furthermore, the dispute solution through BMAI isconfidential, thus, each of the disputing parties may feel more convenient to runthe process. In addition, the process is fast as it is designed to avoid anyprocedural and administrative delays, and supported by experts with particularcompetence on related case, thus, it may reveal an objective and relevantresult.

BMAI provides services in the form of fairsolution for claims of life insurance through alternative resolutions andservices for the insured in order to increase public trust and interest oninsurance for the sake of prosperous and convenient life. Its goals are professionallyindependent and impartial, including helping people solve the claims of lifeinsurance between an insurance company and an insured through alternativeresolutions, providing information and understanding about insurance andmanagement of risk to public, and giving suggestions about particular claimshandled to government and insurance businessmen.BMAI is an accessible department for publicand insurance companies.

The process of mediation, adjudication, andarbitration will help people find solutions for disputed claims, and provide acomprehensive solution for the insured who have less understanding about the notionof insurance and less capability to solve a lawsuit judicially, or even to paya very high-cost legal aid.To request for claim on life insurance, it isa must for the insured to fill a request form of dispute resolution (inIndonesia, known as FPPS) provided by BMAI and file the form to BMAI as thebase to conduct an investigation on a dispute. The solution of life insurancelawsuit through BMAI has boundaries on its portion of claims. For the processof mediation and adjudication, the portion of claims for compensation or theadvantage of the disputed policy is no more than Rp 500,000,000.00 (fivehundred million rupiahs) for each claim of life insurance. Some stages ondispute solution of life insurance are described as follows.a.

     MediationMediation is a process of negotiatingsolutions for a dispute in which there is an externally neutral party helpingto reach a deal for a satisfying negotiation (Bandle, 2011: 30). On the processof mediation, the client proposes a request of solution for a life insuranceclaim to BMAI. The mediator will try to deal with the problem and seek for afair solution. The mediator will act as the bridge between the insured and theinsurance company.The mediator has authority to ask thedisputing parties, and the parties are obligated to provide information andmaterials related to the dispute, such as:(1)     Copy of the policy along with the clause and endorsement, the request ofinsurance, and any other related and accepted correspondences up to theestablishment of the insurance policy;(2)     Form of theclaim and other related reports(e.g., police,loss adjuster, doctor, , etc.

);(3)     Evidences  related to the portionof proposed claim;(4)     Evidences related to the reason of claim objection;(5)     Copy of any related correspondences, including the notes or meetingrecords, between the disputing parties for the claim settlement process;(6)     Information from the third party (the insurance agent or the insurancebroker) who facilitates the establishment/the settlement of the insurance. The mediator will have an interview, when itis necessary, whether through phone call or direct meeting. If the client isout of Jakarta, Bogor, Depok, Tangerang, and Bekasi, the mediator may organizemediation by using communication tools such as telephone, fax, email, or byvisiting the client. Analyzing the request of claim will reveal an initialconclusion which may lead to a dispute resolution, whether closing thesettlement process or continuing the process into investigation. If the initial conclusion from the mediator isnot in line with the claim objection, the mediator will immediately contact theinsurance company to discuss the claim and expect to reach a fair solution forboth parties.

If the client cannot fully accept the reasonof the objection but the compensation, the mediator will approach the insurancecompany. Furthermore, if the insurance company agrees with the solution, thedispute is over, however, if it does not reach the agreement from the company,the dispute will proceed to the adjudication.  b.  AdjudicationA dispute filed to the adjudication is one that hasrun mediation but does not reach any solution yet.

BMAI Adjudication will bringsolutions in the form of final and conclusive judgments. The basis ofestablishing such judgment will be recorded and signed by all panel members.The judgment will be announced in final proceeding. As the result, if all theparties agree with the judgment, they will sign it as the agreement of theclaim. If the adjudicator panel judges the claim forthe client’s benefit, it may include some payment to be paid for financialcompensation, and exclude any compensation outside the insurance policy. Theadjudicator panel may act as the part of judgment, providing a necessaryrecommendation to the insurance company, although it does not bind the client.If the clients objects the BMAI’s adjudicatoryjudgment, they will be free to do further legal actions, as set in the policy,to get their rights. Conversely, if the adjudicatory judgment requires theinsurance company to do some payment, the company has to conduct some paymentas set in the insurance policy.

BMAI’s judgment on life insurance dispute isfinal and binding for the insurance company. This indicates that if aninsurance company is defeated on the adjudicatory proceeding, the company mustpay the proposed claim. In this case, the company must obey the judgment andhave no right to do any legal action. Thus, it is clear that BMAI is anindependent department, and it is difficult to define BMAI as means forinsurance companies to control their customers. If the process of adjudicationcannot solve the claim or the client objects the adjudicatory result, theclient may seek for other resolution (e.g.

, arbitration or through courtproceeding). However, all adjudicatory results from BMAI cannot be used asevidence in judicial proceeding. c. ArbitrationThe definition of arbitration is set under the article1 subsection (1), Law No. 30/ 1999 about Arbitration and Alternative Solutionfor dispute. It mentions that the dispute resolution for civil cases out ofpublic court is based on an agreement of arbitration made by the disputingparties. Arbitration is usually defined as a process where a neutralthird party delivers a decision which is final, and binding on both parties (Petrauskas, 2011: 928).

In regard to life insurance, it is under theprovision of SK 001/SK-BMAI/09.2014 on Regulation of Arbitration Procedure byDepartment of Mediation for Insurance in Indonesia. Furthermore, arbitration isdefined as a dispute solution for civil cases held by BMAI out of the publiccourt under its regulation and procedures based on the agreement ofarbitration.

The scope of the resolution for insurancedispute through arbitration in BMAI must be clearly asserted in the agreementof arbitration, that every dispute that emerges or likely to emerge in thatlegal relationship must be solved based on a good faith with cooperative andnon-confronting way by putting aside any dispute resolutions through court orother alternative departments (Agrawal 2014,67).A request for arbitration is filed by attaching adequatecopies of warrant for the proceeding. The arbitration must contain:(1)    The complete name andaddress or domiciles of the parties;(2)    Brief description about thedispute;(3)    Clear content; in additionto attaching several enclosures such as: copy of evidence, copy of arbitrationagreement, and copy of registration payment.Investigating the dispute through arbitrationis conducted in writing, while the verbal investigation is conducted in privatebetween the disputing parties along with their attorneys. Both parties haveequal rights and obligations to express their arguments, present evidence andwitnesses. The applied law for dispute resolution in Indonesia is the recentarbitration law. The time allowance for investigation is 180 (one hundred andeighteen) days since the date of establishing a single and/or committee arbitrator.An arbitrator has an authority to makedecision based on justice and appropriateness, and thus, the legal regulationcan 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 withfixed 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 EfficientSettlement of Life InsuranceTheprinciples of protecting customers of insurance involve transparency, fairtreatment, reliability, confidentiality, and security of customer’sdata/information, and a simple, cheap, and low-budget dispute resolution.

Article 32 subsection (1) POJKNo. 1/POJK.07/2013 sets that it is a must for businessmen of financialservices (the insurer) to have and do the mechanism of services, and solvecustomers’ complaints. Complaint refers to an expression of dissatisfaction bya customer (the insured) due to financial disadvantages that happen because ofhis/her fault or the dereliction of a financial service company (the insurer)in allocating and utilizing the services and/or products of the financialservice company (Herierri, 2015: 45).

The regulation of Financial Services Authority No. 1/POJK.07/2014 mentions a series of consumer protections including education, servicesof information, complaints and settlements. When consumers often disagree withthe settlements of their insurance companies, the dispute will be filed toBMAI. Some principles of dispute resolution through BMAI are as follow.a.   AccessibilityThis principle indicates that BMAI is easy to accessby customers.

Thus, the customer may use it to solve their problem. To easilyaccess it for settlement, BMAI develops a strategy of communication to improveconsumers’ access on service department of alternative dispute resolution andto improve their understanding about the process of dispute resolution by BMAI.With these accessible lines of services for consumers’ dispute resolution; itis 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 todo its function. In order to support its independency, BMAI is not allowed togive any right of veto toward its members. BMAI consults with some relevantstakeholders to establish and alter its regulation before it is applied. Inorder to keep its independency, BMAI is supported by adequate sources to do itsfunction and not depend on other financial service departments.c.     FairnessFairness, in this case, indicates that this departmenthas regulations for making decisions, and it must provide a written reason forits objection on a request of dispute resolution filed by consumers and/orfinancial service companies under several conditions, including: 1) themediator truly acts as a facilitator that bridges the interests of bothdisputing parties in order to find solution; 2) the adjudicator and the arbitratorare not allowed to make decision based on information that the disputingparties do not know about it; and 3) the adjudicator and the arbitrator mustdevelop a written reason for each of their decisions.d.

     Efficiency and EffectivenessBMAI has to solve a dispute in efficient manner, with particular period oftime allowed for resolution and low cost for consumers’ budget. In addition,effectiveness indicates that BMAI has rules which contain a condition assertingthat its members must obey and apply the rules in each of their judgments andthey must also control the implementation of the judgment.  In order to improve the service quality of BMAI, Financial ServicesAuthority in Article 9 POJK No.

1/ 2014 requires BMAI to make six-monthlyreport on June and December, with the due date is on 10 of the next month. BMAIreport 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 thereason behind the objection);d.       The dispute which is still on-process of settlement;e.

       The period of time needed for settlement;f.        Type of service and/or product disputed; and g.       The number of disputes judged and the result of monitoring on theexecution of the intended judgment. To see the effectiveness of BMAI as a mediatorin a dispute resolution of life insurance lawsuit, some advantages should bedescribed (Sari, 2007: 107-108) as follow:a.        Having dispute resolutionthrough BMAI  is free of charge;b.        BMAI isindependent, it is not allowed to force any party;c.         Time spent for disputeresolution is relatively quick rather than the litigation process due to itssimple procedures;d.        It keeps arelationship safe since the judgment isconfidential;e.

        Although the base office isin Jakarta, every insured from any regions is still capable to file theircomplaints via phone call, letter, fax, or e-mail; and f.          If both parties aredissatisfied with the result of mediation, the dispute can be filed to thelitigation area (for further legal action).Nevertheless, somedisadvantages of BMAI are as follow.a.        BMAI onlysolves disputes which relate to the members of BMAI. This may disadvantageconsumers having disputes with an insurance company that is not a member ofBMAI. Recently, BMAI has 88 insurance companies as its members. among thosenumber, 41 of them are life insurance companies, 4 of them are social insurancecompanies, and 4 others are re-insurance companies;b.

        An insurance company engagedto the judgment is charged to do some payment for operational cost. This operational paymentimplies that the insurance company has a sense of belonging to BMAI and feelsthat this department is on its side. As the result, it will lead theindependency of BMAI into question. ConclusionsA dispute resolution of life insurance lawsuit canbe done through two ways, litigation and non-litigation. In particular tonon-litigation way, Financial Services Authority has built an alternativedepartment for dispute resolution in financial services sector, especially toinsurances mentioned by BMAI, a department of mediation and arbitration inIndonesia.

Dispute resolution through BMAI can be done intwo stages, mediation and adjudication. The process of dispute resolution inBMAI involves: Mediation, starting from filing a complaint to BMAI and the casemanage will immediately handle it. Case Manager will take seriouseffort to find a fair and good solution for the disputing parties; the consumerand the insurance company.

If the dispute cannot be solved through mediation,it will be filed to the adjudication level. The adjudicator panel designated byBMAI will make the judgment. In this stage, if an insurance company is foundguilty, 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 orarbitration level.Resolution reflecting quick, cheap, fair, andefficient manner has been set under POJKNo. 1/POJK.

7/2014. Quick manner implies that the resolution is settledin short time through mediation, while it needs 60 days through adjudication.Cheap or low budget implies that the cost for a dispute resolution isaffordable for the customers. Fair manner indicates that the mediator oradjudicator must be fair in treating both consumers and insurance companies, andthe judgment must be based on a logical reason.

Finally, efficient mannerimplies that it has non-tortuous procedures and provides a legal certainty forboth parties. References1           Agrawal, Krishna. 2014. Justice Dispensation Through The Alternative Dispute Resolution System in India.

Russian Law Journal, II(2):63-74.2           Aqil,  Muhammad et. all.2014.

Factor Influencing  InsuranceAgents Intention to Leave: Findings from Life Insurance Sector in Pakistan. International Journal of Marketing andTechnology. 4(4): 205.3           Bandle,  Anne Laure and  Theurich, Sarah. (2011). Alternative DisputeResolution and Art Law- A New Research Project of the Geneva Art Law Centre.

Journal of International Commercial Law andTechnology. 6(1):28-41.4           Vaughan , Emmet J. and  Therese Vaughan.

2003. Fundamentals of Risk and Insurance. London, John Wiley &Sons.Inc.5            Greene, Mark R.

and James S. Trieschmann.1988.

  Riskand Insurance. Seven Editon. West Chicago, South Westhern PublishingCo.  6            Huda, Mokhamad Khoirul.2016. The Principles of Good Faith in LifeInsurance Agreement.

Yogyakarta, Faculty of Law, Universitas IslamIndonesia.7            Huda, Mokhamad Khoirul, Nugraheni Ninis, Kamarudin. 2016.

TheNature of the Contract of Life Insurance Agency after Enactement of the ActNumber 40 of 2014 on Insurance, Journal  of Advanced Research in Law and Economics,(VolumeVII, Fall), 5(19):1037-1041:10.14505/jarle.v7.5(19).

09.8            Huda, Mokhamad Khoirul. 2017. An Obligation to Represent andDisclose  Material Facts as a Good Faithin Life Insurance Contract. MediterraneanJournal of Social Sciences, 8(4S1):53-59.

9            Herrieti, Nun. 2015. The Mechanismsof Dispute Resolution after Applying POJK No. 1/POJK.7/2013 and POJK No.1/POJK.7/2014. Journal of Law of Civil Procedure, 1(1): 45-61.

10        Petrauskas, Feliksas and Kybartiene, Egle. 2011. On LineDispute  Rosolution in Consumer Disputes,Jurisprudence,18(3):921-941.11        Purba, Radiks.

(1995). Understanding Insurance in Indonesia. Jakarta, Pustaka Binamaan Pressindo.12        Puspitasari, Chandra Dewi. 2007. Alternative Resolution for Insurance Dispute through BMAI (a Departmentof Mediation of Insurance in Indonesia). Journal of Civities,  4 (2): 107-108.***Act Number  30 of  1999 on Arbitrationand Dispute Resolution out of Litigation Proceeding ***Act Number  21 of  2001 on FinancialServices Authority***Act Number  40 of  2014 on Insurance***Regulation of  FinancialServices Authority Number 1 /POJK.07/2013 about Consumer Protection on Financial Services Sector.***Regulation of  FinancialServices Authority Number 1/POJK.07/2014 about Alternative Department for Dispute Resolution on FinancialServices Sector.