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Social Insurance: Definition, Characteristics, and Types of Products

Social insurance is a national-scale guarantee established by the government to provide social welfare for all Indonesian people and its participation is mandatory.

The purpose of social insurance is to provide basic protection to the entire community with minimal, cheap, and affordable premiums. That way, people can still get compensation costs if they experience an unexpected event such as an accident or illness.

Definition of social insurance

Based on Law Number 40 of 2004 concerning the Sistem Jaminan Sosial Nasional (SJSN), the following is the definition of social insurance. Social insurance is a mandatory mechanism for collecting funds from contributions in order to provide protection against socio-economic risks that befall participants or their family members.

The principle is to prioritize the values ​​of gotong royong, cooperation, and cross subsidies to obtain optimal benefits. Simply put, various groups of people can interact with each other those who come from the upper middle class can use this product as a form of their social responsibility towards the poor.

Just like insurance in general, there is a premium that must be paid. So, participants in this case the public are required to deposit premiums in accordance with applicable rules.

However, the mechanism is arranged in such a way as to make it easier. Because the focus is on protecting and improving the welfare of the community, as much as possible the premiums or contributions do not burden the participants.

Social Insurance Features

There are five characteristics that make this insurance different from other insurance products. The characteristics or characteristics of social insurance:

  • It is mandatory for every individual.
  • Built on the principle of gotong royong with the principle of togetherness.
  • Premiums come from the community or workers and the company where the workers take shelter.
  • Social in nature and not aiming for profit.
  • Aims to provide welfare guarantees whole society.

Apart from the characteristics mentioned above, this insurance also has two properties, namely loss and life.

The nature of the loss means that this type of insurance will provide compensation to the party who feels aggrieved based on the agreed provisions. For example, BPJS Employment.

Meanwhile, the nature of life means that this insurance will provide a sum of money to a second party who receives compensation for old age or death. For example, the Pension Fund and Old Age Savings Program for Civil Servants (PNS).

Types of social insurance in Indonesia

In the past, these government program service providers consisted of five state-owned companies with state-owned status, including:

  • PT Askes (Persero)
  • PT Jamsostek (Persero)
  • PT Jasa Raharja (Persero)
  • PT Taspen (Persero)
  • PT Asabri (Persero)

In its development, PT Askes and PT Jamsostek were merged into the Social Security Administering Body or BPJS for short. As a result, there are examples of social insurance in provided by state-owned companies that provide this service, namely:

BPJS Health

BPJS Kesehatan was originally known as ASKES (State Employee Health Insurance).

ASKES at that time provided health protection guarantees to civil servants, state officials, pension recipients of TNI/Polri/State Officials, and families including veterans, independence pioneers, and non-permanent civil servants who paid contributions.

Then, it changed to BPJS Health which functions as social health insurance as well as social security for all Indonesian people which is mandatory with a national premium.

BPJS Ketenagakerjaan

Not much different from BPJS Health, BPJS Employment was originally the Jaminan Sosial Tenaga Kerja (ASTEK) which provided protection against accident insurance, old-age savings, and death benefits.

The program is supported by the Jaminan Sosial Tenaga Kerja (JAMSOSTEK) and has now changed to BPJS Employment.

This labor insurance too wider reach, especially casual workers such as motorcycle taxi drivers, traders, fishermen, farmers, to other ordinary workers.

Asuransi Kecelakaan Lalu Lintas (Jasa Raharja)

Indonesian people are protected by accident insurance from PT Jasa Raharja. The insurance provided includes users of public transportation and users of private vehicles.

The protection provided is in the form of compensation for death, permanent disability, treatment, burial costs if you do not have an heir, and reimbursement of ambulance costs if you have a transportation accident throughout Indonesia.

Asuransi Sosial Pegawai Negeri Sipil (TASPEN)

Civil Service Savings and Insurance or TASPEN insurance provides old-age insurance in the form of retirement savings as well as life protection.

This is a program that is limited to Civil Servants only with premiums deducted from their salaries every month.

Asuransi Sosial ABRI

Its scope is limited to Indonesian National Armed Forces personnel only. PT Asabri protection against the risk of death, loss of job due to retirement, or decision to withdraw from the TNI.

Difference between social and commercial insurance

The main difference between these two types of insurance is the terms. If commercial insurance is voluntary and profit-oriented, it is different from social insurance.

Social insurance is mandatory for all Indonesian citizens and is non-profit. This makes a difference in the price of social insurance premiums with commercial insurance premiums.

In addition, in terms of commercial insurance it is stated that commercial insurance does not cover all types of diseases, while social protection covers almost all types of diseases, including kidney failure to cancer.

The purpose of this insurance also has a significant difference. In social insurance, the main objective is to provide a form of protection to the whole society, not for profit.

This goal is clearly different from commercial insurance, because private insurance or commercial insurance has one of the main objectives to seek profit.

The advantages and disadvantages of social insurance

Like any other insurance, this program has its advantages and disadvantages. What are the advantages and disadvantages of this insurance? Here's the explanation.

Advantages of social insurance

The advantage lies in that the premium cost is relatively affordable, especially when compared to private insurance premium rates which are generally higher.

Therefore, this service is a solution for people who have low incomes so that they do not experience greater financial losses when a disaster strikes.

Lack of social insurance

For the drawbacks, when compared with insurance in general, usually the value of this insurance coverage is much smaller.

For example, Jasa Raharja Insurance determines the type of compensation for death due to: of IDR 50 million.

Meanwhile, some private insurance companies can provide compensation double the sum insured Jasa Raharja.

The sum insured for private insurance can even be more than Rp. 100 million to Rp. 2 billion, depending on the insurance package chosen. As a consequence, the premium to be paid is much larger.

This is not surprising because insurance is intended as a basic protection of economic value needed by participants.

Not looking for more profits or benefits as is the case with private insurance products. So, the nominal coverage is not fantastic because the funds are actually quite sufficient.

Therefore, if you want to be more balanced, you can complete it with conventional health insurance and life insurance. That way, you can get both insurance benefits to the maximum at the same time.

When you buy an insurance product, make sure you understand the insurance policy documents well This is important so that you get maximum benefits and ease in the claim process later.

If you need a reference to get a life insurance product that suits your needs, try to find out with the quiz, find the best type of life insurance here.

Questions about social insurance

What is social insurance?

Social insurance is a mandatory fund-raising system for the people of Indonesia. Social insurance is mandatory for all Indonesian citizens because it is included in government programs that aim to improve people's welfare.

The definition of social security is a form of protection to ensure that all people get proper basic needs. Social security is included in the Universal Declaration of Human Rights in 1948, which means that the state is obliged to provide social security to all its citizens.

What are social insurance products?

Some examples are BPJS Health, BPJS Employment, Social Insurance for Civil Servants (TASPEN), and Jasa Raharja.

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