Lanka a country with enormous potential for insurance- IASL | Daily News


 

Lanka a country with enormous potential for insurance- IASL

Tanuj Edwards
Tanuj Edwards

Insurance not only plays a crucial role in the sustainable growth of an economy but also for an individual to ensure that unavoidable circumstances that cause losses can be reasonably mitigated.

“It is something that provides safety and security, generates financial resources and promotes economic growth. With this in mind, Sri Lanka is a country that has enormous potential for insurance, and thereby, the Insurance Association of Sri Lanka (IASL) began an Insurance Awareness month to help people understand the importance of insurance for the people as well as for the nation at large.”

Following is a Q&A with CEO, Orient Insurance PLC, and Treasurer of IASL, Tanuj Edwards on the trends of the industry, the situation in the country and how the industry is progressing and what should be done to improve it.

Q: What is the current insurance penetration in Sri Lanka?

A: In 2014, the insurance penetration in Sri Lanka was around 1%, and since then as an industry together with the regulator, IRCSL, we have been carrying out various activities to improve this number. So in 2014, it was around 1% of the GDP and now we are close to 1.26%. This is purely due to the efforts of the industry, as we have taken several initiatives to push the penetration of insurance. The regulator too has been enabling the national insurance month and many other initiatives that would enhance the penetration of insurance and instil in the Sri Lankan mindset the need for protection.

Q: Has insurance met the best potential in the country?

A: As a CEO, what I always do in my office is to push my people to do more. However, in terms of general insurance, I feel we are in line with the peers in the region. General insurance also, for the most part, follows the trends of the economy, growth and so on. But in terms of life insurance, our penetration levels are relatively low; this factor comes with the awareness of the need for protection in society. So I feel that there is enormous opportunity in the market and we have to facilitate the infrastructure to increase the penetration levels in this market. I would say that the market is open and there are many growth opportunities, but again it comes down to the people’s economic potential or how much people can afford insurance.

Q: What factors influence the consideration and purchase of insurance by the public?

A: Traditionally the Sri Lankan market is based on recommendations. That means if you need insurance you would call a friend and ask for a recommendation. So, what I feel is the experience people have with insurance companies, as well as the trust that people have built with them, would be the number one factor in a recommendation, and what would influence a purchase or consideration of insurance. The next factor would be the service elements and how good the company has been in meeting their expectations. Finally, the price. I wouldn’t discount the price element. As far as life insurance is concerned, it comes with the protection and the savings elements, but with general insurance, it is a highly competitive marketplace, so the price plays a key role in the customers’ decision on insurance.

Q: What are the potential segments in which insurance can grow?

A: Sri Lanka has enormous potential as we go into the high middle-income category. However, unfortunately, we had the devastating Easter attacks and the COVID pandemic, which pulled down the industry that was growing at a 10 per cent-plus rate. While those circumstances are beyond our control, as a nation, there is still enormous growth potential. Especially with the renewed economic policies of the government and the regulator trying to fully support the general insurance industry, there is enormous potential to push forward in that sector.

Q: How do government and regulatory decisions impact the industry?

A: General insurance depends on government policies and the economy. If you recall when the airport attacks happened some time ago, the whole country came to a virtual standstill because the London underwriters imposed a surcharge on any shipments to Sri Lanka. That is the kind of impact insurance has. I would say insurance is a sour pill, as a nation currently we have got to balance a balance of trade. Certain import restrictions in terms of motor vehicles and other items are needed for the country and while we understand that, we have to consider other options as an industry. There is an enormous segment of cross-selling and upselling to our customer bases which are unexplored, and therefore we should look at all our options to increase the density, the renewal retention and take it forward from there.

The regulator has been continuously trying to implement initiatives to increase penetration. From 2014’s 1% to 1.26% as of now, you could see that there is growth, but how do you take it to the next level? If you look at the Sri Lankan population we have 21 million-plus but we have more mobile connections than that. So how do you facilitate the infrastructure to take insurance to the grassroots level of every Sri Lankan? How do we as an industry and as a nation take the need for protection to those levels? If you take protection to the micro-level in the country, I think automatically you would see the insurance penetration in Sri Lanka going up. Therefore, that is one of my key requests, for everyone in the industry, to take it to all Sri Lankans and inform them that there is a huge protection gap and that protection gap needs to be filled.

Q: How do we move forward from the present situation?

A: As Sri Lankans, we go on word of mouth and recommendations, and our memories are very short-lived. We had the tsunami and we have COVID, where insurance proved to be an advantage, but with these situations, our memories are very short-lived and we forget that unfortunate situations can strike at any moment.

As Sri Lankans, as media organisations, as corporate citizens and CEOs, it is our responsibility to instil in people the importance of protection. I feel that it is up to each one of us and that it is not the responsibility of only the insurers to increase the penetration or the responsibility of the regulator, but we can facilitate the infrastructure to do it.

Thus, we as insurers, we as CEOs in our board rooms will plan how to increase insurance penetration but for the society in this nation to realize the importance of protection, everyone must be involved. There is a huge protection gap in the country and how we address that gap is where we will make the difference.