INSURANCE SECTOR
SHORT TAKES
Compiled by Savithri Rodrigo
Kithsiri Gunawardena
Deepthi Lokuarachchi
Q: How has the sector changed during the COVID-19 pandemic?
Kithsiri Gunawardena (KG): The importance of conducting business on cyber based processes and platforms became apparent. Therefore, investments in cybersecurity will become the norm. Some companies struggled to conduct business as they weren’t ready for this change.
Deepthi Lokuarachchi (DL): The sector adopted new work patterns to a great extent to face the new challenges brought about by COVID-19. Many companies began activating their disaster recovery plans as part of regular operations.
Q: Which insurance segments have witnessed the most interest over this period?
KG There was a definite increase in interest when it came to health insurance and business continuity.
DL Life and medical insurance for individuals, and business interruption and event cancellation insurance among corporates.
Q: And has there been a decline in retention?
KG It is too early to predict patterns but if income levels are impacted, there will be a decline – life insurance reflects improved incomes while the strength of economic activity counts for general insurance.
DL We cannot comment on a pattern yet as it’s too early to notice one; the cascading impacts of government stipulated grace periods continue. The reality will become apparent much later.
Q: Has the pandemic impacted insurance penetration?
KG As a nation, we have managed the pandemic far better than many countries. If the expected boost in agriculture and the export sector takes place, there will be a positive impact on insurance penetration.
DL Yes, as insurance agents cannot make house-to-house visits to customers as in the past due to physical distancing measures. This personalisation is an imperative for business penetration.
Q: Are you seeing the potential for new product innovation?
KG The increase in digital transactions has spurred worldwide demand for cybercrime protection. However, reinsurers are reluctant to extend support due to concerns on currently available cybersecurity measures, which will hopefully be corrected and result in new products being introduced.
DL Having witnessed rapid uncertainty hitting the events business, we are observing a growing need for event cancellation insurance. Meanwhile, insurance cover for life, health and distress is also a need in today’s social context.
Q: Should the state play a greater role in this regard through government policy?
KG The share of a nation’s population covered by life and health insurance is a benchmark of economic prosperity. Currently, life penetration is about 10 percent and most SMEs are devoid of any insurance. State policy must ensure that both have insurance to minimise the burden on the state in challenging times.
DL Policies should be well thought out, and incorporate the inputs of the regulator, the Insurance Association of Sri Lanka (IASL) and stakeholder agencies. State policy can play a much bigger role in helping affected segments while also safeguarding the interests of insurance companies. There should be a balanced approach ensuring the survival of all.
Q: Are insurance companies doing enough to maintain customer interest?
KG A proper needs analysis prior to selling, improving the quality of agents and adhering to higher levels of service will be key to retaining customer interest.
DL That’s a definite ‘yes’ – as has been seen recently. Undoubtedly, all companies without exception have come forward
to respond to customer needs and their efforts are commendable.
Q: And what about retention?
KG Policyholders will demand increased service quality so companies that fall short will find it difficult to retain customers.
DL Retention is key for continuity of business interest and extended grace periods offered in difficult times for premium settlements are good options.
Q: Would you attest to the integrity of the agency force amid allegations of malpractices in some cases?
KG There are bad eggs in any industry but the vast majority of agents offer great service and their integrity is intact. As in developed countries, there is also an opportunity for retired professionals to take on a career as an insurance agent.
DL Malpractice and inappropriate behaviour are ubiquitous in most industries. What’s important is that we deal with situations promptly and ensure customer interests aren’t compromised. All companies work towards this objective when addressing allegations against agents.
Q: And what are the key challenges faced by insurance companies?
KG Increasing penetration and
everyone fighting for the same business. As a sector, we must focus on attracting the vast majority of the population that have no insurance as they will ensure an increase in penetration.
DL Adhering to the new IFRS 17 accounting standard through process and system refinements, and handling the impacts of COVID-19. The world’s response to COVID-19 will determine the speed of recovery in the insurance sector.
Q: How can companies maintain an edge in view of the competition?
KG By focussing on new markets, understanding customer insurance needs and offering suitable solutions. If there’s a need to cash in on a policy, a prompt assessment and payment are most important.
DL With consolidation, market discipline has improved. Service differentiation coupled with high standards and a positive framework is key to maintaining an edge.
Q: Does the sector focus on green insurance to a reasonable degree?
KG With too many players in a market of this size and all engaged in a price war to secure available business, green insurance is not a priority. State policy should incentivise sector consolidation and the development of green insurance.
DL Technology is an essential tool to make processes green and paperless. However, the cost of technology remains quite prohibitive and therefore, tends to fall back on human interaction, which is a deterrent to instituting green insurance.
Q: Do you believe that further sector consolidation is likely in the near term?
KG Yes, as insurance is a business that should ideally be conducted by large financially robust players with the ability to retain a higher level of risk internally.
DL Yes. The general insurance sector has witnessed consolidation – and IFRS 17 will bring about further consolidation and mergers in the life insurance sector.
Q: How do you see the sector panning out by next year – post-COVID?
KG Post the general election, there will be a rapid economic revival that creates opportunities for the sector.
DL Demand and pressure on the insurance sector is bound to increase, and the outcome will depend on a global economic recovery.
