Ensuring all Sri Lankans are safeguarded by insurance

The Insurance Regulatory Commission of Sri Lanka, one of the bodies leading the effort to increase insurance penetration in the country, is also a key player in the organisation of the activations, programs and other events that make up the month of September, beginning with the celebration of National

IRCSL Director General Damayanthi Fernando

Insurance Day on the 1st of the month. Here, IRCSL Director General Damayanthi Fernando expresses her views on the primary factors that come into play in regard to the increase of insurance penetration, the role of the insurance advisor, and the strategies, plans and efforts of the Insurance Regulatory Commission to ensure that every citizen of Sri Lanka enjoys the security provided by insurance. Following are excerpts:

Q: What is the manner in which insurance advisors can convince policyholders to keep their policies active?

A: Insurance advisors are predominantly individuals functioning as agents or representatives of insurance companies and insurance brokering companies to procure insurance business on their behalf for a fee known as a commission. Hence, insurance advisors are the first to get in touch with the public or potential policyholders on behalf of the company it represents, and advise the public on the importance of insurance and the benefits that a person can gain from insuring life, health and property. 

It is therefore the responsibility of the advisor to determine the insurance needs and the financial strength/capacity of a client, prior to promoting an insurance product, as identifying the right product to be sold with the right coverage depends on the needs of the customer, and their financial capacity to purchase a product and continue with the payment of premium.

Once a product is identified, full details of the product should be given to the client. This includes, what the product covers, its benefits and exclusions, and terms and conditions. If the advisor is of the view that the company he/she represents does not have a product suitable to the client, then the advisor should refrain from promoting its products and advise the client to look out for a suitable product at any other insurance company. Therefore, the advisor should act and be seen, as a person with knowledge on insurance products as well as integrity and professional standards. 

The advisor should also be in constant touch with their clients and maintain a healthy advisor-client business relationship. If the role of the insurance advisor is played in a manner expected of him/her, clients will begin to trust the advisor and the insurance company, and no extra effort will be needed by an insurance advisor to convince policyholders to keep their policies active. 

Q: What are the primary reasons for policyholders to allow their policies to lapse?

A: Policyholders tend to lapse their policies due to many reasons. By letting the policy lapse, the policyholder discontinues the contract they commenced with the insurer, thereby ceasing to enjoy the full benefit of the insurance cover/product they purchased, and also resulting in forfeiture of the full or part of the premiums paid. Forfeiture of premiums paid takes place because an insurance company assumes liability from the first day the cover begins. So if the premium is not paid at least until the cover acquires a surrender value in terms of the policy, in case of a life/long term insurance product, the entire premium paid would get forfeited. In a general insurance product, if the full premium is not paid within the due date of payment specified in the policy, the cover would automatically get cancelled.  

I consider three specific reasons for the discontinuation of an insurance contract. The first being, the force selling of a product by an insurance advisor. This is a situation where a product is sold to a person without the will of the person to purchase it. If the purchase is with intention, then a person will want to keep it, otherwise they will let it go. The customer should want insurance, the customer should know the features of the insurance product and its benefits. The features should match with customer expectations. If that link is not established at the point of sale, the need for the product is lost and the policyholder will give up the policy and stop paying premium without incurring further losses. 

The second reason, is where the product is purchased with the full intention of having it and as time goes by, circumstances arise where a person cannot afford to pay premium and hence, discontinues the policy. 

The third reason for discontinuation would be the poor service levels of an insurer. In this scenario the person has the full intention and the financial capacity to maintain an insurance policy. However, if the policyholder is not satisfied with the service levels of the company, he/she will want to discontinue the policy. 

Q: What plans does the IRCSL have in place to increase insurance penetration in Sri Lanka? And what are the results thus far? 

A: The IRCSL has goals set out in this regard and has agreed with certain goals to be achieved in relation to the Financial Sector Modernisation Project, which is currently underway. The goal set for penetration is 3% of GDP by year 2022. As of the end of 2018, the penetration level was 1.26% of GDP. Under the project we have identified numerous activities, such as the revamping of rules, the introduction of regulations on micro-insurance, amendments to the Insurance Act based on the core principles of insurance supervision issued by the International Association of Insurance Supervisors in order to ensure that the insurance legislation will be at an internationally acceptable level to attract more foreign investments and more policyholders to the sector. 

Apart from revisions to legislation, we will focus a lot on the capacity building of the staff of the regulatory body to include areas such as supervision of market conduct activities to ensure the policyholders’ rights are better safeguarded. Another area of attention would be on policyholder grievance handling, and hopefully by the end of this year, we intend to establish the Insurance Industry Ombudsman Centre (IIOC), which will formalise the current Ombudsman Scheme operated by the industry. The intention of this initiative is to legalise the Ombudsman Scheme and bring it under the purview of the regulator. This we hope will enhance public confidence and trust. 

Q: What is the role of the IRCSL in the National Insurance Day and the Insurance Awareness Month campaign? 

A: The IRCSL plays a very vital role in the National Insurance Day and the Insurance Awareness Month campaign. If one remembers, it was the initiative of the IRCSL, upon the request made by the insurance industry, to mark 1 September as the National Insurance Day and to have the entire month of September as Insurance Awareness Month. We achieved that goal in 2017 and since then, the IRCSL has been taking part and being fully active in the activities of the industry to mark the National Insurance Day and the Insurance Awareness Month. 

This year, the IRCSL conducted a mobile campaign to make the public aware of the National Insurance Day and the importance of having insurance to mitigate the risks to lives and property. In addition, the IRCSL has organised an all island art competition for school children during the month of September. The theme of the competition is ‘The importance of insurance for our lives and properties’. The award ceremony will be held on 3 December at the Nelum Pokuna theatre. 

Q: Can you describe the participation and commitment shown by the insurance companies of Sri Lanka during the campaign?

A: The insurance companies have actively participated in the celebration of National Insurance Day, which was on 1 September and the Insurance Awareness Month campaign. We are aware of the fact that the insurance companies have organised several town meetings to inform the public about the concept of insurance and the importance of being covered by insurance. The National Forum for Life Insurance Advisers (NAFLIA) is an annual event organised for Life Insurance Advisors by the Insurance Association in a bid to support the Life Insurance sector of the country. 

Also, there is a competition for all Life Insurance Advisors on the promotion of insurance products. Insurance companies have also volunteered to promote the all island art competition that the IRCSL has organised among all their policyholders and the public so that school children can actively participate in the competition. We at the IRCSL appreciate the efforts of the insurance industry in this regard.