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Friday, 19 September 2014 01:19 - - {{hitsCtrl.values.hits}}
By Shabiya Ali Ahlam
Q: Janashakthi has stood tall in the insurance industry; how has it evolved since its establishment?
A: We started off as a very small entity 20 years ago. If you had asked us at that point in time if we would one day achieve what we have achieved today, the answer is certainly no. We did not envision that we would be a leading corporate entity in Sri Lanka’s commercial sector.
We started by doing Life insurance in 24 Staple street. We started General business a year later, in 1995. The two companies then merged to become Janashakthi in 2000. We have grown over the years mainly because of the commitment we have from the senior management and from our staff. We have been heavily focused and we want to be a major player in Sri Lanka but also don’t want to be an also-ran.
We have invested not only money but also time and effort in building a brand, a sales and distribution network, building a branch network and most importantly building a competent staff and that has helped us to become what we are today.
In terms of reach, today we have over 100 branches that are spread well across the island, including the north and east. In that region we went in way before the war, just after the ceasefire and were one of the first insurance companies to enter that region.
Q: How did the company come into being?
A: Janashakthi was conceived by C.T.A. Schaffter, our founding father. Having been in insurance for 40 years and having made the progression from employee to self-employed agent to principle agent to insurance broker, he had a dream where in the next step he wanted to be an insurer.
The original thought was to only set up a Life insurance company. He thought of setting a company in the early 1990s and it was incorporated in 1992. It took a long time after the incorporation to get the licence since at time the regulators were stringent in that regard. It took more than two years to get the licence and we launched in 1994.
At the initial stages we adopted a concept where we outsourced all the branches. We identified the towns where we branches, identified a person of repute and means in that town who could fund the branch. We paid a percentage of the fee as a turnover. Therefore, we did not have great expenditure in branches in the form of salaries, rentals and utilities. We had a structure that enabled us to get to the next level. Over the years we moved away from that system and now almost all branches are company owned.
I would say that that we are the only ones that used the outsourcing model extensively and successfully. We used it to the fullest at that time since it was relevant and helped us to keep our costs down.
Q: What is the position of Janashakthi in the market? Is it as expected?
A: We rank third in General insurance, a position we have enjoyed since 2005. On Life insurance we are at the seventh position. We certainly have a long way to go in Life where we feel that we have slipped in the ranking. That probably was because we did not have the right sales and distribution model and reward structure. Both have been addressed.
We have restructured the entire sales and distribution model and it is starting to pay dividends. I am confident we will reach very soon the heights that we should be at. This is our short-term aspiration. Our long-term vision is to be the number one insurance company in Sri Lanka.
Q: What would you single out as Janashakthi’s best innovation in the industry, and what is its biggest contribution?
A: We have been a company that has been doing things since inception. An example from Life insurance, we started off a product with a lifetime hospitalisation cover, the Janashakthi Life unlimited. To date it is the only one in the market with lifetime hospitalisation. On the General insurance side on the medical policy there was a sublimit where it is divided into components. We were the first to do away with the sublimit and give a flat amount to the customer. Apart from that we constantly add value to our customers. We were the first to give fire and lighting insurance to homes. We were the first to extend free personal accident cover to the three-wheeler drivers insured with is. We have been innovating right throughout.
Q: The insurance industry is in a transformational phase so what is Janashakthi doing to stay ahead of the game?
A: The industry is going through a huge transformation with the splitting and also with the risk-based capital coming in. As far as the splitting is concerned we have taken action early and have in place a committee to manage the process. We are confident we will be able to comply with the deadlines, provided the court hearing takes place on time. The legal process is one that we have very little control over.
Nevertheless, it is a huge challenge. We relooked at our entire business model, restructured them where required. We have looked at the areas which are better off with a single back office unit to serve business lines.
As far as the risk based capital is concerned I must reiterate that the process itself has been great since the Insurance Board of Sri Lanka (IBSL) has given us enough time to study and discuss the same, while allowing us to go through a voluntary test run. Now it’s going through a mandatory test run and soon it will be implemented in its full form only in 2016. The insurance companies have been given enough lead time to make that adjustment.
Q: Could you elaborate on the progress of the splitting?
A: Aside from the legal part of the splitting, there are mundane aspects. The first is identifying the shape and form of the splitting, which is if both companies are going to be under one umbrella or is there going to be a totally different shareholding. Once that bridge is crossed there are a few nitty-gritty that have to be in place. Such include letterheads, stationary, visiting cards, email addresses, receipts, and similar things have to be dealt with. For these it is imperative to have someone monitoring the progress and we have in place a committee for that.
Q: With the splitting of the companies, what are the possible hurdles that could be faced after segregation?
A: After segregation the main hurdle that we could come across is that the cost will increase, and that will be passed on to the customer. The IBSL has been accommodative and given the permission to share services for five years. I am hopeful they will allow this to continue since it makes more business sense to do so.
The next hurdle is that as far as employees are concerned, they have to resign from one company and work for another. That is something employees have to be prepared to do. However, after the splitting is concerned I really don’t see any major hurdles. All the other possible hurdles have been dealt with.
Q: How has the listing that took place in 2007 helped Janashakthi?
A: The listing has done good for us as an organisation. It has improved the standards of governance, and has made us more accountable not only to ourselves but also to other stakeholders and I would encourage other insurers and organisations to list.
Q: Insurance penetration has been static. What is the impact on the industry?
A: Insurance penetration has been hovering around 1.5% and we would like to see it increase. We are low in comparison to a lot of the countries in South Asia. Partly in my opinion this is due to a cultural aspect. We are an island, the mentality is easy going and laid back, so the mindset is no bad will happen to me. That is one thing we have to deal with.
Quite apart from that, I think we insurers have to responsibility for the low penetration. We haven’t done much to popularise insurance, professionalise the sales force. We have not done much to change the distribution model which may increase the penetration rate. All of that have to be taken into account.
Q: What could be done to increase penetration?
A: Certainly Life insurance has a long way to go and there is immense potential. However, that depends on the earning capacity of the people.
As far as the non- Life markets are concerned, motor insurance account for over 55% of the market share. That doesn’t reflect well on the insurers. Insurance are mainly corporate driven and a common man is not taking up insurance policies. Those are needs not wants. For that we the insurers are responsible to educate the people and ensure they know the need for insurance.
Q: Is there a collective effort amongst the insurers for this purpose?
A: There is but a lot more has to be done. We have carried out joint campaigns in conjunction with the IBSL but it is inadequate.
Q: What is the outlook you have for the industry in the medium and long term?
A: I am hopeful the industry will grow.
Q: Janashakthi has completed 20 years. What is the way forward? What more do you hope to achieve?
A: We need to grow our market share. We would like to make greatest strides in the area of market share then we have in the last five years or so. Whilst profitability has been good, the market share growth has not come because on the large number of insurance companies that is operating in the market. When we started there were just five insurers and today there are over 20 companies operating. It makes the market that much more competitive.
Q: Are you of the view that there are too many players?
A: Yes. And I see a consolidation in the future. That is bound to happen sooner rather than later. The finance industry consolidation was Government-led and driven. This will not be led by the Government but will happen in the insurance industry due to capital requirement and RBC requirements. When such kick in the smaller players will feel it is not worth continuing in the market, and will eventually merge or sell out.
Q: Do you think that consolidation will help improve the status of the industry?
A: Certainly yes. I am not saying it will necessarily increase the insurance premium as a percentage of GDP, but it will help create stringer insurance entities since currently there are far too many.
Q: What can others learn from the success of Janashakthi?
A: What any company, and not just insurers, can learn from us is that there are no boundaries to what one can achieve. We started off small and didn’t set for ourselves the goals to be where we are today. We have possibly done the right things over the years. Ethics has been at the core of our value systems and we have been true to our value systems. I would urge all businesses to uphold ethical values.
Janashakthi have tried over the years to be fair to the policy holders so when it comes to claim payments we have been fair by them and paid what is due. And where not due we have been unwilling to pay since we are dealing with policy holders’ money since and are mere custodians. In a given year we pay over 100,000 claims amounting over Rs. 3.5 billion.
