Friday Sep 20, 2024
Friday Sep 20, 2024
Wednesday, 19 July 2017 00:00 - - {{hitsCtrl.values.hits}}
By the Insurance Committee of the National Chamber of Commerce
of Sri Lanka
The National Chamber of Commerce of Sri Lanka has established business clusters covering many business categories. One of the main objectives of the business clusters is looking into the concerns that its industry faces; As such the Insurance Committee of the National Chamber of Commerce of Sri Lanka has set out its concerns regarding the insurance industry as follows:
The insurance industry General Insurance gross premiums grew by a mere 2.27% in the year on year. This is from Rs. 18,134.34 million in 2016 and Rs. 18,545.26 million as at 1Q 2017. This growth reflects a 4% growth in the motor insurance class of business verses a 0.57 % growth in the Non-Motor class of business. This the chamber feels is a result of the industry functioning within an uneven playing field, due to the preference for State-owned property and risks being granted exclusively to the State-owned insurers. This has created an unhealthy situation to the industry’s growth and if the regulations and circulars providing undue advantages to the State-owned insurers are removed, Government institutions will have the opportunity of benefiting from a competitive service from the private sector companies, particularly with regard to premium prices and reinsurance security.
This will also result in the service levels of the State-owned companies to be more competitive and the service levels of the entire industry to improve, bringing about product diversification within the industry.
A major concern for the Chamber is that the Sri Lanka Insurance Corporation, along with a few other insurance companies, have not completed the segregation of the Life and Non-Life businesses which all insurance companies were required to comply with the regulatory deadline of 1 January 2015.
The split of composite insurance companies was expected to promote greater focus, transparency, policy holder protection and greater visibility on profitability amongst insurance companies. The chamber is concerned that the regulator is yet to implement this requirement in a fair manner, even though these companies claim to have structurally segregated their internal processes. The deadlines for implementing these regulations are far overdue.
The Agrarian Insurance Board was established under Agriculture and Agrarian Insurance Act No. 20 of 1999 and does not come within the purview of regulation of Insurance Industry Act No. 43 of 2000. Hence, the Agrarian Insurance Board was exempted from the Regulation of Insurance Industry (RII) Act of 2000, and is not a licensed insurance company regulated by the Insurance Board of Sri Lanka hence they are not geared to accept liabilities of the public at large. The Agrarian Insurance Board was established only to support the farmers through insuring their agriculture crops/farms, equipment and machinery. Since of late they are underwriting general insurance policies outside their scope which could have serious consequences when facing liabilities of risks undertaken as they do not have proper reinsurance arrangements. Furthermore, as they have now embarked on providing motor insurance cover, the chamber is concerned if this contravenes the Motor Traffic Act and if the Traffic Police recognise insurance covers for vehicles, particularly with regard to 3rd party liabilities from insurance entities that are not regulated by the Insurance Board of Sri Lanka (IBSL) the implementing authority of the RII Act.
Micro insurance companies and similar entities that provide various schemes particularly to underprivileged sections of society is a major concern to the chamber that these insurance providers are not licensed and regulated, under the umbrella of the IBSL. The chamber warns that a serious social issue could arise as a result of default on disbursing claims and maturities in the event of financial collapse of such entities.
Insurance companies world over increasingly work with various platforms such as mobile networks, banks, credit card companies, airline ticketing, etc. to provide the masses easy access to insurance products.
Even in developed markets, the trend is to sell certain categories of insurance products through these networks using various platforms only as distribution channels and the policies are issued and underwritten by the licensed insurers. This concept is widely known as the ‘white labelling’ of products, which is legally underwritten by an authorised insurance entity. These products are popular in the western world and super market chains in particular provide over the counter pre underwritten insurance cover to dwelling houses, pets, personal accident, travel insurance, etc. Local regulations restricting such arrangements should be relaxed and the regulator should understand the need for such products in today’s context and the benefits the industry would derive from selling these products. This could dramatically change the growth scenario of the industry, which still stands at just 1.7% of the GDP in terms of premiums, as well as to provide for product diversification and innovation within the Industry to bring about inclusion to a growing segment of convenience seeking insurance customers.
The Chamber feels that the regulator should encourage and promote these new developments through their mandate to develop the industry, by leveraging modern technology and catalyse greater product offerings to a wider public the opportunity to purchase these products at an affordable price with easy access and convenience.
In conclusion the chamber is watching with concern and is observant of the entry of foreign insurance companies to the local market, particularly in terms of the free movement of professionals, which is under scrutiny with the ongoing discussions of ECTA, where the opportunities and placements of Sri Lankan insurance professionals and actuaries could potentially be threatened. Whereas in other insurance markets, particularly in India, equity requirements are stated for multinational insurance players to participate in their market, Sri Lanka does not have such regulations in place at present. Whist welcoming FDIs in the insurance industry, the chamber would like to see knowledge transfer and access to multinational exposure and placement opportunities being provided to our professionals in the industry.
