Vast potential available for insurance industry

Sri Lanka’s insurance industry umbrella body, the Insurance Association of Sri Lanka (IASL), works very closely with the regulator to bring implementation and development of the sector. IASL President Ramal Jasinghe explains how the amendments to the Regulation of Insurance Industry Act (RII Act) on the introduction of the risk-based capital requirement, which is due this year, will affect the insurer’s risk appetite

Q: Which areas in the industry could be developed in your view?

A: The mainstay of any industry is the link between distribution and production. In the case of insurance, it’s the perfect understanding between the underwriting and sales distribution teams and their functions. They should function like the two arms of a scissor where the ultimate goal is the same – they cannot work as exclusive! Therefore, better appreciation of the roles and mutual respect, will manifest in better product development, better service and professional salesmanship that will result in public awareness and acceptability of insurance as a worthwhile financial service.



Q: Do you feel the regulatory framework is adequate?

A: The regulatory framework governing our industry is world class, if not very close to getting there. It is important for any financial service handling public money to have a vigilant regulator. I see the Regulator playing a major role of developing the industry as well as to safeguard the interests of the Policyholders and stakeholders, thereby building confidence and relevance of insurance to the community at large. Therefore with the rapid expansion of the industry the regulator has a dual role; in addition to regulating it plays a more vital role in industry development as well.



Q: What do you think about the new regulatory changes of segregating insurance companies?

A: The current supervisory system which is commonly known as the ‘Rules Based Supervisory System’ is focused on establishing reasonable rules that scrutinise aspects such as the solvency margin. In this respect implementing a risk sensitive measurement of an insurer’s risk appetite will be carried out. It will contribute to strengthening the risk management system of insurance. This process includes recognising the existence of the risk(s), undertaking an assessment of the risk(s) and developing strategies to manage and mitigate the identified risks. An effective risk-base approach will afford insurance companies and intermediaries to exercise reasonable business judgement with respect to their business portfolio.

The Act now requires insurance firms to segregate their life and general sections into separate entities and also they are required to go public by 2016. The Act has permitted institutional agents. So far they’ve only enabled them, but the criteria in which they should act was drafted and sent by the IBSL board to the industry for comments.



Q: What are the latest trends seen in the industry?

A: We see great opportunity in future and are on alert about the changes in the social environment in order to upgrade products of protection. Sri Lanka has a rapid rate of an ageing population which is only second to Japan. This leaves us the responsibility to address the issue of taking care of our senior citizens.

Another frontier would be the area of micro insurance, particularly in the backdrop of the agro based economy within which Sri Lanka predominantly operates in. Insurance products and services catering to this market segment would be a vital area for development, along with meeting the challenges that will arise along with the development of this segment. We see the development of healthcare insurance as an area that would probably grow in place of Motor insurance, where due to the drop in motor vehicle registrations in the recent past, has seen an impact on the growth of this class of insurance. The State healthcare system is at present overburdened, and with the escalating costs of healthcare and ageism, insurance could contribute towards alleviating the load carried by the state sector. We have seen insurance companies introducing healthcare product offerings to the market, in recent times.

The future for insurance products and services looks bright in the backdrop of the Central Bank’s quest to reach a national per capita income of US$ 4,000 by the year 2016. This will create a demand for more sophisticated financial services, where there will be a need for protection and investment products that the industry would need to innovate and meet.