By Shabiya Ali Ahlam
Sri Lanka has been identified as a market that has huge potential for further growth in the microinsurance space, but requires an enabling environment and support if it is to pick up momentum, an international industry expert said yesterday.

Acknowledging microinsurance is still an infant industry in the island nation, Interim Executive Director Microinsurance Network Henk Van Oosterhout stressed that service providers continue to face plenty of obstacles, in areas such as technical know-how and regulation, which act as barriers and prevent the development of the sector that is much potential. 
Stating the sector is in its experimental stages; Oosterhout asserted there are a number of challenges and issues that calls for immediate attention. 
The primary challenge was identified as high administrative costs, due to which registered insurers are unwilling to market affordable microinsurance products to low income sectors as the transaction is not perceived as profitable.
“This has partly contributed to a concentration of insurance market in the upper and middle income groups, and the scarcity of services available to the lower income segment of the population,” explained Oosterhout, addressing the 12th International Microinsurance Conference in Colombo that was attended by over 400 delegates from 50 countries.
It was noted that the perceived low capacity of poor household to pay premiums also discourages insurance companies, thus leads to a vicious circle. 
“Insurance education is not up to mark and has resulted on insufficient insurance buy in,” asserted the expert.
While the enrollment process in microinsurance is not customized to fit the understanding of the poor, there is insufficient focus on institutions and regulation for the promotion of microinsurance, he added.
Furthermore, it was pointed out that due to the lack of a regulatory framework, a number of private companies are unwilling to engage in microinsurance.
“The vision of microinsurance has not extended beyond simply providing loan protection cover,” stressed Oosterhout.
Identified as a serious setback in the expansion of the sector was also the lack of skilled manpower and funding. The dearth of these two elements is said to have hampered the development of new products and the modification of existing products according to the prevalent need.
Despite the challenges, statistics show that in Sri Lanka, the number of registered microinsurance policies has witnessed a sharp increase where it has grown from 0.35 million in 2013 to 1.4 million in 2015, excluding informal coverage.
The maximum increase is attributed to personal accident covers which increased from 0.17 million in 2013 to around 0.84 million in 2015, an increase of 58 percent.

Meanwhile, total microinsurance written premium amounted to almost US $ 16 million in 2015. Companies that offer microinsurance have reported that microinsurance gross written premium accounted to an average of 6 per cent of their total premium of US $ 266.2 million in 2015.
While the market in Sri Lanka is noted to be almost entirely commercially-driven, claims ratios across product lines have an average of about 34 percent.
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