Increasing foreign interest will heat up competition in general insurance market: People’s Insurance

The general insurance industry in Sri Lanka is set to become even more competitive in the future with increasing foreign interest, according to the state-controlled People’s Insurance PLC.

“With the local insurance market set to grow 8-10 percent in the years ahead, global insurance companies are likely to increase their footprint in Sri Lanka’s non-life insurance market, further intensifying the level of competition,” People’s Insurance Chairman Jehan Amaratunga said in his annual review.

He said that global players entering into the Sri Lankan insurance market over the past two years is a sign that the local financial services industry is moving away from being a bank-centric system to include insurance firms as well. Global players Fairfax and Allianz acquired local general insurance operations over recent years, and Allianz said that its recent deal to acquire Janashakthi’s general insurance arm shows its confidence in the Sri Lankan general insurance market, which would grow as economic growth increases the amount of insurable assets Sri Lankans would come to possess.

Another reason, which may be attracting foreign insurance companies to Sri Lanka is the fact that the current overall insurance penetration level is still within 1.1 percent of gross domestic product, which is below the global average level of 6.2 percent, highlighting untapped potential.

Amaratunga said that general insurance industry so far has been focusing mainly on the motor insurance segment for growth, given the regulatory requirement for all vehicles to be insured, and the increasing registration of vehicles. However, vehicle registrations have been slowing down on a year-on-year basis in recent months, following lax vehicle importation policies adopted by the government in 2015 and 2016 being tightened in 2017.

Amaratunga said that there is greater scope for general insurance businesses in non-motor segments, which currently account for less than 40 percent of the product portfolio in the industry.

“Regardless of the opportunity, growth in these segments remains constrained by low levels of insurance penetration,” he said.

Amaratunga added that the industry has to educate the public on the benefits of insurance, which is viewed with distrust, since low insurance penetration means a majority of households and business are left with having to bear the often-crippling financial risk of unexpected losses.

Sri Lanka has had to endure consecutive natural disasters over the past two years, highlighting the need for insurance.

People’s Insurance, which is increasing its digital outreach, is hoping to diversify its non-motor general insurance products, with a special focus on home and fire insurance policies.

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“Our focus is to build unique lifestyle and business products for households and small/medium enterprises and corporates respectively,” Amaratunga said.

He added that the 17 million customers in the People’s Group will allow People’s Insurance to expand rapidly in a captive market.

(CW)