Insurance industry emerges stronger during pandemic-hit year

• Slump in claims in general insurance sector drives sector profits
• Total industry assets grow 14.6% to Rs.790.1bn

While the banking sector emerged nearly unscathed from the pandemic, the less talked about insurance industry came off stronger in 2020 with almost every key performance metric in the sector doing better as the slump in claims in the general insurance sector drove sector profits higher.  

While assets, gross written premiums and profits, the trifecta of mostly-watched performance indicators in the composite industry delivered well during 2020, the long lasting hazards to one’s health brought in by the pandemic and the enhanced incidence of risks to other material assets drew people and institutions towards both long-term and general insurance policies, propelling the industry into new highs and upending its operating dynamics. 

The latest data showed that total assets in the composite industry grew by robust 14.6 percent in 2020 to reach Rs.790.1 billion, with long-term insurance gaining by 16.1 percent to Rs.563.9 billion in assets while the general insurance gaining by 11 percent to Rs.226.2 billion. 

While, the share of the long-term insurance sub-sector grew from 70.4 percent to 71.4 percent between 2019 and 2020, the general insurance sub-sector slipped to 28.6 percent from 29.6 percent in 2019 as the latter’s growth decelerated due to the import ban on motor vehicles.

However, the pandemic and the related restrictions on mobility, and the general aversion for travel due to fear of catching COVID-19 resulted in significantly less accidents, which reduced claims and thereby improving profits. 
Providing proof of this phenomenon, the general insurance sector claims slumped by as much as 27.1 percent, bringing down the composite insurance sector claims by 14.1 percent to Rs.80.5 billion in 2020. The long term insurance sector claims increased by 7.5 percent in 2020.  
As a result, the profitability of the composite insurance sector, measured by the profit before tax, rose by a robust 25.9 percent to Rs.38.6 billion. While the general insurance sector profits soared by 104.9 percent, the long-term insurance sector saw its profits declining by 19.1 percent. 

“Decline in claims due to lockdowns imposed by the government for controlling the spread of COVID-19 virus, may have contributed to this increase,” the Central Bank said commenting on sector profits in 2020. 

Meanwhile, the gross written premiums of the composite insurance industry rose by 9.7 percent to Rs.208.6 billion in 2020, of which the long-term insurance sub-sector gained 16 percent while the growth in premiums in general insurance decelerated to 4.2 percent, predominantly due to the clamping down on motor vehicles market, as motor insurance premiums declined 1.9 percent. 

Despite the slowdown, the general insurance sub-sector remains the largest contributor with 50.6 percent share to industry premiums. 

The epidemic has greatly upended the pace of policy sales and how the insurers go about promoting and selling policies in the new normal, which greatly disrupted the in-person agent model, the leading source of courting new business. 

Sri Lanka operates with 27 insurance companies, comprising 13 long-term insurance companies, 12 general insurance companies and 2 composite insurers.