Virus related restrictions could blunt life insurance momentum: Fitch

Demand for life insurance could slow down as constraints on consumer spending and travel restrictions could blunt new business generation capacity for insurers, although their digital platforms could mitigate the impact to a certain degree, said Fitch Ratings. 

In a rating report on both HNB Assurance PLC and HNB General Insurance Limited, the life and non-life insurance subsidiaries of the HNB group, the rating agency said the near term outlook for the former, which engages in the life insurance business, could be constrained by the restrictions.  

“…new business generation for life insurance is likely to remain subdued over the near term due to constraints on consumer spending and renewed travel restrictions to fight the resurgence of the coronavirus in the country”, the rating agency said in reference to the industry. 

The life insurance business largely depends on the in-person agency model, but with the disruption of this model due to the pandemic, insurers have increasingly adopted innovative technology to interact with potential clients in courting business. 

“We expect the insurers’ increased use of digital platforms for distributions, along with rising demand for medical insurance products, to partly mitigate the slowdown in business growth,” Fitch added. 

Despite impact of the pandemic on Sri Lanka’s insurance industry, the life insurance industry in particular, emerged stronger with almost every performance indicator from gross written premiums to profitability to capital improved as many people sought health and life protection covers. 

The timely intervention by the regulator preserved capital and minimised policy lapses as it suspended dividends and gave three months deferral on installments at the onset of the pandemic.

Fitch upgraded both HNB Assurance and HNB General Insurance to A+ from A with a Stable outlook on their improved capital positions, favourable business profiles and sustained improvement in non-life underwriting performance, while maintaining satisfactory earnings in its life insurance operations.  

It isn’t clear yet as to what extent the current round of restrictions in place since the third week of April could derail the industry’s growth momentum which continued through March 2021 as seen from the most recent quarterly results.

Meanwhile, the persistent controls on vehicle imports are keeping a lid on the non-life insurance sector of which motor insurance accounts for the bulk.