Ajith Gunawardena, CEO, Ceylinco General Insurance : Interview

Interview : Ajith Gunawardena

To what extent has the sector been affected by the segregation of life and non-life insurance?

AJITH GUNAWARDENA: The segregation of life and non-life insurance was a positive decision, given that life and general insurance are different types of businesses. Certain companies couldn’t survive this change, so to properly adapt, they had to merge with or be acquired by local and foreign companies. This causes the sector to have more solid and strong companies, which reflects positively on consumers and business practices. The segregation transformed the industry by focusing on the performance of individual companies, but the process is not yet complete; as the industry matures this will add transparency and governance. Also, the industry will reap more benefits once Sri Lanka Insurance completes the segregation process.

In what ways are insurers mitigating the impacts of drought, flood and other natural disasters?

GUNAWARDENA: There are two sides to this. First, for insured individuals, insurance companies can provide expert advice on how to reduce risk from natural disasters. This includes increasing floor levels of residences, relocating from flood-prone areas during a possible catastrophe, and being educated on preparedness and response. Second, for uninsured properties, the National Insurance Trust Fund provides natural disaster coverage up to certain limits. The industry should encourage the use of technology to monitor catastrophes through techniques like flood mapping. This could also provide early warning systems so the public would know before disaster strikes. Preventative measures like these would help mitigate negative impacts.

What role will technology play in expanding insurance penetration in the short to medium term?

GUNAWARDENA: Traditional business model systems will not help the insurance industry expand. As is the case with any other industry, insurance should evolve and embrace technological advancements to adapt and enhance its value. It is the duty of the insurance industry to add value to the lives of our people and the country at large. Most companies in Sri Lanka are using technology, but there is still enormous room for improvement, and to add more value to the products and services offered. With the help of technology, the speed of service delivery could be increased tremendously. The literacy level of digital platforms is an area of concern for insurance companies. Education could encourage better and more efficient processes, and therefore nurture growth in the market. Some insurers find it challenging to offer products for low- and middle-income segments using traditional channels due to the high costs of reaching them. However, with the development of IT and mobile technology, backed by high mobile phone penetration, companies could conveniently reach more customers at a relatively low cost.

Which non-life segments have the highest growth potential in the coming years?

GUNAWARDENA: As the economy develops, demand for higher-quality life insurance will also increase. There are significant opportunities for health, personal products and home insurance. Many have their eyes on micro-insurance, and its future looks promising. Given the goal of this product – which is to offer coverage to low-income households – it will be particularly relevant for rural parts of the country. Although many players are still determining how to incorporate micro-insurance in their portfolios, only a few companies have really committed to exploring this untapped market.

Businesses are expected to prepare themselves for challenging years ahead, as the government is focusing on growing the economy and attracting more trade and investment. Insurance companies are fighting to get a bigger share of the vehicle insurance market, as it is compulsory in Sri Lanka. This is likely to be challenging, as family lifestyles are becoming increasingly complex.