Insurance industry picking up now

Shirajiv SIRIMANE

The insurance industry too went through a lean stretch during the last three years where there was a somewhat economic downturn in Sri Lanka.

Janashakthi Insurance Managing Director Prakash Schaffter the third largest general insurance company in Sri Lanka during his lunch break recalled that people were forced to tighten their belts and insurance was a commodity that was not a priority in the people's day to day shopping list.

With the economy bouncing back and people having more money to spend insurance was something they wanted to have. "Hence the industry started catching up and showing growth. However this would not be at a very rapid speed.

He said Sri Lanka's insurance penetration is very low in comparison to the region. It is about 1.29 percent of the GDP which is unimpressive. "This has given us a huge window of opportunity to grow," he said.

Prakash's definition for this low penetration of insurance is Sri Lanka's culture. "Well I think Sri Lanka has a laid back island culture which is "easy going."

He said it is very difficult to lure people in to life insurance despite it being a heavily advertised industry. "Convincing a person into taking an insurance policy is really a difficult task."

He said even after the tsunami there was a lot of life and property damage. "However it still did not have a positive impact on the industry."

However there was a contrast during the LTTE violence period as the demand for insurance grew and naturally the premiums were.

"However this once again zeroed with normalcy coming back to the country."

Schaffter said with the interest rates being lowered a sharp increase was seen in the motor segment. "With a low interest environment, lending rates dropped and it became affordable."

With the lowering of duty on motor vehicle imports to Sri Lanka saw a sharp rise and this too helped the industry. Commenting on the Janashakthi Insurance portfolio he said there was a growth in the last three years.

Janashakthi recorded an impressive 17 percent growth in net profit-after-tax reaching Rs 770 million and revenue of Rs 6.8 billion with a growth of 13 percent during 2010 while the Life sector also showed a significant growth of 18 percent over the previous year.

Their Motor Insurance sector also performed upto expectations with a revenue growth 11 per cent, the highest among the three top insurers.

"We have been there through tough times. Nevertheless we managed to maintain our bottom line."

He said the top line growth was not healthy as expected this is a natural consequence of our emphasis on bottom line growth."

Asked to comment on their North East operations he said they had their foot print firmly planted in Jaffna since 2000. "We saw business potential in this area and we also wanted to expand our service to the region as we want to make available "insurance" to the population in the area. Today they have 10 offices in North and East. He said life insurance is their number one "seller" in Jaffna as there is a saving mentality in the "Northerner" a different culture."

"They have acquired Orient Leasing and they want the company to continue separately. Commenting on the competition in the industry he said it is very intense especially in the General insurance segment.

"The market is very price sensitive and customers don't seem to value services and standards."

Commenting on some of the issues in the industry he said that legislature which spilt Life and General insurance was not very impressive. "We like a composite situation."

The spilt would result in high overheads and even the capital has to be divided among the two. "This will definitely create a negative impact on the bottom line."