Insurance penetration expected to increase | Sunday Observer

Insurance penetration expected to increase

30 August, 2020
Gehan Rajapakse
Gehan Rajapakse

The insurance industry which is yet at its early stages in its life-cycle is expected to record an increase in penetration from the current level of around 1.3 percent to around 2 percent in the next five years, a top official of the industry said during a discussion on this year’s National Insurance Day which is marked each year on September 1.

“We are confident the current penetration level in Life and General insurance will grow to a satisfactory level in the coming years as people have realised the importance of insurance with the outbreak of the global pandemic that has wreaked havoc on economies across the globe increasing risk to life,” said Amana Takaful Life CEO Gehan Rajapakse. The global insurance landscape is expected to change due to the current global health crisis resulting in an upside effect on the industry which is yet to bloom fully in the world. The expansion in technology is said to have a positive impact on insurance penetration as in most industries which will stand to benefit from technological advancements. Despite the gloom and doom in the global economy with a trickle-down effect on all industries, the insurance industry in Sri Lanka reported a recovery faster than expected in June and July this year.

“We did not expect a turnaround so quickly which could be attributed to the need for protection and risk mitigation from health hazards,” Rajapakse said.

The industry offered moratoriums for premiums during the global pandemic to support policy holders.

Industry experts said the national insurance day since its inaugural year in 2017 has helped raise awareness on the importance of insurance as a means of protection and risk mitigation. However, the question of how could the industry increase insurance penetration has been a recurrent issue. The lingering problem has been do people have enough insurance policies and do they have a proper comprehensive cover which will provide the breadwinner and his or her dependents the compensation they expect? The lack of an adequate cover due to the income level and affordability of people has created an insurance gap which the industry will need to bridge with more convenient and innovative products that will suit the earning capacity of insurance policy seekers.

“The industry will come up with new strategies to increase penetration among the low income segment with new distribution models,” Rajapakse said.

This year’s Insurance Day which is to be held for the fourth consecutive year will be a virtual event to raise insurance awareness. “In the past we have been conducting on ground activations to propagate the concept of insurance on life and general, organised by the Marketing and Sales Forum (MSF) with the industry players,” Rajapakse said, adding that this year the industry will not be conducting on ground promotions organised by the MSF due to restriction on the gathering of crowds. However, he said each company will have their own activities that will be carried out throughout September. Public Relations and digital tools will be used to create awareness.

The government declared September 1 as the National Insurance Day in 2017. Since then the day has been marked each year with a series of events across the country organised by the MSF. Activations in the past years took place in Colombo, Kandy, Kurunegala, Jaffna, Ratnapura, Anuradhapura and Matara hosted by the insurance industry players. The day’s events are marked by the presence of insurance advisors of companies who help in raising awareness.

The declaration of September 1 as National Insurance Day, which took place last year was a significant milestone for the industry.

National Insurance Day has helped reduce dependency on the Government to provide relief and compensation to victims of natural catastrophes.

The declaration is expected to help increase the sector’s contribution to the GDP. Insurance sector representatives have been emphasising the need to provide comprehensive protection for all lives and assets. Industry experts note the current increase in life expectancy shows us that people are becoming more health conscious.

However, insurance penetration which is reflected by the insurance premium as a percentage of GDP amounted to 1.26 percent in 2018.

The level of disposable income and negative perceptions on insurance and social security benefits have negatively impacted the growth of the insurance sector over the years.