Life Insurance & its Role in Sri Lanka's Economic Recovery

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Senath, a seasoned management and business deve- lopment professional, he has over 17+ years of ex- tensive experience across diverse business func- tions. In his current role at Union Assurance, he plays a crucial role in developing strategies to propel the company's growth.

In a recent interview with Prisila (Correspondent, Asia Business Outlook), Senath shared his thoughts on the current life insurance sector in Sri Lanka and its impact on the country’s economic landscape.

Below are excerpts from the exclusive interview – How has the Sri Lankan life insurance sector evolved in the last decade?

Despite facing numerous challenges, the life insurance sector in Sri Lanka has experienced exponential growth in recent years, boasting a double-digit compound annual growth rate. Key to this growth has been the transition of insurance companies from traditional distribution models to innovative, next-generation mediums in providing insurance to customers. Also, embracing digital mediums to offer services has enabled insurance companies to provide greater convenience to customers, significantly increasing the accessibility of insurance across the country.

Can you shed some light on the country’s regulatory environment with regard to the life insurance sector today?

In terms of regulatory and governance policies, the life insurance sector in Sri Lanka has matured significantly over the years. Given the critical nature of managing policyholders' funds, stringent regulations are in place to maintain transparency and accountability, placing life insurance among the most heavily regulated sectors in Sri Lanka. We have a very strong regulatory body that ensures that all insurance companies are operated and managed sustainably, benefiting both end customers and the industry as a whole.

Can you explain the impact of macroeconomic factors such as interest rates and inflation on the performance of the life insurance business in Sri Lanka?

Rising inflation levels often coincide with increased interest rates, posing challenges to the life insurance industry. During periods of hyperinflation, such as when interest rates soared to 30 percent, household savings rates plummeted, adversely affecting the sector. However, life insurance products now offer comprehensive benefits beyond death coverage, providing enhanced financial security to policyholders amidst economic crises like inflation. Thus, the sector plays a crucial role in stabilizing the country's economy.

What role does the life insurance sector play in supporting individuals and businesses during challenging economic periods?

From an economic standpoint, a well-protected population reduces the burden of welfare and healthcare expenditure on the government.  Thus, the life insurance sector is a true enabler for the Sri Lankan government to make the country’s households more financially secure and independent, simultaneously enhancing accessibility to healthcare beyond the traditional government benefit schemes. Today, the life insurance sector amounts less than one percent of the country's GDP, which is very low compared to its Asian counterparts. This underscores the immense potential for industry growth and the creation of substantial employment opportunities for the nation's populace.

In your opinion, how do you expect the Sri Lankan life insurance sector to shape-up in the near future?

In Sri Lanka, insurance remains predominantly a push-product rather than a pull-product. Shifting this paradigm requires raising customer awareness about the benefits of insurance and fostering a customer-centric approach within insurance companies. Thus, formulating effective strategies in terms of deeper customer integration and solution development will be key to the overall development of the industry. Also, we expect to see an increased use of digital tools in the insurance sector to not only drive efficiency across all their functions, but also provide a superior customer experience. Moreover, innovation and the introduction of personalized products catering to all segments of the population will be critical for driving industry growth.