Insurance penetration low despite unfair practices: Ceylinco MD

Insurance penetration continues to remain low in Sri Lanka compared to other Asian countries, even regardless of unethical practices prevalent to gain higher access, Managing Director of a leading Insurance company in the country said.

Ceylinco Insurance PLC (General Insurance), MD/CEO Ajith Gunewardena pointed out that total premiums account for only 1.2 per cent of the GDP in Sri Lanka, while the regional average is around 6.2 per cent.

“This could be attributed to the low per capita income of the country which results in low disposable income levels and also the notion that insurance is still largely considered a risk management tool, rather than an investment,” he pointed out.

Gunawardena made these observations in his review to the company’s Annual Report 2012.

He further stated that the increase in import duty tariffs during the early part of 2012 resulted in a drastic reduction in vehicle imports, which adversely impacted the vehicle insurance industry growth.

“Maintaining market share and underwriting profitability continued to be a huge challenge for the Non Life Industry, as price undercutting was rampant, existing at extremely unethical levels in Motor insurance,” the MD/ CEO said.

He also accused the new entrants to the insurance industry of adopting the practice of undercutting for the sake of remaining in the market. “This allows them to comfortably eat in to the market share of larger and more established companies,” Gunawardena noted.

However he added that the insurance industry has the potential of moving ahead with the expected economic development of the country.

“Increase in per capita income will be a positive factor for the industry, as the disposable income of the people will increase as a result,” he said.

Gunawardena stressed that the industry should take measures to increase penetration, while addressing the issues of affordability, also being aware of qualitative aspects.

(KP)