“It is the responsibility of all stakeholders to encourage the general public on the importance of insurance and to improve people’s confidence in insurance and change the general perception towards having an insurance cover. Young people, in particular, do not give priority to insurance in their expenses, which is why the industry really needs to look at how we can create appropriate products that will be beneficial to the customer. On the other hand, we also need to address the insurance needs of the ageing population in Sri Lanka”.

Following is a Q&A with, Insurance Regulatory Commission of Sri Lanka Director General Damayanthi Fernando:

Q:What are the plans of the IRCSL this year?

A: The IRCSL’s role has been enshrined in the Regulation of Insurance Industry Act, No. 43 of 2000, which requires the regulator to ensure that insurance businesses in Sri Lanka is carried out with integrity and in a prudent and professional manner with a view to safeguarding the interests of policyholders and potential policyholders. In accordance with this Act, all our activities are based on this object and responsibility.

This year, the focus is on enabling the regulator to modernize its regulatory and supervisory framework to better protect the interests of policyholders, whilst enforcing the provisions of the Act. To this effect, the Government has identified the insurance sector as a potential channel for economic growth as the banking and the capital market sectors and agreed to grant the IRCSL with funds to carry out its modernization activities.

This project aims to obtain technical input on best practices followed in other developed insurance markets and suitably adopt to the local scenario considering the policy of the government. Ease of doing business with IT support is also identified as a major development activity. The project has kick started with the regulator signing up with an Actuarial Expert who will assist the regulator in developing its actuarial functions from a supervisory perspective, which is considered an integral part for any insurance regulatory body. The project intends to cover the revamping of capital adequacy rules for the sector, develop frameworks for risk based supervision, market conduct, micro insurance, and to have the main legal framework in line with the Insurance Core Principles, issued by the International Association of Insurance Supervisors, which IRCSL holds membership.

This year we have also given more emphasis on raising awareness about insurance in order to create more confidence amongst the people. Focus will be on post-school students and vulnerable groups.

Q: How has the COVID-19 affected these plans?

A: The IRCSL actually had planned lots of new activities for the year 2020, however, due to the COVID-19 pandemic, we could not fully implement these intended activities. Nevertheless, we will strive to carry on those activities during the course of time. Especially when keeping in mind the objective and responsibility of IRCSL, we maintain a good relationship with the insurance industry in order to uphold our commitment to policyholder interest.

Q: What steps has the IRCSL taken in order to help revive the insurance industry post-COVID?

A: The IRCSL has taken quite a few measures with regard to the post-pandemic situation. We made a special announcement during this period to extend the premium payment period for all policyholders. This relaxed the immediate financial burden of policyholders, thus ensuring the policies were kept alive. Further, instructions were issued to insurance companies suspending dividend payments to shareholders to minimize the impact on capital as cash/premium inflows got affected. We have also cleared few Covid-19 related insurance products of companies during the quarantine period.

Q: What are the burning issues you see with regards to the insurance industry, in terms of customer sentiments?

A: Customers and the general public already have their set priorities in life. The cost of living has been an issue in Sri Lanka for decades, therefore, the need for insurance has been pretty much at the lowest level of their list of priorities, also given the fact the government support in crisis situations. This is why customers tend to seek affordable products with adequate coverage and ease of claim settlements. In order to help mitigate the grievances of policyholders, the regulator has identified the formalization of the alternate dispute resolution scheme of the insurance ombudsman, giving the aggrieved individual policyholder a mechanism to lodge his/her grievance on claim rejection at his/her choice for possible resolution based on the insurance contract. This would give such individual added comfort of referring a matter to the insurance ombudsman on claims up to a determined claim amount to be decided shortly. Any disputes falling beyond the scope of authority of the Insurance Ombudsman can be referred to the Insurance Regulatory Commission and this facility comes free of charge.

Q: What about in terms of insurance agents?

A: In regards to insurance agents, the issues as I see are the professionalism and the level of knowledge of products that certain agents lack. We get numerous policyholder complaints on claim disputes and when analyzing such issues, it can be seen that proper sale practices have not been adopted by some agents.

Furthermore, agents represent insurers and brokers and are therefore required to procure business on behalf of their principals, for a commission. Hence, the sale in certain cases is commission-driven rather than being customer-centric. Products are usually sold to meet their business targets rather than fully identifying customer needs, income levels, how much the customer can afford on insurance and the perceived level of persistency. If all such factors are considered and adequate knowledge on product features including the coverage, terms and conditions, particularly the exclusions of coverage are communicated to the customers, they would build customer loyalty.

Building customer trust, confidence and loyalty can take the industry to higher levels. For this to happen, insurers and brokers should take the lead on training their agents, and follow-ups should be conducted to ensure higher customer perception on insurance. Since insurance is inherently a push product and not usually demanded by customers, the sale should be carried out in a very professional manner. Also post sale service would become essential in the event of a time of claim as policyholders generally would want a personalized service when they need most.

The important point when addressing this issue, is that whilst the Insurance Regulatory Commission carries out necessary actions to maintain the professional standard of the industry, insurance companies, insurance brokers, insurance agents and loss adjusters need to have self-regulatory mechanism. This is because the Customer is directly met by the respective insurance company, agent, broker or loss adjuster and transparency as well as trust become key factors throughout the insurance contract.

Insurance penetration is described as a percentage of the gross insurance income compared to the gross domestic product. Last year we witnessed an increase from 1.26% to 1.31% by the end of 2019. Particularly the general insurance sector which is predominantly focusing on motor insurance needs to look at other risk components which the public needs and tailor-make suitable products especially in view of low new vehicle registrations post Covid 19 said.

“It is the responsibility of all stakeholders to encourage the general public on the importance of insurance and to improve people’s confidence in insurance and change the general perception towards having an insurance cover. Young people, in particular, do not give priority to insurance in their expenses, which is why the industry really needs to look at how we can create appropriate products that will be beneficial to the customer. On the other hand, we also need to address the insurance needs of the ageing population in Sri Lanka”.

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