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President’s Report

President's Report For The Year 2016 / 2017

It is with great pleasure that I present this report at the 28t h Annual General Meeting of the Insurance Association of Sri Lanka (IASL) in my capacity as President covering the period April 2016 to March 2017.

Overview

The IASL comprises of the following members.

1. AIA Insurance Lanka PLC 14. HNB General Insurance Ltd 14. HNB General Insurance Ltd
2. Allianz Insurance Lanka Ltd 15. Janashakthi Insurance PLC 15. Janashakthi Insurance PLC
3. Allianz Life Insurance Lanka Ltd 16. Janashakthi General Insurance Ltd 16. Janashakthi General Insurance Ltd
4. Amana Takaful PLC 17. Life Insurance Corporation Lanka Ltd 17. Life Insurance Corporation Lanka Ltd
5. Amana Takaful Life Ltd 18. LOLC Life Assurance Ltd 18. LOLC Life Assurance Ltd
6. Arpico Insurance PLC 19. LOLC General Insurance Ltd 19. LOLC General Insurance Ltd
7. Ceylinco General Insurance Ltd 20. MBSL Insurance Co. Ltd 20. MBSL Insurance Co. Ltd
8. Ceylinco Life Insurance Ltd 21. Orient Insurance Ltd 21. Orient Insurance Ltd
9. Continental Insurance Lanka Ltd 22. Peoples Insurance PLC 22. Peoples Insurance PLC
10. Cooperative Insurance Co. Ltd 23. Sanasa Insurance Co. Ltd
11. Coop Life Insurance Ltd 24. Softlogic Life Insurance PLC
12. Fairfirst Insurance Limited 25. Sri Lanka Insurance Corporation Ltd
13. HNB Assurance PLC 26. Union Assurance PLC

As per information shared among IASL members, life and general insurance companies reported 19% and 14% year on year growth as at December 2016.

As per figures published by the Insurance Board of Sri Lanka (IBSL), life and general insurance premiums accounted for 1.09% of Sri Lanka’s GDP and insurance company assets accounted for 3.4% of financial sector assets (2015 data). While these figures are relatively low, they serve to highlight the vast potential for growth and development in the sector.

As at December 2016, the insurance industry provided direct employment to approximately 16,000 staff, operated from 1,872 (2014: 1,465) branches spread throughout the island and engaged the services of approximately 45,000 (2014: 43,000) life and general insurance agents.

These activities have resulted in 33% (2014: 30%) of the working population having some form of life insurance (2.8 million life insurance policies are in force as at December 2015). There are 5.1 million general insurance policies in force, including 2.5 million 3rd party motor insurance policies which is a compulsory requirement in Sri Lanka (2015 data).

Despite the relatively low penetration levels, the above statistics clearly reflect the significant impact the insurance industry has made on the socio-economic landscape of Sri Lanka.

Principal Office Bearers

Name Post Designation
Dirk Pereira President Director / CEO Union Assurance PLC
Shah Rouf Vice President CEO AIA Insurance Lanka PLC
Surekha Alles Secretary CEO Allianz Insurance Lanka Ltd
Fazal Ghaffoor Treasurer CEO Amana Takaful PLC

Shah Rouf was posted to the AIA Hong Kong office and his position has remained vacant since November 2016.

Sub Committees of IASL

The IASL Executive Committee (ExCo) comprises CEOs of all insurance companies or their representatives. IASL conducts its activities through the active participation of the eight (8) sub committees mentioned below.

Sub committee Chairperson
Life Insurance Forum (LIF) Asoka Sirisena (Ceylinco Life)
General Insurance Forum (GIF) Priyantha Perera (Fairfirst)
Finance & Technical Sub Committee (FTSC) K. Shankaramoorthy (Ceylinco General)
Legal Advisory Forum (LAF) Nirosha Perera (JIPLC)
Marketing & Sales Forum (MSF) Samitha Hemachandra (CeyLife)
Human Resources Sub Committee (HRSC) Rohan Wijesinha (JIPLC)
IT Sub Committee (ITSC) M. S. M. Iqbal (Amana Takaful)
Actuarial Sub Committee (ASC) Frank Munro (AIA)

In line with IASL’s rotation policy to provide leadership opportunities for high potential candidates, new Chairpersons were appointed to the LIF and LAF in May 2016. The Chairman of the ITSC was appointed in June 2016 following the resignation of the previous Chairman.

Executive Committee and Sub Committee Meetings

Twelve Executive Committee meetings were held during the period under review and all meetings were well attended by members.

All sub committees also met on a regular basis / as required. The Secretary General coordinated and attended all subcommittee meetings, prepared minutes and initiated follow up as appropriate.

May 2016 Floods: Value of Insurance

The value and benefits of insurance was keenly felt following the May 2016 floods which caused widespread damage and destruction. As per details shared by IASL members as at June 2016, gross claims intimated to insurers amounted to approximately Rs. 19 billion.

The final claims value is likely to be lower than this amount, and a significant share would be recovered via prudent reinsurance arrangements.

Much to the relief of the industry, NITF had obtained adequate reinsurance for the 30% compulsory cession as well.

National Insurance Day

1st September has been declared as the National Insurance Day by the Cabinet of Ministers. This is a significant milestone for the insurance industry, and follows the success of the National Life Insurance Awareness campaign conducted during the month of September with the active participation of all life insurers.

We wish to formally place on record our sincere appreciation to the Marketing and Sales forum for initiating this valuable idea and the support received from IBSL Chairperson, Director General and their team in finalising this matter.

Promoting Micro Insurance

IASL was privileged to host the 12th International Microinsurance Conference in partnership with the Munich Re Foundation and Microinsurance Network on November 2016.

Since its inception the conference has gained a reputation for creating an ideal forum for thought leaders, practitioners and other stakeholders to share best practices towards ensuring that the benefits of insurance are available to segments of society that need it most.

The conference was attended by over 400 delgates, including over 200 foreign participants from 50 countries and feedback regarding content, networking opportunities and conference arrangements was extremely positive.

Inaugural Insurance Industry Awards

IASL partnered with Fintalekt to host the 1st ever Sri Lanka Insurance Industry Awards in July 2016. Awards were handed out in 12 categories to recognise and honour the achievements of insurers that met measurable and tangible business objectives. The awards were organised in line with IASL’s objectives to promote professionalism, best practices and maintain high standards within the industry to enhance public confidence. Several insurance companies participated at the event which was preceded by a leadership summit, another first in the insurance industry.

The next Fintalekt insurance industry awards is scheduled for July 2017.

Strategic Regulatory Matters

As at the date of this report, the following regulatory matters have been successfully resolved / finalised:

  •  Role and responsibilities of the Principal Officer of an insurer
  •  Enhance investment options available to insurers as per Determination # 1
  •  Regulatory approval process to launch new products to market
  •  Guidelines on complaints handling for insurers
  •  Revised terms / conditions related to reinsurance placements

In addition to the activities mentioned under each of the sub committees, the following matters are being followed up by IASL ExCo:

  •  Rules pertaining to listing of insurance companies
  •  Ensuring a level playing field with regard to complying with the regulatory requirement for composite insurance companies to segregate their life and general insurance businesses
  •  Corporate governance framework for insurance companies
  •  Unregulated parties offering insurance products i.e. Agriculture and Agrarian Insurance Board
  •  Role and responsibilities of the Specified Officer of an insurer
  •  IBSL to follow due / transparent process when exercising authority under section 18 (Cancellation or suspension of a licence issued to an insurer) and section 98 (Power of the Board to settle claims arising under long term or general insurance business) of the RII Act
  •  Guidelines to insurers who obtain leads from licensed finance companies, finance leasing companies and banks under a referral model

Matters Pertaining to the Ministry of Finance & Planning (MoF)

Discussions with representatives of the MoF and Inland Revenue Department (IRD) regarding taxing of life company profits has intensified as the draft IRD Act (currently in limited circulation) indicates that life insurers will be taxed on investment income less expenses related to managing such investments.  

If this proposal is adopted, based on estimates extracted from the IBSL Industry Handbook 2015, life insurers would have paid 102% and 85% of their profits in 2014 and 2015 respectively.

Needless to say, such a high rate of taxation will directly impact over 2.8 million active life insurance policies and erode the future growth of the industry.

In addition to the above, IASL continued to lobby for

  •  State business to be opened to private sector insurers and
  •  General insurers to be provided some relief from VAT related cash flow implications when settling large claims (this matter came to light following the May 2016 floods).

The IASL proposal with regard to setting up a viable pension scheme in Sri Lanka will be pursued at the appropriate time.

Activities of the Life Insurance Forum (LIF)

Members of the LIF continued to play a vital role in supporting the IASL ExCo on technical matters pertaining to the life business.

LIF responded to IBSL’s request to revise life insurance proposal forms to minimise issues related to non disclosure of material information.

Relevant LIF members submitted details to IBSL to update guidelines pertaining to linked long term insurance policies.

As agreed with IBSL, LIF and ITSC are developing a website which could be accessed by interested parties to check details of unclaimed maturities and claims from any life insurance company.

LIF together with ASC is also reviewing options to conduct a protection gap study in the Sri Lankan market with the support of RGA.

General Insurance Forum (GIF)

The GIF continued to be a vibrant forum for general insurance technical leaders to share opinions and shape the regulatory framework for the industry.

The GIF successfully concluded the following matters during the period under review:

  •  Agreed guidelines related to managing 30% compulsory cession with NITF
  •  Obtained IBSL approval for travel agents to issue travel insurance policies
  •  Finalised wording on riot and strike endorsement for business interruption
  •  Delivery of motor insurance policy documents to customers

The GIF is following up on the following matters:

  •  IBSL’s proposal to have a common policy / basis for reversing motor claims provisions
  •  Implement a common process to manage disputes arising from total loss (motor vehicle) clams
  •  Transfer of ownership in the event of a total loss claims
  •  Setting up a database of fraudulent claims (with support from ITSC)

In addition to the above, GIF and the Legal Advisory Forum (LAF) is tracking proposed amendments to the Motor Traffic Act which includes a clause on psychological harm.

Gap Analysis by IBSL

Based on a review of products of selected companies, IBSL identified gaps with regard to fire, health and motor insurance products.

GIF has already commented on fire insurance policies.

Discussions with IBSL with regard to health insurance policies is ongoing.

GIF members representing the five largest motor insurance companies have been nominated to a sub committee including IBSL and SLIBA members to discuss the gap analysis pertaining to motor insurance products.

Legal Advisory Forum (LAF)

The LAF played a key and active role in supporting GIF / LIF and MSF to finalise the following:

  •  Guidelines on conduct of investigators
  •  Guidelines on agents disciplinary inquiries and grievance handling procedures

LAF finalised common arbitration clauses which could be adopted as appropriate by IASL members.

LAF is following up on the following matters:

  •  High claims costs arising from accidents on the Southern highway (together with GIF)
  •  Obtaining relevant documents from North / East courts
  •  Regulatory framework for agents to work for one life and one general insurance company (following segregation of previously composite insurance companies, and subsequent M&A activity)
  •  Fraudulent claims under title insurance policies

 

Marketing and Sales Forum (MSF)

In addition to their efforts to mark 1st September as the National Insurance Day in Sri Lanka, the dynamic MSF team was responsible for several key activities in the IASL calendar.

National Forum for Life Insurance Advisors (NAFLIA)

The annual NAFLIA was conducted successfully on the 19th of August 2016 at the BMICH. Approximately 950 participants attended the conference which was the highest number since inception.

The next NAFLIA conference will be held in August 2017.

Life Insurance Awareness Campaign

The above campaign was conducted in September 2016 with the objective of reaching one million prospective customers and producing 70,000 new policies.

As per figures shared by IASL members, approximately 60,000 new policies had been sold in September which was a significant increase compared with the average number of policies sold prior to the awareness campaign.

Over 2,400 sales advisors achieved the minimum criteria set by the MSF, of which the top 100 advisors were rewarded and recognised at the awards ceremony held on 1st December at the Waters Edge. 

General Insurance Congress (GISCO)

The MSF organised the first ever General Insurance Congress (GISCO) on the 10th of May 2016 at Waters Edge. It was attended by over 500 general insurance sales persons and was a resounding success.

The next GISCO is scheduled in May 2017.

Other Activities

MSF and HRSC agreed a process for all companies verify authenticity of G.C.E. “Ordinary” Level examination results of prospective advisors directly from the Department of Examinations.

The proposal was accepted by IBSL and Sri Lanka Insurance Institute (SLII) and came into effect from 1st October 2016.

In order to speed up the verification process, MSF, HRSC and ITSC are also following with the Information and Communication Technology Agency of Sri Lanka (ICTA) to explore possibilities to verify exam results via sms as well.

The three sub committees are also working with SLII to set up an on line facility to conduct Agency Technical Competency (pre-licensing) examinations.

MSF and HRSC supported IASL ExCo to develop a code of ethics for insurance advisors which is expected to be formally approved by IBSL shortly.

HR Sub Committee (HRSC)

In addition to the activities mentioned above, HRSC submitted a report “Possible Future Strategy for the Recruitment of Employees to the Insurance Industry,” which highlighted talent shortages in specific functions and recommended action points. However, IASL ExCo decided that individual companies would implement their own recruitment and retention initiatives.

Finance Technical Sub Committee (FTSC)

As mentioned above, FTSC is working with IASL ExCo to lobby MoF and IRD regarding taxes on life insurance companies.

A separate submission was made to the Ministry of Finance highlighting the adverse impact on the insurance industry if the budget proposal to remove withholding tax / notional tax credits available on interest income derived from fixed income instruments i.e. treasury bonds, treasury bills, corporate securities, bank deposits is enacted, as this would increase the effective income tax rate on such instruments to 44% from the current rate of 28%.

The paper also highlighted the adverse impact if tax exemptions on corporate debt and dividends from unit trusts and shares was withdrawn.

The submissions to exclude life insurance companies from paying the crop insurance levy was not successful, but will be taken up at a later point.

IBSL duly considered FTSC comments and updated Determination 1 (regulations related to investing insurance funds). The revised Determination came into effect from Q2 2016. FTSC also commented on the Guidelines issued by IBSL on investments for insurance companies and management of insurance funds.

FTSC members worked closely with their actuarial counterparts in the ASC with regard to the following:

  •  Proposed amendments to year end actuarial and finance returns
  •  Segregation of life and general insurance funds (procedure on management of insurance funds)
  •  Procedures to be followed on surplus created due to change in valuation method of policy liabilities from net premium valuation to gross premium valuation

IT Sub Committee (ITSC)

In addition to the activities mentioned above, ITSC together with the MSF developed a generic needs analysis calculator which is available on the IASL web site for individuals to assess their own “protection gap.”

The two sub committees are also working on upgrading the IASL web site to host latest industry news. The main objective of this initiative is to showcase the dynamism and constant evolution of the industry to current and potential employees and advisors.

The industry currently shares six important sets of information, and ITSC is working on automatically collating this data, to ensure timely and accurate information is available to all insurers.

 

Actuarial Sub Committee (ASC)

In addition to working with the FTSC and other sub committees as mentioned above, ASC is also facilitating a Termination and Persistency Study covering the period 1 January 2013 to 31 December 2015 (lapse study).

The study is conducted every three years and eight companies have agreed to use the services of Actuarial Partners Consulting, Malaysia and share costs appropriately.

Quarterly and Annual Accounts

The annual accounts of the IASL has been circulated to the membership.

We wish to formally appreciate the support received from the finance team at UAL to prepare these accounts as well as submit accounts at regular intervals.

Insurance Ombudsman Scheme

IASL continues with the Insurance Ombudsman scheme and on behalf of the members we express our satisfaction with the functioning of the scheme and the benefits derived by all concerned parties. Dr. Weerasooria has not only functioned as an Ombudsman but as a great supporter of the insurance industry.

We appreciate the multiple roles he plays and take this opportunity to convey our sincere thanks for his guidance and support.

We have written to IBSL to formalise the ombudsman scheme, and are awaiting their response in this regard.

Insurance Board of Sri Lanka

We wish to formally acknowledge and appreciate the consultative approach adopted by the Chairperson, Director General and their team in enacting regulations.

The IASL has an extremely cordial working relationship with the IBSL. We believe this is due to both IASL and IBSL sharing a common set of objectives to safeguard policyholder interests and ensure stability and growth in the industry while constantly upgrading industry standards.

We also take this opportunity to acknowledge and appreciate the efforts of the IBSL to publish the Insurance Industry Handbook 2015, which is an extremely useful value addition to the data already circulated by IBSL.

Sri Lanka Insurance Brokers Association (SLIBA)

The IASL appreciates the role played by SLIBA to develop the insurance industry. As per figures published by IBSL, insurance brokers account for 23% of general insurance premiums and 0.4% of life insurance premiums (2015 data).

IASL maintains a strong and cordial relationship with SLIBA and has participated in several joint committees on important industry topics. We are confident that both associations will continue to work together for the benefit of all stakeholders.

Sri Lanka Insurance Institute (SLII)

IASL wishes to appreciate the contributions of the President, Council, CEO and their team at the SLII for continuing to uplift the intellectual capacity of the industry.

LIF and GIF members continued to use SLII to arrange CPD accredited programmes. 

We look forward to working closely with the SLII to further upgrade industry standards.

Ceylon Chamber of Commerce (CCC)

We sincerely thank the Chairman, Office Bearers, Board members and Secretariat of the CCC for lobbying policymakers on key issues pertaining to the insurance industry.

We especially thank the Taxation Steering Committee of the Chamber for taking up the concerns of the life insurance industry when submitting comments on the proposed IRD Act.

We look forward to their continued support in the future as well.

Acknowledgements

The activities mentioned in the previous pages would not have been possible without the support, guidance and direction of the IASL office bearers, ExCo, Secretary General, Sub Committee Chairs and all members who contributed in numerous ways. We sincerely appreciate all of their contributions and look forward to their continued support to further the activities of the IASL.

Concluding Remarks

As reflected in the previous pages, the industry is in an excellent position to play a key role in the socio-economic development of Sri Lanka. We are confident that the industry has the right resources and commitment to grow at double digits and reach even greater heights in the future.  

Thank you.

Dirk Pereira

President 2015/2016

Insurance Association of Sri Lanka

21st March 2016