Ceylinco Life promotes rapid growth in Sri Lanka’s insurance market

Insurance in Sri Lanka is a relatively young market but industry firms are going from strength to strength and key player Ceylinco Life has led the way with innovation and diversification like no other

Ceylinco Life Head Office
Ceylinco Life's Head Office. The company has established a strong position in Sri Lanka's blossoming insurance market 
December 1, 2014

The internal conflict that plagued Sri Lanka through most of the 1980s and the 1990s ended in 2009. Since then, the country has embarked on a programme of accelerated development. Throughout the civil war, Sri Lanka maintained some enviably high socio-economic indicators; according to the Sri Lankan Board of Investment, 50 percent of university graduates have studied technical or business disciplines, making the Sri Lankan workforce one of the most competitive in market terms.

Since then, the Sri Lankan government has been diligently ensuring the rest of the world knows that not only are the hard civil war days over, but that the island is open for business too. Finance is among the fastest-growing industries and foreign direct investment rose in 2013, from $1.38bn to $1.42bn, as the economy continues to grow. Over the last four years, while most of the world saw slow growth, Sri Lanka grew by an average of 7.3 percent annually. What’s more, the signs are looking very positive for 2014.

Insurance was nationalised in Sri Lanka in 1962 and remained a state-owned monopoly for 26 years

Continued improvements
This renewed interest for foreign investment, especially in sectors such as infrastructure development and hospitality has been positive for the finance industry. For life insurers, another important development has been the improved access to the northern and eastern provinces of the country. These were the areas worst affected by the conflict, and companies found it difficult to recruit and run offices in many parts of these provinces during this time.

Penetration of life insurance was, as a result, even lower than in the rest of the country. Since the conflict ended there has been rapid growth in sales of life insurance in these regions, and as a leading insurance provider in Sri Lanka, the accolades Ceylinco Life has earned throughout the years are in recognition of its diverse functions and innovative products in a country that has struggled with internal strife. With one of the highest solvency ratios in Sri Lanka, Ceylinco Life promotes and supports local development as well as advocating teamwork and diversity as an integral part of its business.

Key to its success is the firm’s efficiency in providing insurance to customers, as well as contributing actively to the economic wellbeing of the country through its products and initiatives. Some of the Ceylinco Life’s branches in the north and eastern provinces are among the best performing in the country. The increase in per capita income in recent years has also helped insurance and other businesses.

Insurance was nationalised in Sri Lanka in 1962 and remained a state-owned monopoly for 26 years. When the private sector was permitted to re-enter the market in 1988, the new players had to compete with two state giants, the Sri Lanka Insurance Corporation and the National Insurance Corporation. The new companies had to establish themselves, build public trust and confidence and develop new products to undermine the market dominance of these two entities.

Life Policies Table
Source: Insurance Board of Sri Lanka, Annual Report. Note: 2012 figures

“State entities continued to patronise the state corporations, and there wasn’t a level playing field at the beginning. However, penetration of life insurance was very low, so the market potential was high. By 2004, 16 years after it commenced operations, my company, Ceylinco Life, became the market leader in life insurance and has maintained this position since,” said R. Renganathan, the Managing Director and CEO of Ceylinco Life.

Today, the life insurance market is extremely competitive with 15 players including three international companies. According to the industry regulator, the Insurance Board of Sri Lanka, Gross Written Premium of the life insurance sector stood at $6.1m at the end of 2012, while total assets of the life insurance companies amounted to $3bn.

Increasing priorities
In this respect, life insurance is still a growing market in Sri Lanka with relatively low penetration levels. Four large players currently dominate the market and the products offered cater to different market segments based on levels of affluence, meaning there’s still significant room for growth and product diversification. Disposable income in many population segments is relatively low, which has generally made life insurance a low priority despite the high level of education and literacy in the country.

Awareness of the importance of life insurance is also lower than in more developed markets. But as the population becomes increasingly wealthier, delivery channels such as bancassurance and online insurance are growing in popularity and show major potential for development. “The penetration of life insurance as a percentage of the population is 12.1 percent, according to the 2012 Annual Report of the Insurance Board of Sri Lanka. When computed as a percentage of the work force, the figure is 29.1 percent, and as a percentage of GDP it’s 0.5 percent. This means that a substantial share of the potential market is still untapped. Life insurers will have to develop affordable products and innovative channels to increase penetration,” argued Renganathan, when offering perspective on the potential in Sri Lanka’s insurance market.

In order to promote the importance of life insurance and long-term savings products such as pensions, Ceylinco Life has developed two annual activities that are intended specifically to address the issue of inadequate awareness of the importance of life insurance and retirement planning. This includes the Life Insurance Week conducted in February every year, during which more than 4,000 sales personnel are deployed countrywide on a door-to-door campaign to speak to people and conduct a need analysis and explain about life insurance. The other promotional activity is the Retirement Planning Month conducted in May every year, which with a similar approach, focuses on the need for planning and investing in retirement plans. Both activities are supported by mass media advertising and events at branch level that directly engage the community.

Ceylinco Life also conducts possibly the largest and logistically most challenging customer promotion in Sri Lanka’s corporate sector annually, to reward and engage with policyholders and their families. Called the Ceylinco Life Family Savari, the promotion rewards more than 2,200 people every year with an all-expenses-paid, conducted overseas holidays to multiple destinations and a day-long excursion to a local theme park. Overseas holiday destinations have included Singapore, China, Paris and Japan, and the next edition will see policyholders and their families visiting Switzerland and Dubai. To date, more than 15,000 people have benefitted from the promotion.

Ceylinco Life invests majorly in the local community in order to cement the fact that the insurance industry is key to both Sri Lankans and the company’s future

Another promotional project is its educational tour of the city of Colombo, Sri Lanka’s commercial capital, for children of policyholders, conducted annually in conjunction with the distribution of school timetables to children across the country at the start of the academic year. All this contributes to overall awareness of life insurance and retirement planning products, improving sales.

“Our most popular products are the Anticipated Endowment Plan and our Medical Plans; which include a critical illness policy covering 36 major illnesses; Ceylinco Life Major Surgery, covering 526 types of surgeries; and Family Hospital Cash, which makes a cash payment for every day a policyholder is hospitalised. Our retirement plans branded as Flexi Plans offer many flexibilities and are also very popular,” said Renganathan.

Constantly evolving
Looking ahead, the firm said that it’s also currently in the process of developing new products that will cater to the needs of Sri Lanka’s ageing population. One of the biggest challenges that the young insurance market faces is the lack of a sufficient talent pool in Sri Lanka. Recruitment and retention of sales agents is not easy, as insurance is not one of the preferred professions and this has made the fight for talent a key focus. “Ceylinco Life, has led the way with many programmes to improve the image of the life insurance salesman by promoting international training programmes and qualifications and through mass media campaigns,” explained Renganathan.

According to the firm, another challenge is the high incidence of policies lapsing, due to a combination of factors, including low disposable incomes, inadequate understanding of products, incorrect selling, and the existing commission structure, which makes it more profitable for an agent to sell a new policy rather than follow-up on overdue premium incomes. A lot of these issues come down to a lack of awareness regarding life insurance.

This is why Ceylinco Life invests majorly in the local community in order to cement the fact that the insurance industry is key to both Sri Lankans and the company’s future. Among this portfolio of value additions for policyholders is the annual Ceylinco Life Pranama scholarships programme that rewards the academic and extracurricular achievements policyholders’ children, and an annual Cash Bonus pay-out during the national new year season.

In total, the company to date has issued 1,770 scholarships, and when the next 160 scholarships are presented in February 2015, the cumulative value of the Pranama Scholarships will reach Rs100m. With this year’s cash bonus payments, the cumulative value of cash bonuses paid by Ceylinco Life every April over the past 11 years exceeds $1.6m.