Recognising the value of insurance

The month of September sees the insurance industry celebrate National Insurance Day and the launch of Insurance Awareness Month. The industry comes together on an annual basis to spread the message of insurance throughout the island in a bid to increase the penetration level of insurance in the country and to educate the people of Sri Lanka about the value of purchasing a policy to secure their future and that of their family. 

Speaking on the value of insurance and the role of the industry, especially in uncertain times, IASL President Gehan Rajapakse shared a number of invaluable points, facts and examples during a recent interview. Following are excerpts: 

Q: What are the developments brought on by the declaration of the National Insurance Day and the launch of Insurance Awareness Month?

 1 September was declared as National Insurance Day in order to create a greater awareness about insurance. National Insurance Day is a part of the strategy to increase awareness about insurance among the general public. The reason for that is because people often don’t view insurance as a priority. They don’t understand that the value of the product becomes really valuable only when a widow’s tears touch the policy document. 

Take the case of a life insurance policy – if the primary income earner of a particular family who brings in an income of Rs. 100,000 dies or is left incapacitated, the insurance policy reinstates that Rs. 100,000 income for the family’s maintenance. Unfortunately, many people don’t understand this. If you ask the majority what insurance is, they reply saying that insurance is protection. But insurance is much more than just protection. In my view, insurance is a monthly income protection plan. The Insurance Awareness Month campaign is designed to get this message out to the people and to educate them on the real purpose of insurance. 

The second aspect of this is that people don’t understand and are not aware of risk. For example, one of the biggest assets that a person possesses is their house, and in order to accomplish this, a loan is necessary. Many people insure their house purely due to the fact that it is made necessary by the bank from which they get the loan. If it’s not required by the bank, many people don’t insure their houses. They don’t understand the tremendous risk they run by not insuring their homes. Through general insurance a person can basically transfer his/her major risks to someone else. But people are largely unaware about this. 

Q: What results does the IASL hope to see following the conclusion of this year’s Insurance Awareness Month campaign?

 I know that a lot of people are talking about how low insurance penetration is in Sri Lanka, but I like to look at it in a different way. In Sri Lanka today we have a rough estimate of 8 million working people and we have about 3.2 million policies, so that indicates that about 40% of our working population are insured, which is not too bad. This is all thanks to the efforts of the industry. The IASL organises these programs every year in order to keep building awareness and thereby gradually increase the level of insurance penetration in the country. 

So the main result that we hope to see is a continuum. Life insurance and protection is a process linked to a person’s lifestyle. So a continuum is essential. We also hope to see more people purchasing insurance as well as an increase in the number of customers who maintain their policies without lapse. 

Q: What are the challenges currently faced by the insurance industry?

 A majority of the challenges faced by the insurance industry are due to the lack of awareness among the people of our country. One such issue is the fact that a large number of people buy a policy and let it lapse as they don’t want to or cannot maintain it. In my view, most such cases are a result of people not understanding the value of the policy.

Economic conditions can also pose a threat to the industry. If the economic conditions of the country decline then of course policies lapse, when people are unable to pay.

A lot of people think that insurance is about saving. In my definition insurance is first about ensuring a protection, after that comes saving, because if it was only about saving you might as well go and put the money in a bank.

Q: How have the Easter Sunday attacks affected the insurance industry and what steps has the industry taken to contribute towards easing the burdens of the victims and the government?

 Clearly the Easter Sunday attacks impacted the entire country in terms of cash flow and the insurance industry was no exception. 

The attacks brought on an atmosphere of uncertainty, which led many people to postpone their buying decisions. People adopt a ‘wait and see’ attitude. Thus the insurance industry, especially the life insurance sector in particular faced a rather challenging situation.

While the general insurance sector also suffered a certain degree of decrease in cash flow, there was also an upturn in premium as companies immediately requested the addition of the riot and strike cover to their policies. But overall there has been an issue with the cash flow for both sectors as people were, and some still are, having a hard time maintaining their policies.

We are hopeful that this situation will soon be rectified and the industry will recover.

In regards to the contribution of the industry to the victims and the government following the tragic attacks, I am proud to say that a number of insurance companies stepped forward to ease the burdens of those affected by the unfortunate events of 21 April. 

If you look at the history of the insurance industry, Sri Lanka has undergone various upheavals at various times, from tsunamis to civil war and social unrest. In all these situations the insurance industry has come forward and met their obligations fully and contributed towards restoring the lives of the victims. So as an industry I think we should be very proud that we have never failed to keep our commitments and promises to our clientele. 

Whatever the situation the industry is well managed by top professionals. I must say that the capability of the industry is very high, and that’s why there has never been an instance where something has gone into default. Because we believe that it is our purpose as an industry, so I think that is a huge national strength, to have a sector that will step up whenever the need arises. 

Q: In your opinion, what are the means by which insurance companies can successfully maintain customer interest?

 The most essential thing when it comes to customer service is to sell right. If the selling is done after correctly identifying the need of the customer, and the sales process is accurate the customer will never lose interest, because the customer knows the value of the policy and that it suits his/her needs perfectly. Selling right can also be an effective means of maintaining awareness. 

I think innovation is also an effective way to maintain customer interest. Many companies have adopted the innovative approach and are offering quite a bit of attractive features such as maturity returns and loyalty bonus schemes. 

Ours is not a grocery industry, the main thing is that the customer’s interest is maintained through loyalty programs and the agents. In the case of life insurance, we work through about 45,000 agents. These agents become very close and trusted advisors to the customers, and they build a very special relationship with their clients. Much of the customer’s interest in maintained by the agency network, which is why it is necessary for insurance companies to maintain a skilled and able team of agents. 

Q: How important is need analysis?

 Need analysis is critical. In my view a proper need analysis is the most important activity in the whole process. Sometimes people start with the premium first, which is the wrong approach. The premium should be worked out only after the need of the customer is analysed and identified. If this process is carried out properly and the policy is provided accordingly it will not lapse. 

At the MDRT (million dollar round table conference) panel discussion at NAFLIA, every one of the panellists said the same thing. They said, “We don’t try to push a product, we identify the needs of the customer and design a solution to meet the specific requirements of each customer.” Insurance is very different in terms of need as the needs of each person are different. It is the task of the agent to design a solution that really fits the need. 

Q: Can you describe the role of the IASL and its relationship with the IRCSL?

 The IASL plays a very important role in bringing the industry together and I must say that the members are very corporative and supportive of the industry. Despite there been diverse companies everyone knows each other. So the IASL basically plays a very important role in bringing them together. The IASL is also the main liaising party with the regulator, and I must also say that the regulator has been extremely supportive of the insurance industry. 

Looking at the recent past the industry went through massive changes and the IRCSL has succeeded in these. The IASL and the IRCSL have a very good partnership, and speaking on behalf of the former, I wish to say that we are very grateful for the collaboration of the latter.