Cabraal: High scope for insurance industry

By Shabiya Ali Ahlam

With the insurance industry of Sri Lanka currently holding just 3% of the total assets of the financial sector, Central Bank Governor Nivard Cabraal expressed that this figure indicates the prevalence of immense potential for growth.

Despite the insurance industry having 22 companies, of which 12 are composite , Cabraal said that that the 3% is not a “great number” during his keynote speech at "The future of insurance" forum yesterday.

“The premium income in Sri Lanka is not very high when taking it as a percentage of GDP as it stands at only 1.2%,” he said while revealing that the general premium accounts for 0.2%, whereas the long term life premium, including business, is of 1% of the GDP.

Cabraal asserted that when contrasting this figure with other Asian countries, Sri Lanka is lagging “far behind”; as in the general context, the country earns only 5.8% of its GDP from insurance.

On highlighting the slow performance of the country in this regard, he added: “Those in the insurance industry should recognise this as a tremendous capacity for improvement which can take Sri Lanka on par with other Asian countries as we have space to increase our growth at least six times to what we are today.”

Comparing the density of the insurance industry of Sri Lanka with selected countries of the Asian region, Cabraal stated that  having  just 1.2%, the country ranks just one before the last in this scenario with Japan leading the way by having a density of 11%, followed by Singapore, Malaysia, and India, which have densities of 5.9%, 5.1% and 4.1% respectively. He revealed that the only country that falls below Sri Lanka in this regard is Pakistan where is has a density of approximately 0.7%.

He noted that in the mentioned context, the industry should be aware of the direction of the country. “We are opening many vistas for our nation to progress,” Cabraal stated.

Speaking on the Government’s goal to reach the per capita income target of US$ 4,000 by 2016, the Governor expressed in confidence that the country will certainly get to this level, well before the set deadline.

“For those who are aware of the plans of the Central Bank and the Government, we are on a steady path to reach this goal. The US$ 100 billion economy status is well within reach,” Cabral affirmed.

Acknowledging that the economy is currently standing at approximately US$ 3,000 per capita income levels, “there are enough areas to show progress. The five hub plus tourism concept is a potential area for this,” he pointed out, stating that this focus will help the country to move away from the middle income trap.

Referring to the fact that many companies in the country are either not or are under-insured, Cabraal called for the insurance industry to take into account global trends in the insurance sphere. “The turmoil of the world is hedged with insurance,” he stressed.

Speaking on the technological advancements that are sweeping the world today, Cabraal advised the industry to move with these trends. “The end consumers are now in the position to assess your products with the competition. This constantly evolving platform will give us much to think about when developing strategies to move forward,” he said.

Touching on the segregation of the composite insurance industry, he stressed that it will certain take place despite many calling them ‘plans’ and not action. “The plans that have been formulated today will be put into action tomorrow; with this I believe we are committed and have what it takes to take the insurance industry of Sri Lanka forward,” Cabraal asserted.