Saturday Jul 04, 2026
Saturday Jul 04, 2026
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Sri Lanka’s life insurance industry is frequently cited as one of the country’s biggest untapped growth stories because of its low penetration. The country’s leading insurers say the reality is considerably more complex.
Speaking at a CT Smith Life Insurance Sector Panel Discussion, Softlogic Life Insurance PLC CEO Iftikar Ahamed, Union Assurance PLC CEO Senath Jayatilake, and HNB Life PLC Executive Director/CEO Lasitha Wimalaratne said doubling the industry’s size by 2030 and tripling it by 2035 will depend less on penetration levels than on stronger economic growth, rising household incomes, and a policy framework that encourages long-term savings.
Although the industry has recorded double-digit growth for several years and expanded by around 25% during the first quarter of 2026, they said a large segment of Sri Lankan households remains outside the formal insurance market because affordability continues to limit demand.
Jayatilake cautioned against treating Sri Lanka’s penetration rate, which remains below 1% of GDP compared with about 3% in India, as evidence that growth will automatically follow.
“Just because you are under-penetrated does not necessarily mean that growth is guaranteed,” he said.
Institutional investors assess insurance markets no differently from other sectors, he said, looking at macroeconomic stability, affordability, consumer adoption, and policy certainty rather than penetration statistics alone.
He pointed to India, where stronger economic growth continues to attract regional capital.
“India is hot,” he said, arguing that Sri Lanka needs a more compelling national economic strategy if it hopes to compete for international investment.
Jayatilake also highlighted the industry’s importance to the wider economy, noting that life insurers have invested almost $ 1.5 billion in Government securities, making the sector one of the country’s largest mobilisers of long-term household savings.
“If this industry is to grow to its true potential, what can be the access to funding?” he asked.
He also maintained that financial literacy remains a significant obstacle, with many households still failing to appreciate the role of life insurance in long-term financial planning.
Awareness alone, however, will not increase penetration.
“For the masses to adopt life insurance, you also need to make life insurance less complicated, simpler to purchase and consume, and also affordable,” he said, adding that repeated economic shocks have weakened household savings and purchasing power.
The industry’s seven-pillar roadmap therefore focuses on product innovation, broader distribution, affordability, and accessibility, alongside renewed tax incentives to encourage insurance ownership.
Ahamed took a different view on awareness.
Television advertising, digital platforms, and near-universal mobile penetration mean consumers already know insurance products exist, he said.
The bigger obstacles are behavioural and economic. Unless insurance is compulsory, consumers often assume misfortune will happen to someone else and postpone buying protection products.
More fundamentally, inflation and weak disposable incomes leave many households unable to commit to long-term insurance.
“If people don’t have the money, insurance is the last thing that they worry about,” he said, adding that lower-income households and workers in the informal economy remain the least protected despite facing the greatest financial risks.
Ahamed also warned that Sri Lanka’s demographic transition is creating a widening protection gap.
The country is “getting older before we have become rich,” he said, arguing that retirement financing, long-term healthcare, and elderly care will place increasing pressure on public finances unless insurers are allowed to play a larger role.
Wimalaratne similarly identified disposable income as one of the industry’s biggest constraints.
“If you talk about the masses, they have a lot of other commitments than paying for a life insurance premium,” he said.
Drawing on international research, he said life insurance markets typically accelerate once per capita income exceeds about $ 6,000, suggesting Sri Lanka has yet to reach the income threshold associated with faster structural expansion.
Although around 30% to 40% of the population has some form of insurance through individual, group, or micro-insurance products, Sri Lanka still trails most regional peers, with only Pakistan, Bangladesh, and Nepal recording lower penetration levels.
Wimalaratne said the industry’s expansion plans also depend on Government policy.
He called for the restoration of tax deductibility for life insurance premiums and warned against proposals to tax insurance maturity proceeds or investment-linked insurance products.
“If they want to do that, that will kill the industry,” he said. “At this moment, the Government should support us to grow and come to a regional level.”
Despite approaching the issue from different perspectives, all three executives agreed on one point: low insurance penetration, by itself, is not an investment thesis. Without stronger economic growth, higher household incomes, policy stability, and incentives that encourage long-term savings, the industry’s frequently cited potential will remain difficult to realise.
– Pix by Daminda Harsha Perera
