Increased Access to Insurance

A Sri Lankan perspective

Manila, Philippines18 -20 September 2013

Damayanthi FernandoDirector Legal

Insurance Board of Sri Lanka

Agenda Key Social Indicators Relevant Insurance Industry data How are others covered from shocks? Challenges to develop an inclusive

insurance market Scope of MI Regulation Challenges in regulation and supervision of

MI What have previous studies shown? What steps next?

Key Social Indicators

Mid year population (‘000) in 2012 – 20,328 Age distribution 2011

0-14 yrs – 5,488 15-64 yrs – 14,065 65 years and over – 1,316

Literacy rate (2011) – Average 92.2% Poverty Head Count Index (2002) 22.7 (2006/2007) 15.2 (2009/2010) 8.9 GDP Per Capita @ market prices – US$ 2,836Source – Central Bank A/R 2012

Relevant Insurance Industry Data

2008 2009 2010 2011 2012

Total Premium Income (US$ millions)

447 443 510 604 670

GDP (US$ billions) 34 37 43 50 58

Penetration % (Total Industry Premium as % of GDP)

1.32 1.19 1.18 1.20 1.15

Insurance Density (Total Industry Premium Income/Population) US$

22 22 25 29 33

Mid Year Population (‘000)

1US$ = Rs 130.00

20,217 20,450 20,653 20,869 20,328

Number of Branches Number of Employees Number of Agents

Branch Network, Employees and Agents of Insurance Companies operated in the Island as at 31st December 2012

How are others covered from shocks? Public Sector

Private Sector Self Employed Unemployed

Pensions, EPF’s, ETF’s

Govt. welfare systems

Cooperatives and self helped groups

Conventional insurers offering MI products

MI providers, MFI’s

Savings , family support

Section 12 of the Insurance Law in Sri Lanka

No person shall carry on insurance business in Sri Lanka unless such person is for the time being registered to carry on such business.

Challenges to develop an inclusive insurance market

Inclusive Insurance Market

Downscale ?

Up scale ?

Insurer partner model

?

Downscaling: Commercial Insurers serving the Low-income Market

Up scaling: Formalising informal insurance schemes

Downscaling - issues1) Is it the responsibility of insurance

supervisors to promote MI?2) Should functional regulation be

considered?3) Can the corporate culture in

commercial insurers be conducive to serving the poor?

4) Will Policyholders be protected?

Up scaling – issues

1) Can a tiered approach to MI regulations work?2) What aspects of insurance regulations would

need to be adjusted to formalise informal schemes?

3) Can a market orientation develop in an institution that has had a social orientation?

4) Can MI organisations truly play by the rules of the game?

5) Do they have the staff and systems capacity?

Scope of MI Regulation

Prudential Regulation Market Conduct Regulation Product Regulation Institutional and corporate

governance regulation

Challenges in Regulation and Supervision of MI

Creating an appropriate regulatory framework is a complex task - despite increasing experience with MI, there are still a host of unanswered questions about appropriate steps for overcoming regulatory barriers and achieving greater inclusiveness

Who should supervise? Direct, Self or Delegated

What degree of supervision?

What have previous studies shown ?

Large insures are very active in the market – even at village level

Awareness of insurance products and names of insurers high

Low usage of insurance amongst low income households is not due to lack of access to insurers and therefore, marketing new MI products can be even more difficult

What have previous studies shown ?

There is a need and demand for MI A substantial segment of low

income households is uneducated and skeptical about insurance

A fixed mind-set about insurance and insurers

To penetrate – a balanced combination of the right product and the right strategic marketing

What have previous studies shown ?

Products offered are not suitable Premiums not affordable Delivery mechanism and premium

collection mechanism are not pro-poor

A low cost and easy to understand MI products should be developed

Mind-set should be changed by series of re-orientation programmes and marketing campaigns

What have previous studies shown ?

Demand for life, health and funeral insurance but not property

A low cost delivery mechanism needs to be identified

Tradition of bringing financial services to the rural people through diverse setting of government, private and grass root level initiatives

What have previous studies shown ?

An ideal combination would be an insurer-agent partnership between commercial insurers and grass root level financial intermediaries

What steps next ? Assessment of Sri Lanka’s MI

market, i.e. what is in place in the entire island; MI products issued by registered insurers and unregistered providers, including identifying insurance needs of low income groups

Identify best practices, methods and guidelines in MI in emerging markets and recommend the best suited model for Sri Lanka.

Thank you.