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Insurance Industry not a level playing field, price undercutting remains a hindrance – Ajith Gunawardena
Link: http://lankabusinesstoday.com/news/business/1461-insurance-dilemma
Mar 17, 2012 (LBT) -Sri Lanka’s insurance industry is not a level playing field and price undercutting still remains a hindrance to the vibrancy and growth of the insurance industry, the founder of Sri Lanka's first 'On the Spot - Vehicle Insurance Claiming' product - Managing Director-Chief Executive Officer Ceylinco Insurance General, Ajith Gunawardena poits out.It offers advantages to public sector insurance companies, which many see as an unhealthy situation for the industry at large” he notes.
“It offers advantages to public sector insurance companies, which many see as an unhealthy situation for the industry at large” he notes.
Whilst the general insurance is comprise with insuring the largest commercial and very specific risks in the country, all most all private sector general insurance companies are now hurt in revenue generation due to a circular issued by state treasury in 2009; according to analysts.
As a result private sector insurance companies are losing revenue generated from insuring state owned asset risks. Accordingly the private sector insurance companies are in the opinion that the circular titled “Provision of general insurance cover for Government institutions” dated 18 September 2009 signed by then Treasury Secretary S. Abeysinghe has been the main cause for this.
“It has created a monopoly in general insurance business in the country Sri Lanka Insurance Corporation being benefitted by biggest revenue” an insurance industry source said. As per the circular it stresses that all government and semi government institutes should in accordance with their requirements obtain general insurance cover for Marine, Fire, Motor and General Accidence only from the National Insurance Trust Fund (NITF) or the Sri Lanka Insurance Corporation (SLIC).
Industry sources claim a large portion of Insurance premiums are generated from Sri Lanka’s largest state-owned subsidiaries and state assets such as Sri Lanka Parliament, Sri Lanka Telecom, Ceylon Petroleum Corporation, Ceylon Electricity Board, Sri Lankan Airlines, Airports and Aviation Services (SL) Ltd and Sri Lankan Airports, Litro Gas, state owned Schools, National Hospital Chain, Associated of Newspapers Ceylon, Sri Lanka Ports Authority and Sri Lankan Ports, State-owned banks such as Bank of Ceylon, National Savings Bank, HDFC Bank,People’s Bank, People’s Merchant Bank, Merchant Bank of Sri Lanka and also the MP’s insurance policies and Road Development Projects. The move by the treasury to place all insurance business of government assets with Sri Lanka Insurance Corporation, large chunks of insurance and reinsurance premium money will clearly pour into the state-owned insurance arm.
The above entities are in turn said to have a major insurance risks from fire, marine, and general accidence. The circular further notes that Insurance of property belonging to government and semi government sectors acquired property and Health insurance scheme covering the employees of state corporations statutory bodies, universities, state banks, fully government owned companies and companies with majority shares owned by the government are also should be placed with SLIC and NITF.
In the backdrop of this circular it learnt that Sri Lanka’s premium Colombo hotels such as Galadari and Hilton, and largest private banks such as Hatton National Bank, National Development Bank, Commercial Bank, Seylan Bank, Sampath bank, DFCC Bank being indirectly owned by government will now have to place their insurance risks with SLIC whilst it at recent times Sri Lanka Insurance (SLIC) in turn had started investing in listed companies such as Colombo Dockyard PLC which will direct Dockyard’s ship building insurance covers also to SLIC. The state own insurer also has considerable stakes in Lanka Hospitals PLC (LHCL) and E-Channeling PLC and government owned subsidiaries has considerable stakes in companies such The Finance & Company which large properties in the country.
Further the major forces such as Army, Navy, Air Force and Police including the state employees will now have to obtain their health insurance policies with SLIC. According to sources as a consequence of this move the biggest state owned subsidiaries has lost the main advantage of obtaining competitive rates for their insured risks as now they will have to insure at any cost that will be suggested by SLIC or NITF.
As per circular it also suggests that all other insurance covers other than those of coming under thementioned insurance schemes in the circular should also be obtained only from SLIC or NITF whilst services of insurance agents need not to be obtained for this purpose. The circular also notes that in obtaining insurance covers from NITF or the SLIC the heads of institutes can use their discretion in selecting either of the two insurance institutes considering the cost involved and convenience as advantages to them. Sources also highlights that SLIC has now got even the benefit of getting the insurance deals of government projects or even the projects that are given to private contractors by state.
Sri Lanka’s government in mid 2009, regained overall control of previously state-owned Sri Lanka Insurance Corporation (SLIC), after a landmark judgment of Supreme Court delivered on 4 June 2009, where the shares of SLIC were reverted back to the Treasury Secretary. The Harry Jayawardena-led Sri Lanka Insurance was transferred back to the state while SLIC on January 2011 paid Rs. 6.7 billion in monetary terms to Harry Jayawardena-controlled Distilleries Company of Sri Lanka (DCSL), though the Supreme Court in its judgment said that the purchase price of 6.5 billion Rupees be repaid in Treasury Bonds with interest, within a period of two weeks.
In the latest annual report of the Ceylinco Insurance Company (CINS) Ajith Gunawardena notes that during 2011, two new players entered the industry, bringing the total number of players in General Insurance to eighteen. Gunawardena goes into explain an area of primary concern for the insurance industry will be the natural catastrophes that have ravaged the Asian region and indeed, the world, in the recent past, which have claimed thousands of lives and resulted in financial losses amounting to billions of Rupees .
“Although we are unable to predict such havoc, it is the bounden duty of the insurance industry to help in rebuilding such communities and economies” he points out. According to him moreover, this highlights the need for insurers to increase their efforts in analysing risks in much greater detail, while providing insurance at affordable rates.
Gunawardena stresses that further, it remains incumbent upon the industry at large to play a pivotal role in educating the masses about the manifold benefits of insurance.
Meanwhile Ceylinco Insurance General’s position as a regional player in the global insurance arena, has considerably strengthened in last year.
“In this vein, the Philippines is the latest addition to our growing international presence, where we assists a local company in product development and marketing” Gunawardena notes.
Link: http://lankabusinesstoday.com/news/business/1461-insurance-dilemma
Mar 17, 2012 (LBT) -Sri Lanka’s insurance industry is not a level playing field and price undercutting still remains a hindrance to the vibrancy and growth of the insurance industry, the founder of Sri Lanka's first 'On the Spot - Vehicle Insurance Claiming' product - Managing Director-Chief Executive Officer Ceylinco Insurance General, Ajith Gunawardena poits out.It offers advantages to public sector insurance companies, which many see as an unhealthy situation for the industry at large” he notes.
“It offers advantages to public sector insurance companies, which many see as an unhealthy situation for the industry at large” he notes.
Whilst the general insurance is comprise with insuring the largest commercial and very specific risks in the country, all most all private sector general insurance companies are now hurt in revenue generation due to a circular issued by state treasury in 2009; according to analysts.
As a result private sector insurance companies are losing revenue generated from insuring state owned asset risks. Accordingly the private sector insurance companies are in the opinion that the circular titled “Provision of general insurance cover for Government institutions” dated 18 September 2009 signed by then Treasury Secretary S. Abeysinghe has been the main cause for this.
“It has created a monopoly in general insurance business in the country Sri Lanka Insurance Corporation being benefitted by biggest revenue” an insurance industry source said. As per the circular it stresses that all government and semi government institutes should in accordance with their requirements obtain general insurance cover for Marine, Fire, Motor and General Accidence only from the National Insurance Trust Fund (NITF) or the Sri Lanka Insurance Corporation (SLIC).
Industry sources claim a large portion of Insurance premiums are generated from Sri Lanka’s largest state-owned subsidiaries and state assets such as Sri Lanka Parliament, Sri Lanka Telecom, Ceylon Petroleum Corporation, Ceylon Electricity Board, Sri Lankan Airlines, Airports and Aviation Services (SL) Ltd and Sri Lankan Airports, Litro Gas, state owned Schools, National Hospital Chain, Associated of Newspapers Ceylon, Sri Lanka Ports Authority and Sri Lankan Ports, State-owned banks such as Bank of Ceylon, National Savings Bank, HDFC Bank,People’s Bank, People’s Merchant Bank, Merchant Bank of Sri Lanka and also the MP’s insurance policies and Road Development Projects. The move by the treasury to place all insurance business of government assets with Sri Lanka Insurance Corporation, large chunks of insurance and reinsurance premium money will clearly pour into the state-owned insurance arm.
The above entities are in turn said to have a major insurance risks from fire, marine, and general accidence. The circular further notes that Insurance of property belonging to government and semi government sectors acquired property and Health insurance scheme covering the employees of state corporations statutory bodies, universities, state banks, fully government owned companies and companies with majority shares owned by the government are also should be placed with SLIC and NITF.
In the backdrop of this circular it learnt that Sri Lanka’s premium Colombo hotels such as Galadari and Hilton, and largest private banks such as Hatton National Bank, National Development Bank, Commercial Bank, Seylan Bank, Sampath bank, DFCC Bank being indirectly owned by government will now have to place their insurance risks with SLIC whilst it at recent times Sri Lanka Insurance (SLIC) in turn had started investing in listed companies such as Colombo Dockyard PLC which will direct Dockyard’s ship building insurance covers also to SLIC. The state own insurer also has considerable stakes in Lanka Hospitals PLC (LHCL) and E-Channeling PLC and government owned subsidiaries has considerable stakes in companies such The Finance & Company which large properties in the country.
Further the major forces such as Army, Navy, Air Force and Police including the state employees will now have to obtain their health insurance policies with SLIC. According to sources as a consequence of this move the biggest state owned subsidiaries has lost the main advantage of obtaining competitive rates for their insured risks as now they will have to insure at any cost that will be suggested by SLIC or NITF.
As per circular it also suggests that all other insurance covers other than those of coming under thementioned insurance schemes in the circular should also be obtained only from SLIC or NITF whilst services of insurance agents need not to be obtained for this purpose. The circular also notes that in obtaining insurance covers from NITF or the SLIC the heads of institutes can use their discretion in selecting either of the two insurance institutes considering the cost involved and convenience as advantages to them. Sources also highlights that SLIC has now got even the benefit of getting the insurance deals of government projects or even the projects that are given to private contractors by state.
Sri Lanka’s government in mid 2009, regained overall control of previously state-owned Sri Lanka Insurance Corporation (SLIC), after a landmark judgment of Supreme Court delivered on 4 June 2009, where the shares of SLIC were reverted back to the Treasury Secretary. The Harry Jayawardena-led Sri Lanka Insurance was transferred back to the state while SLIC on January 2011 paid Rs. 6.7 billion in monetary terms to Harry Jayawardena-controlled Distilleries Company of Sri Lanka (DCSL), though the Supreme Court in its judgment said that the purchase price of 6.5 billion Rupees be repaid in Treasury Bonds with interest, within a period of two weeks.
In the latest annual report of the Ceylinco Insurance Company (CINS) Ajith Gunawardena notes that during 2011, two new players entered the industry, bringing the total number of players in General Insurance to eighteen. Gunawardena goes into explain an area of primary concern for the insurance industry will be the natural catastrophes that have ravaged the Asian region and indeed, the world, in the recent past, which have claimed thousands of lives and resulted in financial losses amounting to billions of Rupees .
“Although we are unable to predict such havoc, it is the bounden duty of the insurance industry to help in rebuilding such communities and economies” he points out. According to him moreover, this highlights the need for insurers to increase their efforts in analysing risks in much greater detail, while providing insurance at affordable rates.
Gunawardena stresses that further, it remains incumbent upon the industry at large to play a pivotal role in educating the masses about the manifold benefits of insurance.
Meanwhile Ceylinco Insurance General’s position as a regional player in the global insurance arena, has considerably strengthened in last year.
“In this vein, the Philippines is the latest addition to our growing international presence, where we assists a local company in product development and marketing” Gunawardena notes.
