Sri Lanka’s life insurance industry achieved a 16 percent year-on-year (YoY) overall growth, with the total gross written premium (GWP) topping the Rs.100 billion mark in 2020, despite the COVID-19 pandemic-infused challenges, including a low interest rate regime.
In 2020, the total GWP of the country’s life insurance Industry rose to Rs.102.9 billion, from Rs.88.77 billion in 2019, according to a key industry player, Union Assurance PLC.
Group life and single premium products were the main contributors of the premiums growth, recording YoY growth rates of 92 percent and 51 percent, respectively. However, the growth in regular new business premiums remained low at 4 percent YoY.
Union Assurance noted that customer retention and cost effectiveness have become more critical with the impact of COVID-19, intensifying the competition between market players, forcing insurance firms to seek innovative ways to increase sales and customer satisfaction while keeping costs low and maintaining profitability.
“This has led to the emergence of alternative distribution channels, such as online platforms, mobile applications and social media, etc., which drive premium growth at lower costs.
Meanwhile, strategies such as leveraging digital capabilities to increase premium collection via digital channels and introducing digital products were observed during the year,” it elaborated. Union Assurance posted a 15 percent YoY growth in regular new business while the industry showed a marginal annual growth of 4 percent. Further, it was ranked the fourth largest regular new business producer in the industry, surpassing GWP of Rs.13 billion in the year. The company cited that product diversification and increased focus on non-traditional channels as a key reason for its above industry average performance in GWPs.
In the year under review, Union Assurance’s bancassurance channel posted a 23 percent YoY, reaching Rs.1.8 billion in revenue. Meanwhile, its alternate channel focusing on digital sphere recorded a revenue of Rs.358 million in its first year of operation. Further, it launched five new products, including digital and surgical products during the year. Sri Lanka life insurance industry players were also quick to introduce a free COVID-19 life cover for policyholders last year.
According to ICRA ratings, the sharp decline in systemic interest rates was a key challenge posed for the industry in 2020.
“The insurers saw a sizable increase in life insurance liabilities, due to the repricing effect. This resulted in significant unrealised losses for life insurance companies, in turn affecting their overall profitability and capital buffers,” it noted.
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