AIA Sri Lanka CEO Shah Rouf speaking at the Fintelekt-LIMRA Insurance Summit 2016 last week provided a thoughtful perspective on the region’s market journey and how AIA’s unparalleled experience across Asia provides an insight to what the Sri Lankan industry and most importantly policyholders can expect.
“Asia is being shaped by growth in population and rapid urbanization. Increased disposable incomes bringing households new spending power, combined with low social welfare and a substantial protection gap, means Sri Lankans like all Asians need protection and long term savings” he said.
He further added: “The insurance agent would remain the main way to reach the customer with a growing contribution from other channels such as bancassurance, as has been the case in other Asian markets. However, to be accepted and successful in a growing tech savvy market, the modern agent would have to demonstrate and have access to advice tools comparable to the most developed markets. The pace of bancassurance growth across Asia has strong correlations to decreasing interest rates and thus core banking margins. Hence it might be some time before bancassurance becomes a significant channel for the Life insurance industry as a whole in Sri Lanka”.
Turning his attention to products, Shah emphasized the link between regulation and resulting product mix in markets. He said “protection was the primary focus for most Life insurers and this was best balanced with long term savings to give policyholders a more complete solution. The extent to which this was met with a traditional or unit-linked underlying product structure varied from market to market”.
Citing examples such as UK mortgage endowments, Hong Kong post Lehman Brothers 2008 and the Indian swing to and from linked products over the last decade, he said: “Both structures had their pros and cons and regulation could push markets to one extreme or the other. What was needed was a balanced approach and particularly so in emerging Asian markets to encourage industry development”.
He concluded by highlighting that in most emerging Asian markets bank deposits remain the sole or main financial services product and the customer needed much more than that. Later asking the question “Can a bank savings account continue to save or provide a multiple of itself for the saver’s family; can it top itself up and in effect be re-used if it’s all spent on large medical expenses?”