Sri Lanka’s demographic shift demands economic rethink: Insurance industry

PIC BY PRADEEP PATHIRANA 

• Says aging population and dependency ratio has become a real challenge

By Nishel Fernando 

Sri Lanka’s rapidly shifting demographics signal an urgent need to entirely rethink the country’s broader economic structures, mandatory retirement funds and insurance penetration strategies.

Economic policy analyst Dananath Fernando warned that the island nation is on track to become one of the fastest-aging populations in South Asia, moving toward a reality where one in every four citizens is expected to be over 60 years of age by 2042.

“The aging population and dependency ratio have become a real challenge,” Fernando warned, while speaking at the Softlogic Life Investor Conference held in Colombo this week.

He emphasised that the escalating crisis means “the burden on the employers regarding the EPF and ETF deductions and broader economic structures required to support this, must be completely rethought”, adding that the country urgently requires “an industry exercise to figure out how it can expand coverage and build structures for this transition”. 

Shedding light on the clinical reality of this demographic shift, Dr. Sithira Seneviratne, a specialist in orthogeriatric and perioperative care, explained that the country is facing an incoming “silver tsunami”, driven by a sharp increase in non-communicable diseases. Dr. Seneviratne pointed out that while life expectancy is rising, the actual health span of citizens has failed to keep pace.

“Health span has not gone up that much but age expectancy has gone up,” he explained, noting that this leaves an average gap of “about 10 to 12 years”, where the older citizens live with chronic disabilities and debilitating medical problems. 

He stressed that the country’s reliance on a “more reactive model where we treat diseases when it occurs as such an emergency” is fundamentally unsustainable, urging a pivot toward proactive, preventive care models, which “would be much more economical”.

Addressing how the private sector must step in to bridge this gap, Softlogic Life Managing Director Iftikar Ahamed highlighted that the state cannot carry the health and retirement burden alone, especially given that national insurance penetration currently hovers at just over one percent of GDP. To counter this, Ahamed revealed that collaborative expansion goals are already underway.

“The regulator and industry are planning a roadmap to double insurance penetration to 2 percent by 2030,” Ahamed stated, with a further target of an additional one percent by 2035. 

Achieving these metrics will require shifting the national mindset toward private protection, allowing citizens to redirect a portion of their disposable income into long-term health and annuity funds that outpace inflation and safeguard individual health spans.