A glimpse into the Insurance Industry
The global insurance industry has faced a tumultuous rollercoaster of highs and lows in its recent history. With the onset of the COVID-19 pandemic, the industry faced an opportunity to rebuild itself as per the latest societal necessities and market demands.
Companies across the globe seized the opportunity to reinvent themselves and promote the importance of health and wellbeing. The significance of the insurance industry has come to the forefront, following recognition of its objectives and innate advantages. Its noble attempts to protect individuals and businesses have not gone unnoticed.
Considering the current insurance climate, insurance agents should focus their operations on the needs of their customers. This focus would facilitate the successful execution of transitions and transformations. Increased unemployment, business closures, restricted travel and tourism and hindered premium distribution have adversely affected insurance premium growth globally. The development of technology in leaps and bounds has facilitated the movement of insurers into a well-equipped digital sphere. Insurers have understood the undeniable need for efficient IT infrastructures and digital channels, as people increasingly focus on paying attention to life, health and other protection products.
Claim experience relating to COVID-19 impacts have fluctuated from country to country based on numerous variables such as policy conditions and coverage differences. Hospital and medical benefits have increased in many developed markets, along with enlarged claim exposure from business lines such as event cancellation, business interruption, travel insurance, credit insurance, workmen compensation and many others. In contrast, claims payments for motor insurance reported a widespread decline resulting from reduced vehicle accidents due to restricted mobility.
The Sri Lankan economy has also faced its share of fluctuations. The demand for most general insurance products has declined, particularly in the insurance classes of motor, marine, travel and aviation, compared to previous years. Accordingly, the general insurance business exhibited a negative premium growth of 2.24% in 2020 against the 7.06% growth reported in 2019. In contrast, the long term insurance business displayed a positive momentum as the total premium income increased by 15.98% (2019: 10.58%), surpassing the Rs. 100 Billion mark for the first time in history.
As per the industry highlights for the first quarter of 2021, the profit (before tax) of Long Term Insurance Business amounted to Rs. 4,038 million (Q1, 2020: Rs. 3,580 million) while the profit (before tax) of General Insurance Business amounted to Rs. 3,210 million (Q1, 2020: Rs. 3,952 million). Thus, profit (before tax) of Long Term Insurance Business has increased by 12.79% and profit (before tax) of General Insurance Business has decreased by 18.78% when compared to the same period in 2020.
The value of total assets of insurance companies has increased to Rs. 798,092 million as of 31st March 2021, when compared to Rs. 713,734 million recorded as of 31st March 2020, reflecting a growth of 11.82% mainly due to an increase in corporate debts, government securities and equity.
The insurance industry was able to achieve a growth of 14.36% in terms of overall Gross Written Premium (GWP), during the first quarter of 2021, recording an increase of Rs. 7,211 million when compared to the same period in the year 2020. Thus, Long Term Insurance Business witnessed a growth of 34.18% and General Insurance Business shows a decline of 0.77% when compared to the corresponding period of 2020.
The industry has highlighted its adaptability to functioning during the pandemic, including the adoption of digital and virtual platforms for an added efficiency in customer service. With an increase in product innovation, digitization of operations, remodeling distribution channels, and usage of customer-centric operating models coupled with cultivating public awareness on life protection, the insurance industry will remain resilient, sustaining itself throughout the pandemic.