Top vision:

Competition as an engine of growth in insurance

Lynn OCKERSZ

Since being on a declining trend prior to privatisation, three years ago, Sri Lanka Insurance Corporation Ltd is today a soaring market leader in the local insurance industry. Chief Executive Officer, Sri Lanka Insurance, Nalaka Godahewa, reveals the secrets of his organisation's successes in this interview and focusses on the role of competition in spurring business advancement and growth.

Q: In what ways does Sri Lanka Insurance contribute towards national development?

A: Insurance is another way of promoting people to invest. Like banking it is also another financial service, where people save. The same thing happens when people take an insurance policy and this money is in turn invested in various projects and that is how insurance companies are run.

If you take the insurance industry currently, it is growing at about 25 to 30 per cent.

This money is used in various businesses. These businesses are, of course, part of the national economy.

It needs to be noted that 40 percent of our funds are reinvested in Government Securities, which have a direct positive impact on national development. For example, through the furtherance of infrastructure development in the country.

Q: What are your latest product innovations?

A: If you look at insurance-related product innovation, that's a continuous process. Every year we add at least two or three new products to the market. But if you take the last two or three years - from our company's point of view - I am not very happy with the current rate. But we have done quite a lot of work over the past year to come out with some innovative ideas and major products.

These will be introduced within the first six months of next year. So, in 2007 the public will see many new, innovative categories, in the Life category, the General category and in particularly the Healthcare category, which I believe would be of great benefit to the general public.

Q: You are at present number one in the insurance field, how do you cope with the competitive environment?

A: Insurance is a very competitive industry. At present there are around 16 companies in the field and over the past five years at least four companies have come into the market and several other companies are speaking to IBSL to get the licence. So, the competition is growing.

However, the good thing is that the market is also growing. This is one industry, despite all the economic problems we are having in the country, which is growing. This is because insurance is beneficial to the people in both good times and bad.

This is because its benefits are twofold: it provides investment as well as protection. Because of these reasons, whatever the economic or political climate in the country, people do buy insurance.

The industry is growing, so we don't have a major issue with the competition. We are growing but what we intend to do now is accelerate our growth rate with all the plans which are in the pipeline currently.

Q: You mentioned that the market is growing. Does that mean that despite all our problems we are having development?

A: The insurance industry is growing. We invest our funds in private businesses. When we speak of national development we do not only mean the private sector.

The private sector plays a key role in the economy but if you take development as a whole, our industry alone cannot contribute towards it. It is a national thing. So we play only a minute role in that aspect.

Q: Would you say that the middle class in the country is growing given the growth experienced by your industry?

A: I suppose so, the middle class is growing and the people are more aware than in previous times. In those times it was the older people who bought insurance. Now, more and more younger people, those launching businesses, are buying insurance.

On the one hand, the middle class sector is growing, on the other, people are becoming increasingly conscious of the benefits of insurance, because of the growing competition.

The good thing about competition is that there is a lot of market communication which is taking place. The overall public awareness of the industry is growing.

For example, recently we launched the Standard for Life campaign. It was totally aimed at creating insurance awareness.

We were not talking about a particular product but we were focusing on the benefits of Life insurance; why anyone should go in for it. It helps our competitors also but we don't mind. What we want to do is create this awareness.

Q: What is your vision as CEO for Sri Lanka Insurance?

A: My vision is two-fold. As a company we would like to grow. We would like to establish our market leadership and also look at what we can do beyond our local boundaries. Can we expand offshore for example, how could we contribute to the country by being a regional player?

Secondly, from an internal perspective, I would like this organisation to grow as a most professional organisation. We have a duty by the business elite to promote professionalism.

Currently, the insurance industry is highly competitive and to an extent a cut-throat industry. We could do a lot more to ensure corporate governance and ethics and promote professionalism in the industry. These are the other areas where I would like to see us contributing.

Q: What impact do you expect from the recent changes in the ownership structure of Sri Lanka Insurance?

A: What happened was, about three years ago the Sri Lanka Insurance Corporation was privatised. Before this, the private sector of the insurance industry had already begun. So, the private sector insurance companies were capturing market share and the SLIC was losing its market share.

It was losing profitability; this was one of the reasons why the Government wanted to privatise SLIC. So, the challenge since privatisation was how do you 'stop the bleeding', how do you re-engineer the process, how do you change the culture, so that we could go back and compete in the market place.

Over the past three years we have done a lot of work in this areA: restructuring, engineering, changing the culture, motivating people, making them understand that we are in a competitive market and that the customer is king. The results of that hard work are now paying off.

We have halted the decline we experienced before privatisation, we are capturing market share, we are growing again; our people are more efficient, customer-oriented, so we are on a positive trend now.