Insurance industry contributes 1.5p.c. to GDP

Hiran H. Senewiratne

The Sri Lankan insurance industry needs a Code of Conduct to increase trust among the masses which is the need of the hour, World Bank Country Director Naoko Ishii said.

“It is said that 10 per cent of the country’s population has some kind of an insurance policy and having a Code of Conduct is an important factor to increase the awareness level,” World Bank Country Director Naoko Ishii said at the inauguration of the National Insurance Congress 2007 organised by the Sri Lanka Insurance Institute (SLII). The theme of the event was “Innovation and Change-A Critical Dynamics for the Insurance Industry,”.

Ishii said the Code of Conduct would increase credibility and the transparency in the industry among the masses. She said the insurance industry contributes 1.5 per cent of the country’s GDP and there is plenty of room for the industry to grow, as 90 per cent of the population does not have any kind of insurance coverage in the country.

With the increase in the aging population there is a growing market in the health insurance business, which should be one of the target markets in the country, she said.

Recalling the aid the insurance industry gave in the aftermath of the 2004 tsunami catastrophe she said that was the perfect example of how the lack of awareness of the insurance and its benefits has a direct impact on economic recovery.

With free healthcare and the assistance of the extended family system on the decline more and more people are becoming aware of the importance of obtaining life insurance to supplement pension funds. Market expansion in Sri Lanka is hampered by the limited number of insurance policies.

Ishii said the insurance sector must introduce a variety of products to the market to increase the awareness level. ‘At present Sri Lanka has 15 insurance companies and they have a plenty of opportunities to leave room for competition.

The industry should have a ranking system to rank insurance companies, which will help to introduce good insurance practices in the industry,’ Ishii said.

The World Bank Country Director said the insurance industry is now adopting a risk based system and that has been hampered due to the resource constraints.

She also said that World Bank has pointed out the importance of the insurance sector to the country’s economy and it is absolutely necessary for the country’s entrepreneurs to avert risk.