Cheap advertising mars insurance industry

S.I. Fernando, Insurance Consultant

Today the insurance industry has descended to Pavement Hawk level. If you walk down Pettah you could hear pavement hawkers shouting at the top of their voices to sell items like brasiers, underwear and other types of goods saying "All in one!, Two in one! and Three in one! and so on.

Now you could hear and see on the television, radio and the media, insurance companies trying to sell motor insurance in the same style.

It is very sad and amazing to watch and see this type of cheap advertising by insurance companies. Insurance is a very prestigious and well respected industry all over the world.

If the insurance business is carried, on proper lines by following one theme the insurance companies and the policyholders will benefit.

In Sri Lanka because of cheap competition in companies they go all out to grab business at any cost by offering low rates without any basis for their survival and achieving targets.

There is no unity amongst the insurance companies, each one does in its own way. There is no proper underwriting-policies and endorsements issued contains numerous mistakes, not like in the good old days.

The premiums vary from one to another and there is no uniformity.

All this is because the Insurance Board of Sri Lanka, de-tarrifed major classes of insurance like fire, motor and W.C.I. and allowed the companies to regulate themselves by washing their hands off and sitting pretty in their posh offices without regulating the industry.

If they were really interested they could have taken action against the companies for cheap advertising. I am aware the Board was making arrangements to bring in certain regulations regarding advertising. What happened to it?

Prior to nationalisation everything was operating smoothly and efficiently, even after nationalisation the Insurance Corporation as a monopoly continued to operate fairly well, until a setback took place owing to it's failure to deliver the insuring public a good service.

However, things changed a lot after the formation of the National Insurance Corporation under the efficient chairmanship of Lionel Fernando.

Even prior to privatisation of insurance, tariff rates were quoted and public accepted it. There was no undercutting of rates.

In the past, Associations were very strict and proper controls and checks were carried out. The dignity of the Insurance Industry was in place. It is sad to say that the present Insurance Association is helpless in uniting all insurance companies and bringing in uniformity amongst them.

In Motor Insurance, the 'No Claim Bonus" is given to good drivers who maintain their vehicles well and accident free throughout the period of insurance. Now according to "All in One" and "Three in One" schemes, even if you meet with accidents and recover the loss you would be entitled to your No Claim Bonus, in some way or other. Is this the real meaning of the word "No Claim Bonus"?

The Government has taken a bold step forward by forming a National Re-insurance Trust Fund.

This will save a certain amount of foreign exchange going out of the country. But at the same time the Trust Fund should be managed efficiently by trustworthy and honest men.

I suggest that a New Insurance Company be established by the Government like the former Insurance Corporation and manage in company style and not as a corporation to compete with the present insurance companies with the introduction of tariffs.

I would like to appeal to all insurance companies to unite as one body and the broker association to closely work with them, in the sincere hope of saving the industry from ruination.

The present associations should not be like the previous associations which were only looking after few of their associates.

The writer who had been in the field of insurance for well over forty years and have seen what has been happening over the past decade and have written several articles to the media and have personally discussed with the Insurance Board of Sri Lanka officials and CEOs of companies without any response, request all concerned to take early action in the best interest of the industry and the insuring public by re-introducing the Tariffs.

If this is not done the Government should appoint a commission to look into the affairs of all the insurance companies and the regulatory Board as early as possible in order to save this industry.

Insurance Industry is a financial giant which will help the economy of the country. If no action is taken by the Government it could definitely have disastrous effects on the economy.