[Tea With Ehsan Zaheed]

Uninsureds in Sri Lanka 80%

Hiran H. SENEWIRATNE

Sri Lankan insurance sector is very dynamic but it has a lot of potential in the market due to the low insurance penetration rate in the country. Therefore, 80 per cent of the population doesn’t have any form of insurance in the country, Director/Chief Executive Officer Amana Takaful Insurance Ehsan Zaheed said.

He said the whole industry should work together to educate the public on the importance of having an insurance policy like the way other countries are doing to increase the penetration level.

However, as far as insurance penetration is concerned Sri Lanka is far behind when compared to countries like Singapore and Malaysia.

These markets are very mature markets in the region, with an insurance penetration of 200 per cent, he said.

Zaheed also said lack of awareness and non availability of affordable products in the market has resulted in slowing down the insurance penetration level in the country.

He said pension schemes like EPF and ETF could be used as futuristic insurance schemes for working people who are in the private sector in the country.

He also said that it is the need of the hour to retain skilled and professional people within the country as most of them are leaving Sri Lanka due to uncertainty and the prevailing situation.

Q: What is the Takaful concept of Insurance?

A: The basic fundamentals of the Takaful concept are very similar to cooperative and mutual principles. Takaful means guaranteeing each other or joint guarantee. It’s like playing as a team, standing for one another and taking care of each other.

The only difference is that in Takaful there are only winners and no losers.

Theoretically, Takaful is perceived as cooperative insurance where members contribute a certain sum of money to a common pool. The purpose of this system is not profit but upholding mutual benefits.

Q: What exactly is the difference between the Takaful insurance concept and the conventional insurance business concept?

A: Today, worldwide this concept is getting popular especially among the top insurance companies like Aviva and AIG. The Takaful insurance concept is different to conventional insurance systems, because it emphasizes mainly ethical grounds Because of the ethical factor we don’t provide insurance polices for tobacco, brewery and casino related industries.

Ethics plays a strong role enlightening the people to be more conscious of humanity, transparency, equality and other best business practices.

Another significance of our company is that we have made products and services available to low income level people in the country. We are also concentrating on areas where other insurance companies don’t concentrate much such as medical insurance.

In 2002 we openly offered medical insurance policies to the public, which is one of our prosperous businesses.

Q: What significant feature in Takaful Insurance concept in compared to conventional insurance business on insurance claims?

A: We are normally different to conventional insurance companies because, we were the first company to introduce a Surplus Refund to Sri Lanka; sharing underwriting profit among all participants who have not claimed insurance during the year. There’s nothing quite like this in insurance.

Policyholders’ contribution with adherence to prudent investment principles is invested in viable and sound business.

Once all claims are settled the remains of the fund are distributed by way of surplus at the end of the term to participants which is like getting an unexpected gift. This is what makes Takaful unique to other insurance systems.

In conventional insurance companies policyholders will get no claim bonuses. Therefore, the foundation of Takaful concept is quite clear which cares for the people irrespective of any differences.

Q: The public perception is that your company is a 100 per cent Muslim company promoting Islamic financial solutions in Sri Lanka?

A: We are just promoting financial products to the market, based on certain ethics and principles to promote best business practices and transparency in the country. Forty per cent of our staff consists of non Muslims.

Most of our corporate clients and non corporate clients are also non Muslims. Certain countries like UK have amended their banking laws to accommodate Islamic banking services as well.

Therefore this is only a product offered to the Sri Lankan public.

We are also heavily concentrating on the micro fiance sector especially for farmers and other SME sector entities as well. At present we have a 2.5 per cent market share in the General Insurance and one per cent in life insurance business.

Q: The Insurance Board of Sri Lanka (IBSL), which is the regulator in the sector, imposed various rules and regulations for the industry. What is your view on that?

A: IBSL is doing well. In a globalised world insurance companies have to have safety nets, because insurance companies deal with other people’s funds.

Therefore they are doing pretty well for the development of the industry but still there are room for improvements.

Sri Lanka’s capital requirement ratio is Rs. 250 million for each class of business namely Life and General, which is good for the sustenance of the business in the competitive world.

Q: You said that there is room for further development in the industry compared to other countries. What are the drawbacks you see in the industry?

A: As an industry there has to be certain ethics and principles that needs to be adhered to like best insurance practices, transparency and enlightening the general public on proper insurance policies like that.

Therefore, the entire industry has to work together to lift the image of the sector.

Q: What are the future plans of the company?

A: Currently we are operating well in Maldives and Dubai. Our operations have expanded to include 15 locations island-wide including the South and the East of Sri Lanka.

We have also extended overseas with the setting up of a branch office in the Maldives.

We want to set up service centres and agents in the Middle Eastern region to attract Sri Lankan expatriates living and working in that region. At present more than one million Sri Lankan expatriates are in the Middle Eastern region.