IBSL should do more - Fernando
S. I. Fernando, Insurance Consultant, is a person with over 45 years
of experience in insurance and he first drew up the tariff and handed
over to the Insurance Board of Sri Lanka (IBSL) for their attention.
A decision was taken by the IBSL to review and revise the present
Fire Tariff in August 2002.
After discussing these issues with representatives of all insurance
companies, a committee was appointed headed by the then Director General
to review and revise the tariff.
The committee handed over the revised tariff to the Board in May
2003.
The revised tariff was sent to the Insurance Association in June 2003
for their comments. They were discussing about the tariff until November
2003 and forwarded it back to the IBSL with their comments with a
request to implement the tariff from a given date.
In the meantime the office bearers of the Insurance Association
changed and new office bearers took over.
The new President immediately on assuming office wrote to the
Officer-in-Charge IBSL not to implement the tariff as some of the
companies are not in favour.
It is very strange to note as to why some of the Insurance Companies
are now against the introduction of the new tariff as all companies gave
their consent to revise the Tariff before the commencement of the
Revision.
It is understood that there had been arguments at Association
meetings with regard to the implementation of this tariff and a division
created with some for and others against.
It is very sad to note that the way all companies are behaving in the
market by undercutting rates to grass roots level to obtain business for
their survival forgetting the fact that the insurance industry could
crash in the event of a catastrophe.
As a result of the local market underwriting even large risks at
reduced rates, foreign reinsurance companies have refused to grant
reinsurance cover thereby certain risks remain uncovered.
There could be instances where companies may even keep large
retentions taking the risks themselves when they are not in a position
to obtain foreign cover. This could lead to serious consequences whereby
the insurance companies will not be in a position to settle claims.
There had also been instances within the Asian Region that after de-tariffing
they had to reintroduce the tariff for various reasons in the best
interest of the Insurance Industry.
Finally a decision was taken by Insurance Board to implement the
Tariff with effect form 01.06.2004, but it was not implemented due to
representations made by the Brokers Association and Chamber of Commerce
saying it will effect the cost of living. The then Minister Finance
differed implementation without making any investigation or inquiring
from the Insurance Board.
In the meantime Dr. D. Jayasuriya was re-appointed Chairman of the
Board and the Board took a decision to de-Tariff fire insurance as from
01.01.2005 and it was implemented.
The IBSL has now washed their hands off by de-tariffing Motor and
Fire Insurance. "Then, why should there be a regulatory board," he
asked.
"If the market is disciplined where all insurers agree to charge
agreed rates then they could work without a tariff."
As it is the market is so polluted that rates have gone down to grass
roots level. That is why the tariff is very necessary.
Some companies have had bad experience during the last tsunami.
In case there be another tsunami or any other damage caused by
natural disasters some companies may even have to close down.
Then what is the plight of the policy holder.
I am of the view that IBSL should maintain its position as to the
implementation of the Revised Tariff as per their decision (though there
may be objections to it) as a Regulatory Board.
Fernando joined De Soysa Co. (Insurance Dept) after leaving school as
a clerk in 1952.
Where I learnt the Basic Insurance after nationalisation of Insurance
in 1960, I joined Insurance Corporation (General Dept).
Whilst at NIC I was trained at Swiss Insurance Training Centre,
Switzerland, and Munich Re-insurance Co. Ltd., West Germany. Attended
the Round Table Conference on fire rating organised by the ESCAP/ARC in
Bangkok. After privatisation of insurance. I joined Eagle Insurance Co.
as Manager Fire/Engineering in 1987 to start the company. I was elevated
to the position of A. G. M. (General) and later as a Technical
Consultant.
I joined Janashakthi Insurance Co. Ltd. as D. G. M. (Operations) in
1996 attached to Zenith Insurance Brokers Ltd, a member of Hirdamani
Group of Companies as an Insurance Consultant. From 2007, I joined
Placid Insurance Brokers as General Manager.
Unfortunately due to communal Riots in 1983 NIC suffered a big loss
and had to settle 1900 claims.
It is not the Insurance Corporation though they claimed they are the
people who paid out the largest amount of claims, when advertising.
I was mainly responsible for settlement of these claims within a
short period. |