Letter

Insurance industry should be re-organised

Now that the Insurance Corporation has been taken over by the Govt subsequent to a judgment given by the Supreme Court recently, what would be the plight of the insurance industry?

Let me first thank profusely all concerned who made way to file action against the manner in which the privatization had been carried out, and the judges for the excellent judgment given against privatizing a government owned corporation for the benefit of a few, which in my humble opinion was a great tragedy for the insuring public and the industry as a whole.

I take this opportunity to thank Vasudeva Nanayakkara who spent his valuable time and energy to win this case for the sake of the citizens of this country.

The insurance industry was nationalized in 1960 and the writer being a member of the first batch recruited to the General department has seen what has been happening from the inception, setting up of the National Insurance Corporation and thereafter privatization of the Insurance, which resulted in many changes. At that time everybody hailed privatization and the industry was growing.

The insuring public were very happy about the settlement of claims and the service rendered by the companies.

The privatization started with four companies in 1986 including the National Insurance Corporation and thereafter the number of companies increased to 15.

Before privatization the NIC was doing a very good job of work by charging Tariff rates, making prompt settlement of claims, rendering personal attention to policyholders and prospective clients, carrying out periodic inspections of risks etc., which was appreciated by the public. They also earned a good name after settling 1800 claims subsequent to the ethnic disturbances in 1983.

However, since privatization, things changed year after year with the addition of new companies and by 1990 the crude way of underwriting by undercutting of rates was introduced to the market for their survival.

Thereafter, this process became increasingly aggressive owing to the reduction of rates to grass roots levels. By this time companies had started introducing the novel Motor policy "On the spot", Formula Plus, Full Option and so on, to attract policyholders. Likewise rebates were given to policyholders in respect of other classes of insurance without any basis, just to obtain business.

I would like to mention that at present what the insurers get for Riot and Strike and Terrorism as premia is much more than the basic premium on a risk.

The rates on R and S and terrorism were increased because of the war we were subjected to, over the years. Now that the war is over premium on R and S and T will definitely come down and most of the policyholders may not take this overdue to high premium component. In this context I wonder how companies are going to cover the gap and show a profit.

It will be a dead loss. I have been from time to time writing several articles to the media having personal discussions with the Insurance Board of Sri Lanka (IBSL) officials, CEOs of companies, members of the Insurance Association and others who are interested in the industry to get together in order to find a solution to safeguard the industry from ruination. To this there was no response.

To my dismay even the insurance professionals are not interested in the uplift of the industry. It's a shame! They are only looking after themselves as they get good perks running into several lakhs of rupees nowadays.

With the takeover of the SLIC by the Government at least it is not too late for the companies to get together and call for the re-introduction of Tariffs as early as possible in the best interest of all concerned - at the same time the IBSL should be reorganised with a staff consisting of Insurance personnel to check the work of the companies.

Finally, I would like to suggest that the SLIC which had learnt bitter lessons in the past should take all necessary steps and precautions to reorganize all departments taking into consideration the talents and knowledge of the staff members.

I presume as a new government entity the SLIC will be out of the IBSL and that it can operate by itself, by adhering to Tariffs with a good service as was done by the NIC. I am sure the new company will prosper in no time, if it is operated in company style and not as a government corporation and that it would be a valuable financial asset to the country.

S. I. FERNANDO - Panadura