Insurers today, face a multitude of challenges, ranging from a volatile interest rates and intense competition to changing regulatory regimes and socioeconomic conditions. In this context, we at Ceylinco Life Insurance Limited (‘Ceylinco Life’ or ‘Company’), have chosen to provide few thoughts on the drivers of our business and a glimpse into the future of the Sri Lankan life insurance industry.
To put it bluntly, one may say that life insurance is for those who may unexpectedly die too soon, leaving their dependants with a financial burden or for those who live too long and run out of savings to sustain themselves in the latter years of their lives.
Sir Winston Churchill once expressed –
“If I had my way, I would write the word ‘insure’ upon the door of every cottage and upon the blotting book of every public man, because I am convinced, for sacrifices so small, families and estates can be protected against catastrophes, which would otherwise smash them up forever. It is our duty to arrest the ghastly waste, not merely of human happiness but of national health and strength which follows when, through the death of the bread winner, that frail boat in which the fortunes of the family are embarked flounders and the women and children are left to struggle helplessly on the dark waters of a friendless world.”
This philosophy is ingrained in Ceylinco Life’s vision, purpose and core values. We continuously strive to reach Sri Lankans in need of protection and provide them with tailor-made covers to suit their unique needs. We are heartened by the true life stories of how lives have been redeemed from serious catastrophes, for the better, solely due to the protection we have offered. We chronicle one such story which reiterates the importance of life insurance in the hope that general public would realise the benefits that are offered through life insurance:
The insured person was a 38-year old small scale businessman in the Wariyapola area and a life policy was issued, which included critical illness benefit, hospitalisation benefit and a family protection benefit which compensates the bread winner’s income in case of death. A total amount of Rs. 5,349/- was paid as premiums for three months before the unfortunate demise of the insured due to a road accident. His wife and three children were paid a total claim amounting to Rs. 1,100,000/- which helped to ensure a stable future for the dependents.
We understand that we are not in a transactional business of selling life insurance. We create and nurture ‘A Relationship for Life’ by providing protection to our policyholders. This is the core purpose of our existence and this aspect is engraved holistically in everything we do.
Translating these into affirmative action, we make every effort to introduce and increase the awareness of the concept of life insurance and its implications. We pioneered the ‘Life Insurance Week’ which is an annual event where Ceylinco Life team members take to the streets focusing on spreading the message of life insurance across ‘every cottage’ in the country. The industry too, has risen to the occasion and introduced the Life Insurance Month in 2016 to address the low level of penetration and awareness in the country.
Premiums of a few hundred Rupees, collected from customers from all parts of the country, are aggregated to form the Life Fund. Our Life Fund, which has grown over the years, has become one of the largest in Sri Lanka. It acts as a pillar of strength and a source of wealth, facilitating smooth and timely payment of customer benefits.
The Life Fund makes prudent investments, with the bulk placed in gilt-edged securities, which in turn support the long term capital needs of the Government to finance various infrastructure projects and similar undertakings. The Life Fund also makes direct investments in the private sector to infuse capital and long term financing, thus fueling entrepreneurship and growth. Through the very nature of the Life Fund, which mobilises long term capital that supports productive investment purposes, we indirectly contribute towards employment, wealth creation and improvement in the quality of life across the country. This is further discussed under Social and Environmental Capital on pages 106 to 113.
The tone set at the top, by the Board of Ceylinco Life and the leadership provided by an experienced corporate management team illustrates our commitment to ensure prudence and professionalism in all our operations. Recognising the need for safety and stability, the Life Fund, as noted earlier, is invested mainly in secure investments with steady returns.
Life insurance contracts, by their very nature, carry a significant level of unpredictability and risk. In order to mitigate this risk, prudently, life insurance contracts, provide a suitable risk adjusted return to shareholders and an affordable level of cost to the policyholders, we obtain the services of an independent, professional actuarial firm of international repute to supplement our own research and product development work.
Capital Adequacy is another aspect of stability. In simple terms, the Capital Adequacy Ratio (CAR) is the ratio of: (a) the level of total capital available with an insurance company to; (b) the required level of capital, based on the level of risk exposures that insurer has assumed.
Depicting the stability, strength and confidence of Ceylinco Life to meet the benefits payable to policyholders, our CAR as of end 2016, stood at 335%, well above the minimum required by the regulator. Illustrating financial prowess and continued growth, Ceylinco Life crossed the Rs. 23.4 Bn total revenue milestone during the year and turned in a return on equity of 25.85%.
As a sales driven industry, we invest in our outreach. Ceylinco Life has the largest branch network among local life insurance companies, with a presence in over 140 cities, towns and villages in every district in Sri Lanka. The distribution network includes 267 branches. Each branch has its own sales force, numbering over 3,900 agents in total.
We at Ceylinco Life believe in using technology to improve the efficiency and the standard of service that are provided to our customers. Hence, we will achieve full IT empowerment of the top two tiers of the agency force by the beginning of 2017.
While direct selling through agency force remains one of our main channels that bring in majority of our revenue, we also focus on reaching our customers through different distribution channels such as bancassurance. Ceylinco Life has tied up with several leading commercial banks for this purpose.
In addition, we have tied up with Sri Lanka Post to facilitate the paying of premiums, thereby increasing convenience to our policyholders residing in rural areas.
Our agency force is the main distribution channel that takes the message of insurance island wide. We invest in their training and development to ensure professionalism. Likewise, every department head is professionally qualified and teamwork is emphasised. More importantly, we ensure that every team member lives our corporate vision, purpose and values, which lie at the core of our business model. For the policyholder, these translate into trust, loyalty and a lifelong relationship that we cherish and reciprocate.
We anticipate change and seek opportunities to fulfil new needs, while mitigating any downside impacts. For example, breakthrough developments in preventive and curative medicine, coupled with greater awareness on healthy lifestyles, have contributed to extending human life expectancy. This makes retirement planning part and parcel of everyone’s lives. Ceylinco Life is prepared for this changing pattern, a universal phenomenon and offers a wide array of innovative retirement and investment solutions to suit the varying needs of this growing market segment.
Ceylinco Life conducts periodical brand health studies through an independent research agency. It was highlighted through the findings, that Ceylinco Life has the highest top of the mind awareness in the Sri Lankan life insurance industry and Top of the mind recall has increased during the year under review amongst both current and potential users.
In a nutshell, our success and market leadership hinge on stability, reach, trust and innovation. Underpinning these are the visionary leadership and guidance of the Board of Directors and a top management team which has been with the Company from its founding years.
There is a strong correlation between per capita income levels and the demand for life insurance. The life insurance penetration (gross written premiums expressed as a percentage of gross domestic product) of mature markets far exceeds that of emerging markets, with the figures typically ranging from 5% to 8% levels in the former. Research (Rudolf Enz, The Geneva Papers on Risk and Insurance, Vol. 25, No. 3, July 2000) indicates that life insurance penetration increases with per capita GDP, and takes the form of S-curve. There is a steep increase in penetration levels as per capita GDP rises, but after around USD 15,000, it is found that penetration levels tend to flatten.
Sri Lanka, elevated to a lower middle income country with a per capita GDP estimated around USD 3,925 (2015), is yet to reach such income levels, but targets an ambitious and aggressive economic growth rates going forward. Although, the life insurance penetration levels are currently at a very modest 0.5%, given the relatively strong GDP growth projections, there is ample opportunity and the outlook for the life insurance industry in Sri Lanka looks very promising.