Insurers today, face a multitude of challenges, ranging from a low interest rate environment 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 underpinned by our emotive tagline 'Life, Love, Protection' which is ingrained in Ceylinco Life’s vision, purpose and core values.
Translating these into affirmative action, the Company makes 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 2015 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 fuelling 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.
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. To mitigate this risk, to prudently price life insurance contracts and to 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.
Solvency is another aspect of stability. In simple terms, the solvency margin is the amount by which the assets of an insurance company, at fair values, are considered to exceed its liabilities. Depicting the stability, strength and confidence of Ceylinco Life to meet the benefits payable to policyholders, our solvency margin as of end 2015 stood at 8.25 times the minimum required by the regulator.
Illustrating financial prowess and continued growth, Ceylinco Life crossed the Rs. 20 Bn total revenue milestone during the year, and turned in a return on equity of 20.13%.
Given the strong projections of GDP growth, the country provides ample opportunities and a bright outlook for the life insurance industry in an underpenetrated market.
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 4,000 agents in total.
Our agency force is the main distribution channel that takes the message of insurance countrywide. 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 alive to 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.
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 as a 'Life Division' within its parent composite insurance company.
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 an 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 3,625 (2014), 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 strong projections of GDP growth, the country provides ample opportunities and a bright outlook for the life insurance industry in an underpenetrated market.