More disposable income will hike Lankan insurance penetration – Report
View(s):Greater penetration in Sri Lanka’s insurance sector will largely depend on increased disposable income in the market, as insurance is still viewed as a discretionary product by many, analysts say.
A report by Softlogic Stockbrokers said that given the stable political and conducive macro environment in the country, the life insurance business is geared to be part of the growing economy. “The current low penetration levels which stands at 0.5 per cent of the GDP in 2013 plus increasing per capita income levels are poised to create opportunities to grow more business for the company in the forthcoming years. Further the lower interest rates prevailing in the market is expected to boost economic activities thus creating more opportunities for the company to serve the demanding needs of clients.” Growing aging population in the country gives rise to opportunities for more retirement related insurance products and thus provides the company with ample new visits to grow, the report said.
“On par with the developing economic infrastructure, international trade is expected to witness a robust growth in the foreseeable future. With the expansion of other industries in the economy, improved public awareness of insurance would promote new business opportunities in general insurance segment,” the report said, adding that the fierce price competition coupled with state imposed inconsistent tariffs on motor vehicles creates significant pressure to the bottom line of the insurance class.
Sri Lanka remains heavily under-penetrated by insurance, with a total premiums/GDP ratio of 1.15 per cent (2011 was at 1.2 per cent) compared with an average of 6.2 per cent for Asia, according to industry data. Analysts say that a main reason for the comparative under-penetration is Sri Lanka’s low per capita income in relation to some of its Asian counterparts.
The total industry premiums grew by 9.06 per cent last year with the total assets of insurance companies growing to Rs. 345 billion which is an increase of 23.95 per cent.