Financial Times

A possible return to hostilities in the North and East has prompted insurance companies to rethink their market strategies for the region.

“After the ceasefire was agreed upon, the people living in the area were interested in, insurance policies, but as we move closer to a potential war situation people in Jaffna have seemingly lost their interest despite their disposable income being high,” C. N. Mathivathanan, Regional Manager, Union Assurance’s Jaffna Branch told The Sunday Times FT. He said the company arrived in Jaffna town in May, 2002 and was doing well up until last year.

However, now the company has decided to focus on their direct-sales force to bring in business.

“We have limited working hours in Jaffna because the city is deserted by six in the evening. As such, we cannot engage in mobile promotions or organise large events since the situation in the area is very restrictive,” he said.

Mathivathanan said that presently the company’s sales people were approaching clients to do business. “This is the most we can do at present because we cannot take any big risks, but we hope that the situation will improve soon,” he said, adding optimistically that two-thirds of the year still remained to bring in more business.

Last year, branches of insurance companies in the region such as Union Assurance, have come out on top with the best sales figures countrywide for each respective company.

The Union Assurance Jaffna Branch was honoured as the ‘Best Regional Office’ for 2005.

“Insurance awareness was present in Jaffna, but during the war, people did not have a chance for insurance because of the war-risk area classification by insurance companies. With the ceasefire, many companies including Ceylinco Insurance, HNB Assurance Limited, Sri Lanka Insurance Corporation and Union Assurance moved into the area,” an industry analyst said.

“Despite starting our operations in the regions two years ago, we increased sales last year,” Lalith Fernando, Head of Sales, HNB Assurance Limited said, adding that the company had not yet quantified the sales figure, but they were ‘decent’.

Meanwhile, Mathivathanan said Union Assurance’s Jaffna branch in 2005, was able to achieve sales over 100 percent of its target each month. “Even though there was a small drop towards the latter part of the year, we were still over stipulated targets. We achieved 115 percent for last year,” he said.

“After the tsunami, general insurance sales increased because of the construction and rehabilitation projects.

Non-governmental organisations (NGO), such as Sarvodaya, are continuing to build and have become a big part of our total sales,” Mathivathanan said, while an industry source cited insurance documentation as a necessity for both government and private contractors to secure NGO construction contracts as a reason for this increase. “These mandatory requirements increased the insurance company sales quite dramatically,” he said. Sawan Rodrigo, Senior Executive, Business Development Branch, HNB Assurance Limited, said that people in the northern area were more interested in financial services, such as housing loans, where insurance cover is mandatory prompting an increase in general insurance sales.

“The peace negotiations have made it easier for us to reach the huge potential that these areas offer us. This resulted in sales growth,” he said.
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He also added that people in Jaffna are ‘cash rich’ people, but they are interested in doing business on a credit basis rather than with cash and thus go in heavily for leasing requirements.

Clement David, Senior Executive, Trincomalee Branch, Eagle Insurance (Pvt) Limited, said people in the region were interested in life insurance last year due to the prevailing peace process and that the branch achieved 90 percent of its targets.

“Since last June till now, we have increased sales by about 10 percent, and so far our figures have not dropped,” he said, admitting that the company did not have a branch in Jaffna, without immediate plans for the future.

“Due to the current situation, sales figures have been facing a slight downward trend over the last six months in Trincomalee, and we will be increasing our sales force strategically,” he said.

However, some industry analysts said that the situation in Jaffna and the East was becoming very tricky and that insurance firms would have to revise their viability in the regions.

Sri Lanka Insurance Corporation (SLIC), operating in Jaffna for the last 40 years said it has no plans to withdraw. Ranee Ariyanayagam, SLIC’s Regional Sales Manager in Jaffna, said the branch would increase its individual sales force but would “never” close.

“Despite LTTE-controlled areas such as Kilinochchi and Mulativu, where reaching clients is difficult, sales elsewhere did well last year,” said Manel Dissanayake, Regional Manager, SLIC, Vavuniya Branch. She added that during the last six months there was a decrease in sales due to the political situation, but it has not created a big impact.

Irwin Jayawardena, Senior Assistant General Manager, Ceylinco Insurance, said Jaffna and Trincomalee branches were performing well, but due to the unrest over the last six months, business was affected to a certain extent.

“We have about 60 to 70 percent of the market in the Northern peninsula and we have a large product range. As such, we can cater to different segments within the region with those products. We feel that this strategy will sustain our growth momentum,” he said.

He also added that people in Jaffna are ‘cash rich’ people, but they are interested in doing business on a credit basis rather than with cash and thus go in heavily for leasing requirements.

“Due to the current situation, sales figures have been facing a slight downward trend over the last six months in Trincomalee, and we will be increasing our sales force strategically,” he said.

However, some industry analysts said that the situation in Jaffna and the East was becoming very tricky and that insurance firms would have to revise their viability in the regions.