Insurance in Sri Lanka

Insurance in Sri Lanka

Insurance plays a crucial role in safeguarding individuals, businesses, and the overall economy from unforeseen risks and uncertainties. In Sri Lanka, the insurance industry has witnessed significant growth and transformation over the years, contributing to the country’s economic development and financial stability. This article explores the landscape of insurance in Sri Lanka, examining its history, key players, regulatory framework, and the evolving trends shaping the industry.

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Insurance Companies in Sri Lanka

Below is the list of insurance companies in Sri Lanka as updated on 11 January (F.Y. 2023/24).

  1. AIA Insurance Lanka Ltd
    • Type: Long Term Insurance
    • Establishment Date: December 16, 1987
  2. Allianz Insurance Lanka Ltd
    • Type: General Insurance
    • Establishment Date: January 1, 2015
  3. Allianz Life Insurance Lanka Ltd
    • Type: Long Term Insurance
    • Establishment Date: July 1, 2008
  4. Amana Takaful Life PLC
    • Type: Long Term Insurance
    • Establishment Date: January 1, 2015
  5. Amana Takaful PLC
    • Type: General Insurance
    • Establishment Date: February 1, 2002
  6. Arpico Insurance PLC
    • Type: Long Term Insurance
    • Establishment Date: October 20, 2011
  7. Ceylinco General Insurance Limited
    • Type: General Insurance
    • Establishment Date: June 1, 2015
  8. Ceylinco Life Insurance Limited
    • Type: Long Term Insurance
    • Establishment Date: June 1, 2005
  9. Continental Insurance Lanka Ltd
    • Type: General Insurance
    • Establishment Date: December 18, 2009
  10. Continental Insurance Life Lanka Ltd
    • Type: Long Term Insurance
    • Establishment Date: July 29, 2022
  11. Cooperative Insurance Company PLC
    • Type: General Insurance
    • Establishment Date: September 18, 1998
  12. Cooplife Insurance Limited
    • Type: Long Term Insurance
    • Establishment Date: January 1, 2015
  13. Fairfirst Insurance Limited
    • Type: General Insurance
    • Establishment Date: January 1, 2015
  14. HNB Assurance PLC
    • Type: Long Term Insurance
    • Establishment Date: August 30, 2001
  15. HNB General Insurance Ltd
    • Type: General Insurance
    • Establishment Date: January 1, 2015
  16. Janashakthi Insurance PLC
    • Type: Long Term Insurance
    • Establishment Date: August 12, 1994
  17. Life Insurance Corporation (Lanka) Ltd.
    • Type: Long Term Insurance
    • Establishment Date: December 18, 2002
  18. LOLC General Insurance PLC
    • Type: General Insurance
    • Establishment Date: October 1, 2015
  19. LOLC Life Assurance Limited
    • Type: Long Term Insurance
    • Establishment Date: April 30, 2010
  20. MBSL Insurance Company Limited
    • Type: Long Term Insurance (April 1, 2005)
    • Type: General Insurance (August 2, 2005)
    • Note: MBSL Insurance Company Ltd. has stopped offering new life insurance policies starting from June 1, 2020.
  21. National Insurance Trust Fund
    • Type: General Insurance (Came under the purview of the Commission)
    • Establishment Date: February 7, 2011
  22. Orient Insurance Limited
    • Type: General Insurance
    • Establishment Date: October 15, 2011
  23. People’s Insurance PLC
    • Type: General Insurance
    • Establishment Date: December 2, 2009
  24. Sanasa General Insurance Company Limited
    • Type: General Insurance
    • Establishment Date: July 1, 2019
  25. Sanasa Life Insurance Company PLC
    • Type: Long Term Insurance
    • Establishment Date: July 8, 2003
  26. Softlogic Life Insurance PLC
    • Type: Long Term Insurance
    • Establishment Date: March 8, 2000
  27. Sri Lanka Insurance Corporation Ltd
    • Type: General and Long Term Insurance
    • Establishment Date: February 3, 1993
  28. Union Assurance PLC
    • Type: Long Term Insurance
    • Establishment Date: January 8, 1987

History of Insurance in Sri Lanka

Colonial Roots

The inception of the insurance industry in Sri Lanka can be traced back to the early 19th century, a period marked by British colonial dominance. During this time, maritime trade played a pivotal role in the region’s economy, prompting the establishment of insurance companies to mitigate risks associated with sea voyages. The Ceylon Insurance Company, founded in 1931, stands as a pioneer, laying the groundwork for what would become a burgeoning sector.

Early Years and Diversification

In the initial years, insurance offerings were primarily focused on maritime and trade-related risks. However, as Sri Lanka’s economy evolved, so did the insurance sector. The industry gradually diversified its portfolio, expanding beyond marine insurance to include life, health, and various non-life insurance products.

The diversification was driven by the increasing recognition of the importance of comprehensive insurance coverage, both for individuals and businesses. This expansion marked a crucial phase in the history of insurance in Sri Lanka, setting the stage for the diverse range of products available today.

Post-Independence Era

Sri Lanka gained independence in 1948, ushering in a new era for the nation and its industries. The insurance sector continued to grow and adapt to the changing economic landscape. Local players emerged alongside international insurers, contributing to the sector’s competitiveness and innovation.

During this period, several insurance companies, both life and non-life, were established, further enriching the industry. The Sri Lanka Insurance Corporation, founded in 1962 as a state-owned entity, became a key player in shaping the landscape of general insurance in the country.

Regulatory Framework and Institutional Development

The need for a robust regulatory framework became evident as the insurance industry expanded. In 2000, the Insurance Regulatory Commission of Sri Lanka (IRCSL) was established under the Insurance Industry Act No. 43 of 2000. The IRCSL became the cornerstone of regulation, overseeing insurance companies, intermediaries, and related entities.

The regulatory framework aimed to ensure the stability and integrity of the insurance industry, providing guidelines for licensing, solvency, market conduct, and consumer protection. This institutional development marked a significant milestone, fostering a regulated environment conducive to sustainable growth.

Changing Dynamics in the Late 20th Century

The latter part of the 20th century witnessed dynamic changes in the insurance landscape. Life insurance gained prominence as awareness of financial planning and long-term security increased among individuals. Companies like Ceylinco Life, founded in 1987, played a pivotal role in popularizing life insurance products.

The non-life insurance sector also witnessed growth, with companies diversifying their offerings to include motor insurance, property insurance, health insurance, and more. The introduction of mandatory motor insurance added a new dimension to the industry, ensuring broader coverage and compliance.

Challenges and Adaptations in the 21st Century

The 21st century brought both challenges and opportunities for the insurance industry in Sri Lanka. The sector faced the global financial crisis of 2008, necessitating resilience and adaptability. Regulatory frameworks were refined to align with international standards, emphasizing transparency, risk management, and consumer protection.

Technological advancements became a catalyst for change, paving the way for digital transformation within the industry. Insurtech innovations streamlined processes, improved customer experiences, and expanded accessibility, marking a significant shift in how insurance products are bought and managed.

Regulation

The regulator of insurance sector in Sri Lanka is Insurance Regulatory Commission of Sri Lanka (IRCSL), which was established in 2000 under the Insurance Industry Act No. 43 of 2000. The IRCSL is responsible for regulating and supervising insurance companies, intermediaries, and other related entities to ensure the stability and integrity of the insurance industry.

IRCSL is basically in charge of enforcing regulatory framework, which includes guidelines for licensing, solvency requirements, market conduct, and consumer protection. Insurance companies are required to adhere to prudential norms to maintain financial soundness and protect the interests of policyholders. Additionally, the IRCSL regularly updates regulations to align with international best practices and promote transparency within the industry.

Key Segments of the Insurance Industry

1. Life Insurance

Life insurance in Sri Lanka has gained prominence as individuals recognize the importance of financial protection for themselves and their families. Life insurance products in the country cover a range of needs, including income protection, savings, retirement planning, and education funding. Leading life insurance companies such as Ceylinco Life, AIA Sri Lanka, and Union Assurance have played a significant role in shaping the life insurance landscape.

2. General Insurance

The general insurance segment encompasses a wide array of non-life insurance products, including motor insurance, property insurance, health insurance, and travel insurance. Motor insurance, in particular, is a mandatory requirement for vehicle owners in Sri Lanka. The general insurance market is characterized by strong competition, and companies like Sri Lanka Insurance Corporation, Allianz Insurance Lanka, and HNB General Insurance are key players in this space.

3. Health Insurance

With a growing awareness of healthcare costs and the importance of well-being, health insurance has become a crucial component of the insurance industry in Sri Lanka. Health insurance policies provide coverage for medical expenses, hospitalization, and related costs. As individuals prioritize their health, the demand for innovative and comprehensive health insurance products has increased.

1. Digital Transformation

The insurance industry in Sri Lanka, like many others globally, is undergoing a digital transformation. Insurtech companies are leveraging technology to streamline processes, enhance customer experience, and introduce innovative products. Digital platforms facilitate online policy purchase, claims processing, and customer support, making insurance more accessible and convenient for the population.

2. Microinsurance

Microinsurance has gained traction in Sri Lanka, addressing the insurance needs of low-income individuals and small businesses. These affordable and simplified insurance products provide coverage for specific risks, such as crop failure, illness, or accidents. Microinsurance plays a vital role in promoting financial inclusion by offering protection to segments of the population that may have limited access to traditional insurance services.

3. Climate-Related Insurance

Given Sri Lanka’s vulnerability to climate-related risks, there is a growing emphasis on climate-related insurance products. These products aim to provide coverage for damages caused by natural disasters such as floods, cyclones, and droughts. As climate change impacts become more pronounced, insurers are working to develop resilient solutions that help individuals and businesses recover from climate-related losses.

4. Bancassurance

Bancassurance, the distribution of insurance products through banks, has gained popularity in Sri Lanka. This distribution channel enables banks to offer insurance products to their customers, creating a one-stop financial solution. Bancassurance has proven to be an effective way to reach a wider audience and increase insurance penetration in the country.