Surekha Alles may have accidently tripped into the insurance industry, having studied agriculture for her university degree, but having steered Allianz Insurance Lanka and Allianz Life Insurance Lanka as CEO for nine of its ten years of existence in Sri Lanka, growing it from a skeleton crew of seven (including herself) to 500 employees at a steady rate constantly above industry averages to recently become the fifth largest insurer, clearly it was a fortuitous stumble
As a recent entrant to the insurance industry dominated by the big three, what was your growth strategy? How much of a factor was the global brand name?
Not having much to advertise, we initially focused on utilizing the global brand recognition of Allianz as one of the top insurers of the world to tap into the corporate insurance market. Brand recognition definitely helped us initially, especially with corporate clients. We did not start with a lot of luxury; in fact, we functioned on a skeleton crew of seven for three years.
We also started providing reinsurance to local insurers because organizations lacked capacity. From the beginning, we made rapid progress and were the first insurer to achieve certain benchmarks. For example, we were the first to record underwriting profits in the second year of operation, the first to make Rs100 million gross written premium (GWP) in the first year of operation, the first to make Rs500 million GWP in four years of operation and the first to exceed Rs1 billion GWP in less than five years of operation. We continued to grow above industry average from the beginning, except in 2014 when we invested heavily to build a retail arm. However, we reversed the trend the next year by advancing to fifth ranking in the industry (from seventh). We have also recorded the highest industry growth for the first quarter of 2016, a rate of 37.5% against industry growth of 9.8%. We are also the only company that made underwriting profits in the second year of existence. We have continued to do so, except in 2014.
Allianz made the shift to the retail market in 2013. What took you so long and how did you go about making this shift?
We relied heavily on our corporate clients until 2013, but we had already realized by 2009 that we needed to expand to the retail sector if we really wanted to reach the top. For example, 60% of the market comprises motor insurance, and if we do not make significant inroads into this sector, we won’t reach the top. It took us four years to make the final leap into the retail market, and in 2013, we started hiring a sales team of about 200 who were attached to branches across the country.
Currently, we are the fifth largest insurer with 6% market share in the non-life space. We also started providing life coverage, but the life arm is relatively small because of our late entry. Breaking into the life market without investing heavily on ads is tough, but we have done well. We have about 780 agents in 58 branches who have sold about 32,000 policies.
[pullquote]Sri Lanka has been a non-tariff market since 2004, which has created a lot of competition. There are 15 insurance companies that offer diverse products, which has allowed the customer to pick and choose.[/pullquote]
In a significant development for the local industry, the insurance regulator ordered the segregation of life and non-life arms of insurance providers by February 2015. How has this impacted this industry?
I think this is a good decision because it allows an organization to focus on the two sectors separately, which in turn allows for more tailored strategies. Segregation also creates the separation of funds. Maybe it’s a bit expensive in the beginning for the company, but in the long-term, it will benefit the organization. This move has not affected us at all because we started as two separate companies from our inception.
Insurance penetration in Sri Lanka remains low (penetration of the long-term insurance business was 0.46% in 2014, 0.48% in 2013), but highly competitive. What is your strategy to grow in this tough market?
Sri Lanka has been a non-tariff market since 2004, which has created a lot of competition. There are 15 insurance companies that offer diverse products, which has allowed the customer to pick and choose.
Price is definitely something the customer will look at, but I don’t think that is all. Usually, an insurance policy is taken by someone with a surplus income, and for such a person, there are other considerations apart from price. Therefore, I believe we should focus greatly on giving a good service, be proactive and customer friendly when handling claims, and build a good relationship with the customer. As I said, price is an important factor, and if we run the organization efficiently and reduce internal costs, we can pass those efficiencies on to the customer. So internal efficiency, good customer service and claim handling are the three important things in attracting and retaining customers.
Why is penetration so low? What is the industry doing to improve this?
Yes, insurance as a percentage of GDP in Sri Lanka is only about 6.5%. Compared to other Asian nations, penetration is very low in Sri Lanka. Most Sri Lankans do not have insurance policies, which is something we realized during the recent floods. I know people in my own company who did not have insurance, and they also suffered due to the floods. Now there is a spike in the number of insurance policies bought, a trend we also saw right after the tsunami. As I mentioned briefly, only someone with a surplus income will buy an insurance policy. Currently, a Sri Lankan makes, on average, $4,000 per year. I think for a person to think of insurance, their income must increase to $6,000. With current incomes, it’s hard to allocate money for insurance while paying for your daily expenses. So apart from the lack of knowledge, the lack of disposable income can also be a reason.
While there is nothing we can do about increasing disposable income, we do quite a bit to increase public awareness.
What are the biggest challenges facing the insurance industry in this present phase?
The insurance industry faces a lot of challenges in the 21st century. In recent years we have seen a great deal of change and the unfolding digital revolution will be extremely disruptive to the industry. Research says that digitalization will pose the biggest challenges to insurance, even more than to banks. Internet penetration is increasing daily and what is there to prevent Google or Yahoo from putting all available policies online and when that happens no one will care who provides the cover. So we have to be ahead and we must also use digital to make it more convenient to the customer. We should also make the terms of the policies simple. In addition we also try to use technology internally to cut costs. Insurance is a very labour intensive industry. If we can automate a lot of these processes, and make it more efficient, that benefit can also be passed to the consumer.