Sri Lanka Insurance is the leader in the 57-billion-rupee motor insurance market. Its generic Motor Plus insurance together with a couple of other products designed for lady drivers and three wheelers has helped the company grow and remain profitable even during the couple of years impacted by the Corona pandemic.

Instead of competing on price, SLI’s Chief Executive Chandana Aluthgama is leading a cultural and product transformation at the company to maintain its market edge.

During an interview with Echelon Chandana Aluthgama discussed how the company has done last year, and how they’re strategizing for a transforming market.

How has the business done in the last year?

The year 2021 was a challenging one for everyone, all over the world. The insurance industry has been quite resilient, and produced good results, delivering the promises to its customers. If you consider the motor insurance market, where total underwriting premiums were Rs 57 billion in 2021. SLI holds a 20% market share.

In 2021 there was a decline in the motor insurance market because there were no new vehicle imports into the country. As companies had to rely on insuring the existing stock of vehicles, the industry witnessed negative growth.

SLI is the motor insurance market leader and we have the biggest portfolio. In 2021 our motor portfolio grew by 5%. Our growth is due to our reach across the country and our ability to understand customers better. No doubt our dynamic sales team also better connects and caters to all our customers.

Any company, even ones in insurance, will have a strategy focusing on a particular segment brand that is profitable for them. But in our case, we cater to all segments. That’s another reason for our performance and success last year. We also acquired new business and ensured a healthy underwriting performance during the year.

Sri Lanka is facing some economic challenges. What do you anticipate will happen in the general insurance market in the future?

An economic strain was faced by so many countries in the aftermath of the global pandemic. What’s important is how fast we address these challenges and solve these problems. For SLI as a company, the main challenges would be rising costs. At the same time, since there are no new vehicle imports, we have to grow our business within the existing market.

We have to understand our customers better and cater to their needs individually. This will become a win-win for the customer and the insurance company.

You talked about segmentation as a growth strategy in the current environment. How are you approaching this?

You can market insurance in different ways. Often, insurance is sold as a generic product. But, if you consider the needs of the individual segments; like a three-wheel driver, a motorist or a person who owns a Mercedes, they are all not the same.

All these people have a common need only to a certain point. A person who wants more value, will be able to afford to pay a little more. But it makes no sense to charge the same premium from somebody who doesn’t want that value.

The motor insurance market is segmented to some level. At SLI there are segments for lady drivers, and its differentiated from other classes of business. And now we are launching the latest segment Pinnacle, for the high-end market.

What has been your experience segmenting the market so far? You’ve created motor insurance products for female drivers and another for tuk tuk owners. Now SLI is aiming at another segment. What’s been the experience so far that gives you the confidence to segment the market further?

We identify our customers in segments and address their needs in ways that are most suitable. To serve all these segments we are now digitizing our claims process. There will be some customers who want to be updated on the status of their claim on their smartphone. At the same time, someone else might prefer to come to the branch to get an update. We want to be able to serve all segments, not only the main towns.

You’re about to launch a product called Pinnacle targeting fairly high value motor insurance policies. What is the opportunity and the market size you’re seeing here, that gives you the confidence to be addressing this segment?

If you take the entire motor market, this isn’t a large percentage of the market in terms of the number of policies, but its more significant in the underwriting values and the potential value added.

The premia on a vehicle worth 20 million, and one worth 3 million are very different. Average premiums are in the range of 50,000 rupees, but some of these vehicles can attract premiums that are 10 times greater than that.

We identify our customers in segments and address their needs in ways that are most suitable

We also know this segment has grown in the past 5 to 10 years and that growth is not restricted to Colombo.

In the past, people came to Colombo to buy a vehicle, but that’s no longer the case. Sometimes people from Colombo go to the provinces now to purchase a vehicle. Similarly, high end vehicle users have grown all over. This segment is looking for a differentiated insurance product. That’s the market we are targeting. Things will change in the future. The market is not going to be like this. There’ll be vehicle importation into the country. At that point, we should be ready.

If you can contrast for us the approach towards segmentation from one that is product based, which is often seen to one that is needs based. Can you contrast the two?

For example, somebody may be going for a very important meeting and using a high valued vehicle. Should there be a collision that person will not be able to wait at the site. Instead that person may prefer to inform the insurance company and proceed. We need to identify the needs of all these segments accordingly.

Can you tell us how SLI is doing in terms of underwriting profitability in general insurance? You said the last couple of years have been challenging ones. Has that impacted your underwriting profitability?

There is some impact on the underwriting result, but our underwriting remains profitable. We’ve kept underwriting results at a favorable range in the last couple of years.

This year will be especially challenging due to the continuing restrictions on new vehicle imports. Also, business costs may escalate beyond our estimates.

Do you think SLI can maintain its track record of underwriting profitability on general insurance since your costs are expected to rise?

That’s what any insurer would want to do and that’s why we are prudently putting our strategies in place to ensure underwriting profitability. As a company we have to be watching this every day, you can’t just allow it to run for six months and then turn around and check your portfolio profitability.

This year will be especially challenging due to the continuing restrictions on new vehicle imports. Also, business costs may escalate beyond our estimates

Today we are identifying preferred risks and pricing these appropriately. But, then the most important thing is Sri Lanka Insurance, as a responsible company and an organization backed by the Treasury, might go slightly beyond the norm of profitability. That doesn’t mean we are going to compromise profitability, we are keen on our profits, but there may be times when we have to balance other interests too.

If you look at the past trajectory of SLI, we have gone beyond to serve the public because we are a state-owned entity.

Of all the strategic initiatives that are in front of you, for the future of SLI, what excites you the most?

We have 10,000 odd people selling insurance for us and 2,700 people supporting sales. Our biggest challenge now is we need to constantly make sure the right people are in the right places. We have to keep an eye on productivity.

We have been paving the way to this change over four years, gradually getting people to understand culture. This year is a pivotal one in our culture transformation.

SLI has a great team, when you consider their experience, knowledge, and qualifications. I wouldn’t hesitate to say they are the industry’s best. But what we want them to understand is that the market and the industry too are changing, and we have to keep up. This type of transformation is the most challenging for any business. But I’m confident the team will deliver.

From 2020 its been very challenging. During Covid we had to respond rapidly. As a result SLI has been very resilient and we have seen this in the financial results in 2021. That was a huge change internally, which is difficult to capture in an annual report.

Further, we were able to look after the interests of our salespeople and our staff as well. In 2022 we are expecting the same team to be very proactive, and take measures in order to survive this period and deliver even better results.