Ever since entering Sri Lanka in 2005, Allianz has grown constantly. A big boost came with the end of the civil war in the island nation off the coast of India. Now, in addition to benefiting from the growing prosperity there, Allianz is also trying to spread its name and strong reputation. How this works in a market, where the ad spend of the insurance industry is amongst the highest worldwide, explains Surekha Alles, CEO Allianz Sri Lanka.
Can you give us a brief overview of your business in Sri Lanka?
Allianz entered the Sri Lankan market in 2005 as a greenfield operation. We were the fastest growing insurer from inception, and achieved underwriting profits from our second year of operations: this was just one of the many ‘firsts’ we notched up within a short time span. Our success with property and casualty insurance prompted us to set up the life insurance operation in 2009.
We started up with just five people. Today, our staff strength has expanded to 650 people and an additional 852 active life insurance agents.
So what’s the environment like now in Sri Lanka?
We entered the market as the long civil war there was coming to an end and peace talks were in progress. Four years later, when peace finally came, the positive sentiments that followed generated tremendous growth in the former war-torn areas of the country.
GDP rose to its present annual growth rate of 6.5 percent, underpinned by low unemployment, higher personal disposable income and increased consumer credit extended by the banking sector. These factors resulted in healthy domestic demand and consumption, and per capita income is expected to grow from 2,866 US dollars today to 4,000 US dollars by 2016.
The government also focused on infrastructure development, especially in upgrading the road network in the country including building expressways – Allianz was happy to partner in insuring construction of the Southern expressway, the first highway project in Sri Lanka. The development of the road infrastructure has substantially improved land connectivity, which in turn, contributed towards reviving economic activity and also improved people’s mobility.
Continued economic recovery has resulted in the rapid growth of the middle income segment, creating huge potential for the insurance business.
What are the challenges you face in Sri Lanka?
First of all, insurance penetration remains low. Only 13 percent of the entire population has a life insurance policy.
There is also the added task of convincing people of the need to insure themselves against future calamities. Many people in this country distrust insurance sales personnel, because they have had negative experiences when doing business with some of them and also find it difficult to understand the complicated legal jargon they used.
So what are you doing to change perceptions?
Allianz Lanka rigorously follows the Allianz sales code of conduct and ethical business practices. As a result, our customers find doing business with us a refreshing change. We are confident that the ethics we follow when approaching a customer, gaining his confidence, obtaining his business, and being there for him at his moment of truth, has helped to improve the image of the insurance sales professional in Sri Lanka. Our ethical business practices have also ensured that our return business is high, which has resulted in continuous expansion of our customer base.
What is it like as a relative newcomer to the market?
It has been a challenge for Allianz that, as one of the newest insurers in the market, many of the big players have established bases dating back over a quarter century in time, with captive business that has kept them in the lead. But although they may have had the advantage over us in terms of base and business, we have been successful in making significant inroads into the large captive business of our competitors.
Have people’s needs changed over the years and if so, have you been able to adjust to this change?
Yes, we see that there has been a change in Sri Lanka in recent years, in terms of what people look for in an insurance policy. People now focus more on investment than on protection, and the most attractive policies to them are those that combine insurance with investment options. I am pleased to say that we were geared to meet this rather radical shift in demand, and came up with Universal Life and Unit Link, which took the market by storm.
And, the other way around, has Allianz Sri Lanka changed its focus over the years?
Sure. When we first came in, our focus was on large multinationals and corporates, but we have now extended into the retail market and reached out to low income customers as well. With the recent revival in economic activity, hitherto inaccessible and underdeveloped markets have become more accessible and attractive. In anticipation of this business expansion, we designed products that met the requirements of this new rural market segment, whose needs and wants differ from those of our urban customers. Our personal accident and natural death cover, for instance, has a very nominal premium and a death benefit that is proving very popular with our outstation customers.
How do you propagate your brand in Sri Lanka?
We are gratified that Allianz, as a strong global brand, has gained significant momentum in the Sri Lankan market.
The growth in our business is despite the fact that we do not advertise in Sri Lanka: in a market where the insurance industry has the highest ad spend, this could have been to our disadvantage. But word of mouth has been our main marketing tool from the day we set up in Sri Lanka. Word of mouth is probably the world’s most powerful marketing tool and the secret of gaining and retaining customers. We use it to its full advantage. The positive experience that people have with us during their moment of truth gives them the confidence to continue to insure with us, and to recommend us to others.
But the experience Sri Lankans have with Allianz is not just through business, right?
That’s right. We are always conscious of the needs of the communities we work in and set aside a share of profits to improving their quality of life. Our CSR initiatives assist marginalized communities in many parts of the island and rejuvenate the post-war economies of the North and East.
My Finance Coach was an initiative we have introduced to teach children how to manage their finances from a young age. We designed such initiatives to help establish a more financially savvy community in the future.
The Allianz global partnership of the Paralympics was brought to Sri Lankan shores through our partnership with the National Federation of Sports for the Disabled (NFSD) in Sri Lanka. Allianz Lanka provides the NFSD with monetary as well as non- monetary support through this partnership.
We also sponsored teenagers from impoverished homes to attend the football camps in Germany, and will continue to do so.
What are Sri Lanka’s new requirements for insurers?
The Regulation of Insurance Industry Act was amended in February 2011, which brought with it several changes to the existing regulatory environment. Allianz is well placed to adapt to these requirements. Chief among them is the requirement to split composite insurance business into two separate legal entities for Life and General business, and the proposed change from the rule based to the risk based capital model (RBC) which will be in place in 2016 . These are huge challenge for insurers, but we were structured to meet them from inception.
How does Allianz in Sri Lanka propose to address the new requirements of international investors and customers?
The resurgence of business confidence has several international investors and insurers looking at the Sri Lankan market. So it is an attractive market, despite the challenges. I am confident that, if we continue to follow prudent underwriting and investment strategies and do business in a manner that continues to identify us as being the most trusted insurer in the market, we will have the edge over our competition. With this in view, we will continue to ensure that our products and service standards are talked about in the years to come, and also pursue every avenue to create value for our customers and business partners, year after year.
