The Insurance Association of Sri Lanka (IASL) has raised concerns with the Insurance Board of Sri Lanka (IBSL) pertaining to the National Insurance Trust Fund’s (NITF) ‘unfair practices’ which it says is affecting the level playing field in the industry.
“The IASL has raised concerns with the IBSL regarding the entry of NIFT into commercial insurance. Through the Ceylon Chamber of Commerce, a letter was sent to Dr Sarath Amunugama, a couple of months ago seeking some redress from the Ministry of Finance (when Dr Amunugama was the Deputy Finance Minister). We still have not received a response,” Manjula de Silva, President IASL told the Business Times.
Industry sources said that NIFT was not meant for such a purpose (general insurance) and also the fact that it has been exempted from the Insurance Act raises serious issues on how NIFT is governed. “All of us are governed by this Act. Exempting NIFT from this regulation when its competitors are governed by this Act creates a stark imbalance in the market,” an industry source pointed out.
However A. A. Wijepala, Chairman NIFT has another story to say. “The IBSL does not need to control us, because we’re governed by the Treasury,” he told the Business Times. He said that NIFT is an agency that is regulated by the Administrative Regulations (AR) and the Financial Regulations (FR), which exempts them from any Act.
“We are the cheapest in the market which is why some firms may be losing (their) business. We pay any claim within three days. Also customers come to us because we’re a state institution and they know that there’s 100% security with NIFT,” he added.
He pointed out that the Sri Lanka Insurance Corporation (SLIC) was also not governed by the IBSL before it was privatized. “Before we entered into commercial business there were many queries by the public for us to do so (which is why we decided to get into the general business),” he said.
Private sector insurance firms are also perturbed over a government circular issued last September and now adhered to by state sector insurance institutions to create a monopolist situation in the local market.
The public finance circular number PF/437 titled ‘Provision of general insurance cover for government institutions’ instructs all government and semi government institutions to obtain their general insurance cover only from the NIFT or the SLIC. Another insurance industry stakeholder countered this argument saying that the government is not owned by a ‘few’ shareholders such as other private firms. “Such circulars and directives disturb the equal play in the industry,” he said.
IBSL Chairman, Udaya Sri Kariyawasam was uncontactable, but an IBSL source, while agreeing that this circular is not in line with industry best practices and fairplay noted that IASL’s letter pertaining to this issue was forwarded to the Ministry of Finance.
In a letter of protest written to Mr. Kariyawasam, Mr. de Silva says that the industry was extremely concerned about this circular. “We are seriously concerned about this measure which essentially shuts down the opportunity to access a significant volume of the business to the other insurance companies from both the public and private sectors. At the same time, we wish to point out that government institutions would also stand to lose substantially due to the absence of a competitive market which would determine the right price for their insurance purchases.”
The circular is very comprehensive and covers state sector insurance, marine, fire, motor, general accident, insurance of property belonging to government and semi government sectors and acquired property. Industry experts are perturbed over this issue saying that this is not a formula to follow in an open economy.