In Sri Lanka, life insurance has long been viewed as discretionary spending. However, Union Assurance is leading efforts to alter this perception, positioning life insurance as an essential aspect of financial planning. Union Assurance’s Chief Executive Officer, Senath Jayatilake, its Chief Information Officer Harsha Senanayake, and Chief Partnership Distribution Officer, Wathsala Aluthgedara joined this discussion.
The last several years have been tumultuous for Sri Lanka due to several crises. How did the life insurance industry perform at this time, and Union Assurance in particular?
Senath Jayatilake: Despite facing various challenges, the life insurance industry has demonstrated remarkable perseverance. Over the past few years, it has maintained a strong compound annual growth rate (CAGR), consistently achieving double-digit growth. With the industry’s gross written premium now surpassing Rs150 billion.
Union Assurance has experienced significant growth, surpassing market rates, thanks to several key factors. Firstly, we’ve adapted our value proposition to better cater to evolving customer needs. Secondly, we’ve focused on aligning with shifting market dynamics and customer preferences. Lastly, we’ve proactively adjusted our strategies to adapt to the transformative journey the country has undertaken in recent years.
You said the value proposition has been adapted to be relevant to the environment. Can you explain what you mean by that?
Jayatilake: As an organization, we prioritize delivering value to all our stakeholders: policyholders, shareholders, distributors, and employees. We’ve expanded our range of protection solutions for policyholders, covering areas like health, retirement, and protection enhancers. This ensures we can meet their evolving needs, particularly crucial in the current hyperinflationary environment where household savings are dwindling.
Technology is increasingly becoming synonymous with convenience and efficiency in various industries. How do you believe advancements in technology have revolutionized the way life insurance companies, including Union Assurance, interact with and serve their customers?
Harsha Senanayake: Life insurance, one of the oldest industries, has undergone significant transformation in the last decade or so, from our insurance advisors carrying rate tables and calculating premiums on paper 37 years ago, to completely digital point-of-sale technology in the palms of their hands. Union Assurance was the first insurance company to achieve 100% digital submissions and the fastest policy issuance, whereas many global companies struggled to achieve this milestone.
Life insurance distribution has not significantly shifted online and remains in single digits; however, it doubled during the pandemic as customer behaviour, especially among millennials and Gen Z, changed. Union Assurance keeps innovating in this space by launching multiple online products as part of its long-term strategy.
In the near term, advisory-led life insurance sales will continue to dominate, and advancing the digital tools used by advisors will be a key differentiator in delivering high-quality advice to customers. Union Assurance provides some of the most advanced bionic agency capabilities for our 3,500+ advisors.
Another key trend we see is connected life insurance products. Most people rarely engage with life insurers after purchasing a policy, aside from making billing inquiries or updating contact information. The industry trails most others in consumer interaction frequency across channels, with only 14% of insurance consumers interacting with their carrier daily or monthly, compared to 55% of bank customers and 46% of online retail customers. Less frequency means less relevance. It’s the old out-of-sight, out-of-mind dynamic at work. We want to change this by providing a more engaging experience by integrating health tracking for improving health outcomes, rewarding good behaviour, telemedicine, and comprehensive self-service functionality. Union Assurance’s Clicklife App is a pioneer in this space.
Wathsala, you overlook the channels and distribution. What do you view as challenges in these areas you lead?
Wathsala Aluthgedara: Traditionally, life insurance has been sold through an advisor-led model, which remains a robust aspect of Union Assurance’s revenue stream. However, in more mature markets with higher life insurance penetration, there is a trend towards diversifying channels. One such avenue is bancassurance, where customers access life insurance products through their banking networks, enabling broader reach.
Additionally, the digital space is gaining traction as a channel for life insurance distribution. The COVID-19 pandemic accelerated this shift, compelling companies to embrace digital solutions swiftly. This allows insurers to engage with customers, especially Gen Z. Embracing digitalization not only meets customer preferences but also offers cost-efficient operations.
Union Assurance recognizes this potential and is investing significantly in partnerships and technology to capitalize on these trends and remain competitive in the industry.
Diversifying distribution away from the insurance advisor-led model seems to be one of the objectives. Tell us about the strategy to achieve this.
Aluthgedara: Diversification of distribution is not exclusive to the life insurance industry; it holds significance across various sectors. By diversifying channels, companies reduce their reliance on any single avenue, mitigating risks associated with over-dependence. This strategy ensures that all their eggs are not in one basket.
Moreover, diversification expands its reach. While traditional models have limitations in reaching customers, partnerships with banks, non-banking financial institutions, and telcos provide access to a broader consumer base. This enables companies to interact with a larger audience, fostering awareness and engagement more effectively.
Senath, one of your aims with technology investment will be to diversify your selling model. What’s your vision for the distribution model?
Jayatilake: Diversification aims to broaden the reach and enhance accessibility to insurance. Currently, life insurance penetration in Sri Lanka is below one per cent of GDP, lagging regional peers. This highlights the significant under-protection within the country. Our organization’s focus extends beyond achieving top-line growth to ensuring that everyone can access life insurance. Diversification enables us to reach diverse customer segments effectively, aligning with evolving customer needs in both product offerings and distribution channels.
Union Assurance has been proactive in adopting innovative technological solutions. Could you elaborate on some specific instances where cutting-edge technology has significantly enhanced the company value chain, setting Union Assurance apart from its competitors?
Senanayake: We have three pillars in our digital transformation journey: digitizing the customer experience, creating a holistic customer value proposition, and implementing a bionic distribution model.
Digitizing the customer experience:
From the outset, we recognized the importance of meeting our customers’ evolving needs in the digital age. By being the first life Insurer to enable 100% digital proposal submissions, we streamlined the process for our customers, making it faster and more convenient. The introduction of the Clicklife App revolutionized self-service and engagement, transforming the way our customers interact with us.
We are leading the way in the Sri Lankan life insurance industry with the introduction of electronic medical examination reports (e-Mer) and digital medical records, a cutting-edge initiative that promises to streamline life insurance policy issuance like never before. It was introduced with a top healthcare provider resulting in higher straight-through processing (STP) in medical underwriting, improved quality in underwriting decisions and faster policy issuance.
Union Assurance will be continuously investing in improving customer convenience, operational efficiency and customer empowerment in all processes to deliver superlative customer experience at all servicing touchpoints.
Creating a holistic customer value proposition:
Our focus on catering to the needs of millennials and Gen Z has driven us to develop a one-stop shop for life insurance and well-being services within the Clicklife platform. Understanding the importance of financial consciousness and overall well-being to these generations, we have integrated wellness and rewards for healthy behaviour into our ecosystem. By promoting a healthy lifestyle through our app, we aim to offer our customers not just insurance coverage but also a path to healthier and more fulfilling lives.
In Sri Lanka, obesity and non-communicable diseases (NCDs) pose significant health challenges. To address this, we enhanced the Clicklife App with an innovative fitness solution that combines calorie counting and physical activity tracking. By setting fitness goals and rewarding healthy choices, we motivate our customers to lead healthier lives. The app’s AI-powered calorie counter makes it easy for users to track their intake, providing comprehensive support for maintaining a healthy diet.
Our fully digital rewards system complements the healthy lifestyle initiatives. Customers can earn points for their healthy habits and redeem them through digital vouchers at over 140 partner merchants. This seamless rewards system ensures that our customers enjoy the benefits of their efforts in a diverse range of ways.
Implementing a bionic distribution model:
Empowering our insurance advisors is integral to our success. Our third pillar, the bionic distribution model, combines digital technologies with personalized human interactions. We understand that customers often switch channels during their sales journey, so we equip our advisors with digital tools for comprehensive financial needs analysis, mobile and tablet-based point-of-sale solutions, and digital marketing content. This enables them to provide a seamless experience that caters to our customers’ preferences at every stage of their journey.
Wathsala, in your role of distribution what are the demographics and income-related trends that you’re seeing and how are you adapting the strategy to be able to meet those emerging market needs?
Aluthgedara: We concentrate on different customer segments, delving into each to comprehend their unique requirements thoroughly. This enables us to tailor products and propositions precisely to meet their financial and lifestyle goals, enhancing uptake. Moving away from a one-size-fits-all approach, we’ve adopted a highly customized strategy. Achieving this level of personalization requires a profound understanding of our customers, a focus area for us.
Research indicates that Gen Z differs from previous segments in their attitudes towards life insurance. Contrary to mature segments that may be less aware of the need for life insurance, Gen Z demonstrates an understanding of the importance of protection. However, the challenge lies in bridging the gap and making insurance more accessible to them in a manner that aligns with their preferences.
Gen Z may not prefer traditional methods of interaction, such as engaging with advisors or visiting banks. Instead, they seek seamless digital experiences. By providing accessible, digitally-driven interactions, we can anticipate significant growth in life insurance penetration levels among this demographic in the future.
Senath if you’ve managed to grow faster than the market, you’ve got your strategy right. What do you think are the one, two or three things that you need to keep sharp to maintain momentum?
Jayatilake: Our primary focus for driving growth is on customer centricity; as life insurance is often perceived as a complex product. Simplifying distribution channels and increasing market awareness, particularly in life insurance, is integral to our strategy. Diversifying distribution methods allows us to make insurance more accessible and give customers greater control of their life insurance. Because life insurance is a deeply personal product, it’s not a one-size-fits-all product so giving the customers the ability to pick and choose how they want to design their life insurance cover, how they want to purchase the life insurance cover and, how they want to experience the life insurance cover is a core focus in our strategy.
Can you talk to us about what you’ve done well in the last few years in terms of innovation?
Aluthgedara: When considering bancassurance as a channel, prioritizing customer-centricity is key, as individual needs vary greatly. Understanding these diverse needs requires thorough exploration and analysis.
Once we grasp these needs, our extensive range of meticulously researched products becomes pivotal. However, innovation lies in recognizing that customers should not feel compelled to adopt products that don’t align with their requirements. Instead, our approach resembles a “plug and play” model, where customers can combine various products to create tailored solutions.
From an innovation standpoint, this flexibility is crucial. Additionally, we constantly review industry best practices to identify areas where we can introduce new propositions, mirroring the innovative products found in more mature markets.
Senath, you have the challenging job of not just coming up with this vision, but also making sure all these individual strategies align to meet and deliver something that you’ve imagined. So, when considering the landscape you operate in, what do you think you are doing well?
Jayatilake: The strategies we’ve developed at Union Assurance are aimed at responsibly disrupting the life insurance landscape in Sri Lanka. This entails diversification, product innovation, and expanding our reach, all driven by a clear purpose behind our actions.
We understand that a strategy without a purpose lacks direction, and people rally behind a purpose-driven strategy. Our vision is not just to transform our company, but to uplift the entire community and population of Sri Lanka. As one of the most underinsured markets with low savings rates globally, there’s immense potential to create a truly protected nation.
To achieve this, we require not only the support of our internal teams but also that of the broader community and districts across Sri Lanka. Our corporate vision and strategy are centred around this purpose, serving as a guiding light for our teams as we work towards building a more secure future for all.
How well do you think the company is prepared to seize the opportunity when robust economic growth does return?
Jayatilake: Traditionally, life insurance in Sri Lanka has been viewed as part of discretionary spending, whereas in many other markets, it’s considered essential. As a country and an industry, we need to transition towards recognizing the essential nature of life insurance. Union Assurance, with its 37 years of experience, has weathered numerous challenges alongside the nation.
While increased discretionary spending and purchasing power would undoubtedly bolster the insurance sector, raising awareness about the importance of life insurance is equally crucial. By educating customers about the necessity of life insurance, we can drive increased penetration rates, regardless of spending trends. This dual approach will be essential for advancing the insurance industry in Sri Lanka.