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Sanasa Insurance experience in the transition from

informal to formal.

SANASA INSURANCE COMPANY LIMITED

- SRI LANKA -

Presentation to the ICMIF-AOA Development (Micro insurance) Network Seminar

by Dr. P.A. Kiriwandeniya

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The Sanasa Movement – What it is……

"Sanasa" is the English transliteration of the Sinhala acronym for a Thrift and Credit Co-Operative society at primary level.

The term Sanasa is also used to signify the entire movement covering nearly 8424 primary societies and the associated network of subsidiary organizations.

Total Membership of Sanasa Societies…805,000 Total number of Beneficiaries from the Sanasa Network...3,100,000 Covering 15% of total population in the country.

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Progress of Sanasa from the status of informal to formal.

Transition of Credit Co‐operative Societies to Consumer Cooperative Societies to involve in procurement of inputs and distribution of products.

1940

1950Role of Consumer Co-operative Societies was taken over by Multi Purpose Co‐operative Societies (MPCSs).

1970

Decline in network and scope of activities of TCCSs.

1906

Establishment of Thrift and Credit Cooperative Societies (TCCSs) under the Cooperative Societies Ordinance to relieve peasants from the grip of village money lender.

1978

Resurgence of TCCSs under the brand name of SANASA and establishment of Sanasa Federation and other organizations under the Companies Act.

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Progress of Sanasa Group - to meet common

man’s different aspirations in the open economy.

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Background story of SICLSICL is an insurance provider emerged from a long and outstanding experience in microinsurance activities conducted by an organization called “All Lanka Mutual Assurance Organization”(ALMAO) which was the insurance arm of SANASA prior to its incorporation under Companies Act.

1989

1991

1993

1996

2002

2005

Formation of ALMAO with Society Leaders of Funeral Aid Societies.Pioneer in introducing Life Cover with Maturity Benefits , Accident and Health Cover

Declared as a Specially Authorized Society in the government gazette by the Ministry of Trade and Commerce

Amalgamation with Micro-Insurance Unit of Sanasa Federation

Establishment of Sanasa Insurance Company Ltd. (SICL) and ALMAO becomes the major shareholder

SICL begins operations in General Insurance as well.

Community Development survey by Forum of Development established by Dr. P.A. Kiriwandeniya. Starting point of the formation of the SICL

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Insurance Environment in Sri Lanka Regulation & Organizational Structure

Insurance Law – Regulation of Insurance industry Act No.43 of 2000 and Amendments by Act No. 3 of 2011

Total number of insurance companies: Long term and General – 13 Long Term – 06 General – 03 22

Provision in insurance law for micro insurance providers – No

Status of micro insurance providers – Not legalized

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Company profile of SICL Registered Name of the Company

Seemasahitha Sanasa Rakshana Samagama.

Legal Form A public limited liability company incorporated in Sri Lanka under Companies Act No 17 of 1982 and re- registered under the companies Act No 07 of 2007.

Licensed as a company authorized to carry on Insurance business, under the Regulation of

Insurance Industry Act No.43 of 2000.

Company Registration Number N (PB) 379

Stated Capital Stated Capital Rs. Mn 332.69 ( as at 31st December 2012 )

Contact Details   Tele: +94(0)11 2002021   E-mail : info@sicl.lk             

Fax: +94(0) 112002023

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Company profile of- SICL …...ContdAuditors

B R De Silva & Company (External)Ernst & Young Advisory Services (Pvt) Ltd. (Internal)

Consultant ActuariesActuarial & management Consultants (Pvt) limited,Sri Lanka.K.A. Pandit & Com, India

BankersSanasa Development Bank Ltd.People’s Bank.Bank of Ceylon.Commercial Bank of Ceylon Ltd.

ReinsurerHanover Re

GIC (India)

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Vision of SICLTo establish a new society based on

Co-operative principles.

Mission of SICL To strengthen the society through adequate Risk coverage and developing the community

Through comprehensive risk cover.

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Objectives of SICL

Incorporated as any other Commercial Insurance Company to promote micro insurance with following objectives:

• To popularize insurance among the low income householders.

• To introduce simple and affordable insurance products for benefit of the poor.

• To design less expensive insurance schemes which provide benefits promptly.

• To increase learning and dissemination of best practice for delivering micro insurance services to the low income families.• To explore ways and means to strengthen capital reserves so as to ensure solvency and sustainability.

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Strategies adopted to serve the Target Market as a formal insurance company.

1. Adaptation of informal insurance Products to suit the features of formal insurance products as follows:

- Loan Protection Insurances for high values(over Rs. 500,000) were developed to suit actuarial and reinsurance requirements.

- Insurance for Funeral Expenses: Modified to limit the number of beneficiaries to six.

- Life Insurance: Pricing and product development of new policies by an actuary, at an affordable premium.

- Personal Accident & Health Insurance: Developed to broaden the scope of cover to reimburse all expenses of indoor and outdoor treatments. Insures are issued health cards to ensure facility of obtaining immediate treatment from hospitals approved by the company.

2. Adjusting the distribution channels to procure business from the open market.

- Expansion of Insurance Agency Force to procure business from the open market.

3. Introduction of innovative insurance products for agricultural sector.

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Innovative Insurance Products Introduced Recently by SICL

- Weather Index Based Crop Insurance For Paddy (Rice) Farmers.

- Weather Index Based Crop Insurance for Tea

growers.

- Livestock Insurance For Low Income earners.

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Weather Index Insurance (WII) for Paddy(Rice) farmers

WII came into operation for the first time in Sri Lanka by Sanasa Insurance company in collaboration with following partners;

-International Labour Organization (ILO) -Canadian International Development Agency (CIDA) -Développement international Desjardins (DID) -Basix (India) -Financiere Agricole du Quebec – Developpement international

(FADQDI)

WII for Paddy commenced on experimental basis in 2010 and the number of insurance policies increased from 570 in Yala season 2010 to 4815 policies in Maha season 2012/2013.

Modifications to the WII product for Paddy is in progress with the objective of expanding further to reach a new target of 10,000 farmers.

Weather Index Insurance (WII)for Tea Growers

Commencement WII for Tea came into operation under the sponsorship of International

Finance Cooperation (IFC), the private sector arm of the World Bank Group to advance economic development by investing in strictly for profit and commercial projects which reduce poverty and promote development.

Objectives To develop weather index –based insurance products that are climate

responsive and cater to diverse food crops in Sri Lanka. To promote institutional capacities of SANASA Insurance Company Ltd

(SICL) in order to make it possible to develop weather index-based insurance products and do under-writing efficiently.

Raise awareness amongst 50,000 Sri Lankan farmers on the availability of the developed weather index-based insurance products and their benefits.

Current Status Business of WII for Tea commenced in 2012 and is progressing well.

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Challenges faced by SICL as a formal micro insurance provider.

Insurance business is operated under server competition from other 21 companies which are more developed and at the same time making efforts to penetrate into the rural sector.

Necessity of significant amount of investment for enhancing the awareness of insurance among the low income householders.

Lack of qualified and trained staff.

Inadequacy of share capital in according with the required level imposed by the regulator (IBSL)

Regulatory requirements to split the present company into two companies to operate Long Term Insurance Business (Life) and General Insurance Business separately.

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Advantages of formalization1. Security of Policy holders are well secured

2. More strength through reinsurance support .

3. Formal insurance companies are geared to make significant contributions to capital formation in the country.

4. Better confidence towards the risk management through insurance.

5. Insurance penetration in the economy tends to increase.

SANASA Insurance Company Limited