Chandra Schaffter, Chairman of Janashakthi Group, Sri Lanka, was the Guest of Honor at InsureNext 2024. Edited excerpts of his keynote:
The prospects for them to come to Sri Lanka, not only for insurance, but for other financial services and tourism as well. After I finished my studies in school, I got a job as a clerk in what was then known as the Ceylon Insurance Company, which was the first Sri Lankan company to be set up in 1938. I worked there for one year. And from May 1959 at the age of 22, I then joined a Canadian company called Manufacturer’s Life, now known as Manulife. Life changed for me as my new employers recognized that I had some ability. Within 2-3 years, I was made the No. 2 in their Colombo branch.
In Sri Lanka, life insurance was nationalized in 1962 and non-life insurance in 1964. Privatization came in 1988. At the age of 42, I decided to go on my own. I left regular salaried employment, which was extremely lucrative, and took the risk of becoming an ordinary agent for Insurance Corporation of Sri Lanka, selling insurance door to door. Several large companies, which had their own insurance department, engaged me to advise them in putting their insurances right. That became a very profitable source of income.
I set up an office and my staff increased. In 1979, the minister of commerce asked me to give him a plan for setting up an alternate government corporation, because there was a great deal of dissatisfaction with the service given by the Sri Lanka Corporation. I provided a plan for setting up private sector companies. They would run the business on behalf of the government corporation, issuing policies and settling claims. So, the National Insurance Corporation was set up, and some big corporates became principal agents.
The system worked extremely well, and the public were getting private sector treatment, although the company was owned by government. I too was fortunate to be given a principal agency, and that gave a great flip to my work.
In 1987, the then finance minister asked me to provide a plan for privatization of insurance in Sri Lanka. He wanted me to give him a draft of a white paper, which I did. I am proud to say, it was adopted without any alteration whatsoever. The government was moving to privatization in many other areas as well. And so in 1988, Sri Lanka privatized insurance.
Simultaneously, principal agencies were done away with, and the broking system was introduced, for both life and non-life insurance. By the early 90s, my own children had grown up, and they began to think of setting up a life insurance company of our own. The other life companies were mighty corporates, with a 7-year start.
I was a one-man show, and 64 years old at the time. With little or no funds, and considerable difficulties to meet the reserve requirements, I still set up Janashakti Life on 15 September 1994.
I had to do all the work on my own to set up the company. And the only outside help I received was from the actuary who calculated the premiums for me. We started non-life business exactly a year later, on 15 September 1995.
In 2018, we sold Janashakti General to the Alliance Group, which had grown from 30 employees to nearly 1000.
I retired more or less officially from insurance business 10 years ago, a little after I turned 80. The companies are now managed by my family.
Side by side, giving up my regular employment in 1972, I decided to move to India as well to broad my area of work. It was a big risk as India is a hard country to work in. It was even harder because transfer of funds was difficult. So, though I was earning money in Sri Lanka, I couldn’t send it to India. I moved to India in 1973. I had to earn in India, with my family to give my children an education in India.
With my experience, I looked for consultancy work. Perhaps I was one of the earliest to go into consultancy in India. My greatest work in India, however, was on tea plantations and factories. Eventually I did cover 50 tea factories in India. I advised them how to put their insurances right and saved them a lot of money.
I shut down my Indian operations and went back to Sri Lanka. In 2001, the National Insurance Corporation, which I had set up, went up for sale. We were among the bidders and we were successful in purchasing it. That gave us a great boost in the insurance market. And people began to take notice of us.
Let me now come to the most important part of my talk, which is in regard to the prospects for Indian companies in Sri Lanka.
Insurance in Sri Lanka is over 150 years old. And in the days prior to independence, that is 1948, the biggest insurers were the Indian and British companies. It is only after 1986, when insurance was privatized and a regulatory body set up, that insurance companies began to come up in fairly organized, serious manner.
For quite some time, there were only 3 companies, apart from the Insurance Corporation of Sri Lanka and the National Insurance Corporation. But gradually other companies came into play. We now have 15 life companies and 14 non-life companies. 8 of them have common owners. Some of these companies have full or part foreign ownership – AIG, Fairfax, Alliance, LIC.
Foreign companies are virtually offshoots of their parent companies, and are not stand-alone branches. Generally speaking, local companies do not wish to hand over majority control to an overseas company. But those are matters which can always be negotiated.
Sri Lankan companies prefer to have majority ownership. The way out may be for the foreign company to get a management contract and run the company, even though they don’t have a majority holding. There is a lot of scope for expansion in insurance business in Sri Lanka.
Similarly, there are other financial services, such as fund management, financial leasing, which are very successful. And again, there are opportunities for Indian companies who have the funds to invest. All these companies in Sri Lanka are quite small in comparison with their Indian counterparts.
Coming into the market, therefore, will not be a barrier to Indian companies. I do not think the cost will be prohibitive, considering that now the Indian rupee is equal to 3.5 Sri Lankan rupees. Because the rates have also gone down.
In addition to insurance, there are plenty of opportunities in tourism and fund management, and a lot of other financial areas. And I am sad that Indian entrepreneurs have not thought of looking across the Palk Street at an area which is just next door to them and offers very good and lucrative opportunities. I have done my best to portray my views. Thank you very much.
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