Why insurance in developing economies Like Sri Lanka should be bought, not sold

In developing economies like Sri Lanka, insurance sectors often face significant challenges in terms of market penetration and public perception. Traditionally, in Sri Lanka insurance has always been a product that has to be sold.

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However, in today's increasingly unpredictable world, insurance should be viewed as an actively pursued financial rather than a product people are pressured to purchase.

The traditional approach of insurance asa hard sell

The statement ‘Insurance is sold, not bought typically means insurance agents and companies have to take an active role in convincing people to purchase policies. This is largely due the lack of understanding and awareness about the true value of insurance. In Sri Lanka, the concept of insurance is often viewed skeptically as an unnecessary expense rather than a safety net.

This perception is partly due to a lack of financial literacy, as many individuals are unaware of how insurance can protect them from financial adversities in the face of unforeseen events.

Moreover, the statement also implies that insurance is perceived as a luxury item rather than a necessity. In a country where many people are struggling to meet basic needs, investing on insurance products may be out of reach or irrelevant. This fact was proved recently with statistics that showed insurance penetration in Sri Lanka declined to 1.1% in 2023, from 1.3% in 2021.

Why insurance should be bought

To understand why insurance should be bought rather than sold, it is important to understand the fundamental purpose of insurance. That is providing financial protection against risks. In developing economies like Sri Lanka, where economic uncertainty and vulnerability to natural disasters are frequent, insurance offers a critical safety net. If people begin to view insurance as a proactive measure for these kinds of vulnerabilities, they are more likely to appreciate its value and integrate it into their financial planning.

Empowering individuals through financial literacy