Jubilee Life and EFU Life leading the sector remarkably
Diversified products added for further development of the sector
Life insurance is growing and the share of private insurers is increasing. The profit of private life insurers continues to rise as the sector has been in a high-growth mode for the last few years. The sturdy growth is seen in the industry over last five years to six years onwards. The performance of the life insurers to rapid growth in the country’s is due to the rising capital markets. The private insurers have invested heavily in the stock market while due to lower expense, the profitability of life insurance companies has remained strong in the recent years.
Apart from the arrival of Takaful, growing middle class, soaring Bancassurance and introduction of small ticket insurance schemes will all aid growth of life insurers in coming years. Bancassurance channel have been a key driver for business growth in the past, through alliances with 14 bank partners for conventional life insurance products, and 10 bank partners for BancaTakaful solutions.
The life insurers’ pre-tax profits rose by almost a fifth to Rs3.7 billion in the first nine months of 2016 to September from Rs3.1 billion a year ago. Assets under management of the five private companies operating in the life insurance segment of the industry increased by 28.6 percent to Rs225 billion from Rs175billion and investments grew by 26 percent from Rs152.5 billion to Rs193 billion.
The premium rose slowly by a mere 5.1 percent from Rs52.7billion to Rs55.5 billion during the first three quarters of the year.
The private life insurance industry reported in 2015 that its net claims ratio had improved 3.5 percent from 31.8 percent a year earlier to 28.3 percent. Higher business acquisition costs, the expense ratio of the industry fell from 28.6 percent to 22.4 percent.
The premium base of the life insurance firms, including the state-owned State Life Insurance Company, has grown at a compound annual growth rate (CAGR) of 25 percent since 2009, with total gross premium rising to Rs162 billion at the end of 2015.
Private insurers had underwritten a little over half of it or Rs82.3 billion, up by 52 percent from Rs54.1 billion, at the end of 2014. However, life insurance penetration remained at lower levels and was around 0.57 percent at the end of 2015 against the world average of 3.3 percent.
Life insurance companies earned a profit of Rs 798.6 million in the first quarter of 2016, which is an increment of 28.5 percent from the comparable period in 2015.
In 2015, the life insurance total gross premium crossed the Rs150 billion marks, with an average 5 year annualized growth of approximately 25 percent.
PAYBACK AND FUTURE PLANS
The life insurance industry owes much of its premium base growth to the introduction of Bancassurance and the sale of life and other insurance products through banks.
The income and awareness of middle class households has also driven the demand for life insurance. Significant proportion of premium invested into the life insurance companies’ own managed funds; customers are able to earn a handsome return on their investments.
Despite years of high growth, life insurance coverage remains significantly small. Low penetration and density mean the life insurance industry has tremendous scope for expansion.
The introduction of Bancassurance, the insurance companies would reach out to the rural population. In addition to six life insurance companies, including the state-owned SLIC, operating in the country along, two family Takaful firms are also working in this segment.
The market share of the Takaful operators remains small owing to lack of much public awareness about Shariah-compliant products and services but with the opening of Takaful windows by conventional life insurance companies is expected to help grow this segment.
The use of information technology tools would also increased for back-end operations as well as for sales services to reach out to the customers.
Traditionally, direct selling played a major role, now however; Print advertisements and TVCs are used extensively for awareness and image building.
The shift in marketing communications is due to the fact that Pakistan’s life insurance to GDP ratio is one of the lowest among developing countries, standing at only 0.58 percent of GDP in 2016.
The creation awareness of life insurance policies, not only as a protection-based product, but as a savings and investment tool, is expected to expand the customer base.
THE ROLE OF EFU AND JUBILEE LIFE
EFU Life and Jubilee Life have diversified their life insurance portfolios and launched marketing campaigns to introduce their new products to the market.
The highest share of the life insurance market belongs to State Life (50 percent); Jubilee Life and EFU Life each account for 20 percent of the overall market and the remaining 10 percent is shared between smaller companies such as Adamjee Life, Pak-Qatar Takaful, and IGI Life.
Although State Life’s penetration in the market has been stagnant for a while, Jubilee Life Insurance has seen an average annual growth of 35 percent in the last 13 years.
To break State Life’s hold on the market meant creating differentiation in the form of a c portfolio.
Market research was conducted to identify latent needs and this led to the formulation of cardiac savings, critical illness, education, retirement and wedding plans within the life insurance category. Education and wedding plans have the greatest emotional appeal and are the most sellable products. The child financial planning solutions make up 75 percent of the company’s revenues.
Child savings plans (education and wedding plans) have the greatest emotional appeal and are the most sellable products.
Both EFU and Jubilee Life have substantially increased their budgets, and are advertising heavily on print, TV and outdoor. The future looks very promising, because almost 60 percent of the population is below 25 years of age.
This presents a huge opportunity for marketers to inculcate a savings concept early on to ensure that once these individuals enter the workforce, they invest in various insurance plans.
EFU Life Insurance in particular the year 2016 was a good year, not only in terms of the exceptional growth across all segments but also because of the ground breaking innovations in new products.
EFU Life Insurance commenced operations in 1992, with a paid up capital of Rs30 million, and today that paid up capital has increased to Rs1 billion, which is the highest in the life insurance industry.
EFU Life Insurance is one of the leading asset managers in the country with total funds under management of over Rs94 billion.
Credit rating was upgraded to AA+ with outlook stable by JCR VIS, which is a testament to company’s strong capitalization level vis-à-vis the nature of risks underwritten and a very high capacity to meet policyholders’ obligation.
EFU vision as the leading life insurance provider is to take life insurance to every household in Pakistan.
The main task is to further expand distribution network for marketing products, and continue to grow our portfolio and providing innovative and efficient financial planning solutions that cater to all pockets and segments of our society.
EFU head believes the country’s youth has the power to move the economy into the next phase of independence.