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Pakistan’s insurance industry — scope, growth and future

The insurance industry in Pakistan is relatively small as compared to its peers in the region. The insurance penetration and density has remained very modest as compared to other countries. However, the situation has been improving over the last 5 years and the insurance industry, especially life insurance has shown tremendous growth. This growth can be attributed to the change in perception of life insurance which is now being perceived as security for prosperous future in the event of some unfortunate incident.

Life insurance affects a country’s social and economic structure to a great extent. Due to its nature, life insurance differs from all other kinds of insurance. In the last few years, this sector in Pakistan has experienced tremendous growth of 30-35% annually. There have been many product and operational innovations because of customer needs and increased competition among the players. Although the industry faces the challenges of uncertain economic conditions, it has also benefitted from the changes in the regulatory environment.

The impressive growth of the last few years is due to aggressive expansion of distribution channels, especially bancassurance which now comprises of a significant portion of the business of most private sector players. Bancassurance has enhanced the insurance industry in Pakistan in terms of increased market penetration by being able to access millions of bank’s customers.

Recently, SBP has allowed conventional companies to open Takaful Window Operations which will further boost the insurance sector as companies with their expansive distribution channels will be able to target the market which was previously inaccessible due to religious reasons. Takaful now gives this target market the opportunity to access the value proposition of insurance. It aims to target that market segment that deems conventional insurance against the Islamic principles.

The key drivers of insurance growth in a country are typically macroeconomic factors, regulatory factors and demographics of a country. In Pakistan, the insurance penetration is less than 1% which is very low as compared to India and Bangladesh. Yet there is a remarkable opportunity for the whole sector as there is a huge untapped market. Insurance companies can grab this opportunity with innovative products tailor-made for customers’ needs. Life insurance in Pakistan promises exciting growth. There is also room for new players in both conventional and Takaful areas. At present, in the life insurance sector there are nine life insurers, including two family takaful operators and one state-owned insurer. There are currently 41 non-life insurers operating in the market, including three general takaful operators and one state-owned insurer. Multinational players do not appear to be interested in this segment due to political instability and security concerns.


A major challenge facing the insurance industry is lack of quality human resource. Insurance companies need to invest in developing the competencies and skills of their employees along with technical abilities to innovate new products. Further, inculcating ethics and good business practice is also crucial.

Another major area of utmost importance is customer services. The needs of the customers are evolving and they rightly demand value and differentiation in return for their loyalty and long-term relationship. The insurers have to abide by various operational, regulatory and financial requirements which makes it all the more complex and expensive. When insurers deliver an exceptional customer experience, it ultimately translates into profits. Therefore, continuous improvement and innovation is required in this area for insurance companies to excel.

The insurance sector is going through a lot of changes worldwide, creating new challenges and opportunities for both the insurers and regulators. Therefore, it is essential for insurance companies to go through organizational and operational restructuring to achieve overall efficiency by avoiding financial risk and uncertainties.

The players in the insurance market should ensure that the life insurance is presented to an individual with all its advantages and benefits. Better education and awareness that would result from a fair and quality transfer of knowledge would itself represent a motivational force that could be highly beneficial for the economy in general and for the insurance industry in particular.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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