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Insurtech in Pakistan: trends, products and significance to penetrating a developing market

What is Insurtech?

Insurtech is an umbrella term that refers to the application of contemporary technology to create efficiencies and added value from traditional insurance models. While traditional insurance models can also be made improved through the employment of new digital systems, this would not be considered ‘insurtech’ unless some tech-based innovation that disrupted the underlying model was involved.


The shiny new website of a traditional insurance provider would, therefore, not come under the ‘insurtech’ umbrella, regardless of if it was built on the latest front-end coding framework. Or even if the usability and functionality of the website’s CRM was updated. That would be considered the tech equivalent of a new window display or refitting of the storeroom in a shop.

However, if the traditional insurance company used an AI algorithm to more efficiently analyse the individual risk profile of an insurance customer, using big data to arrive at a highly personalised offer, that would be insurtech. The technology employed also doesn’t have to be hugely complex or sophisticated. It just needs to be used in a way that fundamentally changes how an insurance product is priced and sold.

If a digital micro-insurance product is sold and redeemed via a basic mobile phone, in an innovative way that addresses new demographics that have previously not been serviced by insurance products, that would also be considered ‘insurtech’. The technology itself might not be cutting edge but it is used in a way that creates new markets or efficiencies in those markets.

The importance of insurance access to Pakistan’s economic development

The insurtech trend is disrupting established consumer-facing insurance models and products across the world. In the developed world the focus is on more personalised premiums and improving the efficiency of providers’ back office systems or how they sell on part of their risk to re-insurers. But it is in the developing world that insurtech is arguably having the greatest impact. It is opening up entirely new markets and bringing insurance to demographics that were until now financial refugees – unable to access mainstream, traditional financial services. That could be because they are low income individuals or families or because they simply lack the personal identity or financial documentation traditional systems require.

Along with banking and credit, insurance is one of the pillars of the kind of basic financial services that promote economic growth, on both an individual/family and regional/state level. Pakistan is still one of the countries in its region with the lowest rates of adoption and, most importantly, access. But fintech, the broader term that refers to technology innovation and disruption across financial services, is changing that. And when it comes to specifically insurance in Pakistan, insurtech.

The strong development of insurtech is of particular importance to the country’s lower and lower-middle income demographics, for whom traditional insurance products are usually inappropriate. Insurance cover can help save families and small businesses with little to no financial buffer from disaster when the unexpected strikes. Freeing individuals and companies of that worry, as well as providing a life jacket when things do go wrong, has been demonstrated to significantly improve productivity and economic stability and output.

In recognition of this fact, The Securities and Exchange Commission of Pakistan (SECP) is working hard to promote the development of insurtech in the country as well as strategize on how best to direct its focus. Initiatives such as last year’s (2018) Insurtech (Insurance Technology) for Inclusive Insurance: Opportunities and Challenges for Developing Countries in Islamabad workshop are a cornerstone of the Commission’s insurtech push.


Increasing mobile phone penetration key to Pakistan’s insurtech revolution

As in other developing economies, the mobile phone has become a crucial catalyst to accelerating economic development. The access to communication and information is one benefit to increasing percentages of the population owning mobile phones. The other is them providing a gateway to financial inclusion and enablement.

The low income consumers whom insurance products can most benefit often do not have traditional bricks-and-mortar financial services buildings such as banks and insurance brokers within comfortable walking distance. This presents a logistical challenge to them first signing up for insurance products, being able to pay their premiums regularly and making a claim should the need arise. However, simple mobile phone technology helps bridge this logistics bottleneck.

Travelling vendors with tablet computers can more easily visit the often isolated rural areas this demographic lives in, signing them up to policies. They can then make small premiums payments via SMS or simple payments solutions built for simpler mobile phones that are not ‘smartphones’ or need mobile internet access.

According to the Pakistan Telecommunications Association’s (PTA) annual report for 2017/18, there were 150 million mobile subscribers in Pakistan, adding up to market penetration, or ‘teledensity’ of 74% as of June 2018. That figure is also on a strongly positive trajectory, supported by initiatives such as the Development of AMA Scheme, Integration of Third Party Service Provider (TPSP) and Cellular Mobile Operators (CMOs) networks for interoperable solutions, Rationalization of National Database & Registration Authority (NADRA).

Smartphone ownership is increasingly quickly too and is, according to data and statistics service Statista.com, expected to top 50% of all mobile phones in Pakistan by 2020.

Smartphone penetration in Pakistan as a share of connections


One of the major outcomes of mobile phone penetration in Pakistan has been the increase in usage of core financial services. According to the annual PTA report, the number of mobile/branchless bank accounts increased from 15 million at the end of 2015 to 38.5 million by March of 2018. A similar opportunity exists for growth in insurtech adoption.

Challenges facing insurtech in Pakistan

Other than the space for growth that still exists for mobile phone ownership to overcome logistical barriers to the penetration of insurtech products, with more than 20% of the population still ‘unconnected’, education is the greatest challenge facing the sector in 2019. The challenge of educating low and lower middle income demographics on the value of paying for insurance they may never need to use was highlighted by the deputy CEO of BIMA, a microinsurance provider operating in Pakistan in a recent interview with online technology media TechCrunch. Mathilda Strom told TechCrunch:

“Seventy-five percent of our subscribers have never had insurance before. We need to educate people about what it is, and also why you need it.”

However, despite the challenges, there is hope that insurtech lead to a trend of insurance adoption in Pakistan that is comparable with mobile-based branchless bank accounts.

The Author (Muhammad Waqar Asghar) is the Founder & CEO of Pakistan’s leading Insurance Aggregator Platform called Mawazna.com. Mawazna.com is Pakistan’s consumer champion across financial services. Compare and contrast Pakistan’s best financial products and services across retail insurance, credit cards, consumer loans, mortgages, bank accounts and more as well as read consumer reviews and the opinion of our personal finance experts. Mawazna.com supports Pakistan’s progress towards a rich and inclusive ecosystem of financial services.

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