INSURANCE AT NASCENT STAGE

KANWAL SALEEM
(feedback@pgeconomist.com)
Apr 19 - 25, 2010

Currently, there are around 54 insurance companies out of which 49 companies offer non-life insurance and 5 offer life insurance services in the country. The non-life insurance industry also includes six companies that provide health insurance coverage as well.

The country's two major political parties-Pakistan People's Party and Pakistan Muslim League-Nawaz had announced to introduce health insurance scheme for the country's population but still a lot of practical work is to be taken in this regard.

In the wake of increased burden of diseases with limited resources for vast population of the country, it is necessary to introduce scheme of health insurance so that people could get quality treatment facilities.

What is needed is to promote the concept of insurance so that more and more companies could come forward and provide better policies to the people.

Experts told Page that the insurance industry of Pakistan forms a meager part of the GDP as compared to other nations of the world. With penetration of merely 0.5 per cent the insurance industry in Pakistan is still at its nascent stage in consequent of lower demand.

"There is a monopolistic competition within the non-life insurance sector in Pakistan as there are around 49 non-life insurance companies. However, the industry is highly concentrated as the top 5 companies hold 70 per cent in the overall assets and net premium of the sector," they added.

According to them, Motor and Fire insurance are the largest segments with the overall market share of 35 per cent and 34 per cent respectively. This is followed by marine insurance with around 16 per cent share. The profitability of the non-life insurance sector has been on the decline from the last 3 years.

The major reason is primarily the poor economic condition of the country. The factors that have contributed to the decline in profitability include declining gross premiums because of lower demand, losses on investments on account of poor stock market and higher claims due to poor law and order.

Most of the insurance companies incurred huge losses in their investment in stocks because of extreme volatility of KSE 100 index due to political instability, poor law and order situation and lack of foreign direct investments in the year 2009.

On the other hand, State Life Insurance Corporation of Pakistan (SLICP) has secured Rs1.68 billion as First Year Premium (New Business) during the first quarter of 2010 showing an increase of 35.32 per cent while in the year 2009 the corporation had secured record First Year Premium of Rs6.96 billion showing an unprecedented increase of 40 per cent.

In the year 2009, State Life Insurance Corporation of Pakistan had also paid Rs6.92 billion on account of claims thus providing financial protection and savings to thousands of valued policyholders and their families nationwide.

A spokesman of the State Life Insurance Corporation of Pakistan said that SLICP is one of those public sector organisations, which are not a burden on the national exchequer.

In fact SLICP is playing a pivotal role in providing financial protection to million of families through life insurance.

According to him, the SLICP has paid Rs1.15 billion as death claims to 6,600 families of policyholders and Rs5.77 billion as maturity claims to more than 47,000 families, which provided financial relief to policyholders and their families. Renewal premium also touched the figure of Rs15.36 billion showing an increase of 21.43 per cent. The marketing force of State Life also extended financial protection to 5,26,000 new families' nation-wide during the year 2009.

He further said that the SLICP's Life Fund, which is the key indicator of its financial stability, has now reached to Rs202 billion.

About future products, the spokesman said that the SLICP is considering to launch some new life insurance plans, so that people can invest their small savings in the life insurance policies. The work is in progress in Bancassurance and Takaful. The State Life Insurance Corporation of Pakistan is a very sound and stable financial institution, which is also evident by the fact that it has assigned "AAA" rating by PACRA.

The spokesman further said that SLICP's business in Gulf Region is also improved and in the year 2009 it has procured new premium around $3.2 million showing 10.42 per cent increase over the previous year. He said that SLICP's investment portfolio is also progressing and in the year 2009 the investment income has reached to Rs21.38 billion showing an increase of 11.69 per cent. Further, he said the State Life Insurance Corporation of Pakistan is one of the largest real estate owners of the country. The corporation has wisely invested the policyholders' money in sound real estate projects. This not only provides earnings to the corporation in shape of rent but also provides space for its offices throughout Pakistan. In the year 2009, the SLICP has secured Rs335 million as net income from its real estate operations, he added.

In the Group Life side in the first quarter of 2010, the State Life Insurance Corporation of Pakistan has so far secured new premium of Rs627 million while in the year 2009 it has secured Rs3.70 billion premium from 1323 groups, which also include 227 new groups. State Life's Multan, Central, Southern and Northern Regions have shown a record increase of 55.92 per cent, 43.65 per cent, 36.33 per cent and 22.44 per cent respectively.