The First Foreign Investment in Health Insurance
Sector in Pakistan
By SYED M. ASLAM
May 07 - 13, 2001
Allianz-EFU has designs on Pakistan: It envisions
to turn health insurance a genuinely affordable proposition in a
country where insurance, health or otherwise, still much remains an
involuntary expense to meet a certain legal requirement.
Allianz-EFUνs optimism to play the self-appointed
pioneering role in the health insurance sector obvious from many
firsts which it has achieved in less than one year of commercial
operations here in Pakistan is based on ground realities. It feels
that it would be able to mobilize the thus dormant potential in the
top sixth or seventh most populated country of the world which houses
a huge market of 140 million people.
The optimism is strengthened by the existing
realities which leaves a wide vacuum in healthcare services. On the
one hand, the public sector medical health service, financially
constrained as it is, is geared to reach only a negligible percentage
of a huge population and on the other, the rising cost of health
services in the private sector has already touched an unaffordable
level at least for the low and middle income groups which make up
the biggest segment of the society.
Allianz Group is one of the world's largest
composite insurers in the world. It is engaged in two business
primarily Insurance, both life and general, and Assets Management.
In 1999, the annual premium income of the Group exceeded US$ 50
million while its Assets exceeded US $ 600 million. Established in
Germany in 1890, Allianz today has active presence in over 70
countries across the globe. Today, Allianz is the 25th Fortune company
in term of business and 6th in term of assets under management.
EFU Group is one of the largest insurers of
Pakistan which underwrites both life and non-life risks. EFU General,
the local joint venture partner of Allianz, premium income for the
year 1999 exceeded Rs 1.8 billion. Allianz and EFU together share over
170 years of experience and expertise to offer quality healthcare
insurance both accessible and affordable.
About four years ago Allianz and EFU talked about
an idea to look at possibilities in healthcare insurance in Pakistan.
In March last year the two leading Groups signed a Joint Venture
Agreement. Two months later in May Allianz-EFU was incorporated once
it met the necessary regulatory requirements. License was granted in
August and Allianz-EFU commenced its commercial operations the same
The formal launching ceremony of Allianz-EFU was
held on the 3rd of this month. However, during less than nine months
of its informal operations, Allianz-EFU's has already expanded its
customer base to 140 companies and over 30,000 insured lives, both
group and individual today. Allianz-EFU sells both Group and
individual health insurance products. It also continues to expand its
customer base by tapping into voluntary groups, which offers a
combination of both corporate and individual health insurance products
to associations like Income Tax Bar Association, Institute of
Chartered Accountants of Pakistan, Karachi Club, Sindh High Court Bar
Association, etc., to insure only the interested members. The
individual health insurance plan can also be extended to members of
one's immediate family at an extra cost.
What makes Allianz-EFU health insurance products
unique is that individual/family as well as voluntary group's coverage
do not require an otherwise mandatory medical check-up. As far as
Group/corporate coverage is concerned, no medical check-up is needed
universally. Abolishing the mandatory medical check-up for
individual/family and voluntary coverage tacitly hints at
Allianz-EFU's resolve to provide open access to healthcare at
affordable prices. Yes, it does have designs on Pakistan to ultimately
make health insurance an affordable choice at the lowest levels of the
society, gradually and ultimately.
So how does the joint venture agreement between the
world's largest composite insurer Allianz and second largest domestic
insurer EFU would benefit the otherwise health insurance deprived
people of Pakistan? First, it puts together the expertise and
experience of two market leaders to focus exclusively on the thus
neglected health insurance industry. Second, it is the only company
which specialises and focus only on health insurance unlike others
which are primarily underwriting the health insurance covers like all
other general insurance businesses.
In addition, it also sells health insurance to
individuals, small Groups and voluntary groups making it the only
company catering to the needs of these two important segments of the
society. Being the only individual and small groups health insurance
seller it faces no competition whatsoever in these market niches, an
With an extensive network of over 70 branches and
1,000 agents nationwide, EFU General is in a position to help make
Allianz-EFU a market leader in health insurance. What makes
Allianz-EFU different is not only its vision but also its strong
financial, administrative, professional and infrastructure back-ups
which allows it to make a deeper penetration in the local health
Allianz is aware of the fact that at present New
Jubilee is the market leader in the group health insurance enjoying
more than 50 per cent of the overall share. It also realises that for
the last one year or so Commercial Union has also became very active
to increase its market share. Allianz-EFU thus have an strategy not
only to make a deeper penetration in the group health insurance market
but also to fully exploit the potential of the virgin individual and
small groups market which no other company cater to in the country.
How does Allianz-EFU plans to achieve that goal. PAGE
talked to the Managing Director and Chief Executive of Allianz-EFU,
Ahmir ud Deen. The following are the excerpts of the talk.
PAGE: Please give a brief of Allianz AG and
its joint venture agreement with EFU.
Ahmir ud Deen: Allianz was formed in 1890 in
Berlin. One-hundred-and-ten years later, today we are the largest
international insurance company in the world. Allianz transacts
business in 70 countries across five continentals.
Allianz has grown steadily over the past decade and
in the financial year our gross premium income has risen to 57.8
billion euros and net income during the same period totalled 3.4
billion euros. We focus on three main areas life insurance,
general insurance and assets under management.
Allianz in German means alliance. True to our name,
it is our corporate philosophy to prefer to work with local partners
in the countries where we transact business. We have a decentralised
style of management as we believe that every single of our market is
different and thus active participation of the local partner is
essential for success in that particular market.
We select our partners very carefully and that was
also true for our joint venture partner here. EFU, our partner in
Pakistan has 70 years of diversified experience in this region. In
addition, it has a strong distribution network, is the second largest
general insurer and the largest private sector life insurance company.
Last but not least, EFU's participative and decentralised style of
management is in congruity with our own.
PAGE: How do you see Allianz -EFU
contributing towards improving the quality of healthcare in Pakistan?
Ahmir ud Deen: As you know, Allianz-EFU
Health is a specialised heath insurance company. In fact, it is the
only such company in Pakistan. We write health insurance business
and just that. So, we are naturally very focused on delivering quality
to our customers.
One of the first things we are doing to improve the
quality of healthcare is to provide the population the means to pay
for it. Our first goal was to make quality healthcare accessible and
affordable. For instance, we are the first company here to offer
health insurance to individuals and families. Our corporate plans are
available to companies with as few as five employees.
Our early research indicated that the plans offered
in the market provided insufficient coverage. The patients were
exposed to the risk of incurring significant out-of-pocket expenses in
case of serious illness. Our products offer high coverage limits and
are designed to minimise the patientsν financial burden. So how does
all this improve quality?
Firstly, the patients will no longer have to forgo
medical treatment because they have the means to pay for it. In
addition, there are a number of other initiatives we have undertaken
to work with the medical community to improve the quality of
healthcare. Without going into detail I would give you an example: We
are working very closely with some of the most eminent physicians and
surgeons to gradually implement evidence-based International Best
Practice Guidelines. These guidelines, developed by the International
Medical Community and endorsed by organisations such as the World
Health Organisation, provide a set of protocols that reduce the
variability in treatment patterns that are much common here.
PAGE: What are the new trends of healthcare
in the international markets that Allianz-EFU would be introducing in
Ahmir ud Deen: The trend in delivering
healthcare internationally is to move from in-patient setting to
out-patient settings. The patients admitted in hospitals are exposed
to infections and viruses that pose great risk and can result in
Our next generation products are being designed to
focus on primary care and early involvement of family physicians. The
early detection of disease and its treatment will result in improved
health. We are in the process of introducing integrated care
principles to select the best hospital and healthcare for the benefit
of our customers. These include selecting only the quality hospitals
and provider networks, credentialing of physicians and surgeons,
gathering and analyzing clinical data and sharing it with doctors and
clients to improve the quality of treatment. It also includes
introducing the best practice guidelines and protocols, coordinating
the patient's care all the stages from admission to discharge and case
management for prolonged or chronic illnesses.
PAGE: What potential do you see in this
country for the growth and development of the healthcare sector?
Ahmir ud Deen: Healthcare costs are rising
rapidly. Governments and employers all over the world are faced with
the challenge of rising costs. They demand greater value and
efficiency in triangulating cost, access and quality. The situation is
no different in Pakistan. Numerous public and private sector
organisations are looking to health insurers like us to provide them
Pakistan's expenditure on healthcare is very low at
less than one per cent of GDP. The insured element again is very low
at less than one per cent of this expenditure. You can see that
healthcare sector offers many opportunities and challenges.
However, the great demand from the corporate sector
is driven more by price decision than the quality. Of course, group
insurance worldwide is one of the most risky as it includes all the
employees of an organisation many of them may not be in good physical
PAGE: How does Pakistan fit in your
organisation's overall business plan?
Ahmir ud Deen: Allianz is growing rapidly in
Asia Pacific. We are already present in 18 countries of the region
including Australia, Singapore, India, Thailand, Philippines, China,
Hong Kong, Malaysia and Indonesia to name a few.
Pakistan is a growing market and offers good
potential due to its large population base particularly for the health
insurance sector. The insurance sector has recently undergone
extensive legislative changes that make the environment attractive for
investment. Allianz is committed to stay in Pakistan on a long-term
basis and we expect our relationship with EFU to grow with the passage
We have achieved many firsts here in Pakistan
the installation of state-of-the-art health insurance-specific IT
system, first, and the only, company selling individual and family
health insurance products, a insurance company which is exclusively
focuses on health-insurance, new products tailor-made specifically to
meet the needs of the people. Of course, one of our greatest strength
is that we enjoy the fullest backing of the experience and expertise
of Allianz worldwide.
Thus far health insurance sector here has suffered
from lack of innovation primarily due to lack of specific data and
also the efficient use of it. We on our part feel that investment in
IT is actually is an investment in future and that explains our
installing the state-of-the-art health insurance specific IT system.
PAGE: Hospitals remain almost entirely
deregulated in Pakistan. On the other hand, pharmaceutical industry
and insurance sector are highly regulated. Does that mean anything for
a health insurance company like yourself which has to deal with both
the hospitals and medications?
Ahmir ud Deen: As stated above we follow a
very strict criteria in selecting partner hospitals. At present we
have over 70 such partner hospitals across the country including 30
alone in Karachi. Our selection is primarily based on quality of these
hospitals and their physicians. We have established, an another first,
a medical advisory board comprising physicians who specialise in their
respective fields to help induct fresh ideas to match quality of
service at par with internationally acceptable standards.
Yes, the lack of regulations for hospitals have
resulted in wide gaps in prices and services at hospitals here.
However, we apply international standardisation at our partner
hospitals. Our customers are free to go to any participating hospital
of their choice as our policies cost the same.
Besides the population factor, the financial side
of our business makes it imperative for us to work in an environment
which allows us to bring products which can trickle down to the lowest
levels. That explains why we have selected partner hospitals in many
low-income localities of Karachi. Insurance is all about numbers and
we would go for the volumes primarily by offering products which are
affordable. With the expected increase in demand we plan to make our
products even more affordable.
PAGE: What role you feel private sector can
Ahmir ud Deen: As stated above we feel that
corporate sector here have long been denied an opportunity to provide
health insurance to its employees at affordable costs of course.
We are ready to fill the niche. Yes, private and corporate sector has
to play an important role for the required economies of scale for us
to help us penetrate to the lowest strata of the society. We feel
there is a willingness on its part to help out its sick employees
otherwise not possible as it is one of major social aspect of our
culture. Yes, a few general insurance companies have been writing
health insurance but none of them treat it as their core activity.
Allianz on the other hand is totally health insurance-focused company
and thus in a much better position to meet the existing but unmet
demand both in terms of service and price.
Coming back to trickling down of our products to
the lowest levels, we feel we have to start from more developed urban
areas. However, we will also be working closely with healthcare
authorities in the rural areas about basic health issues as hygience.
PAGE: Undercutting has become all too common
a phenomenon for almost all types of non-life insurance businesses. Do
you have any concerns?
Ahmir ud Deen: There is no undercutting
malpractices in health insurance, because health insurance presently
is not tariffed thus allowing the players to fix rates as they see fit
according to market conditions. We also feel that government should
abstain from fixing a tariff so as to let the people and market
dictate the rates though the situation does not affect us as we are a
foreign joint venture partner. I must add that we are not here to
steal business from our competitors. In fact, we want to be the
pioneer to make health insurance affordable and want to work with
other players for the overall betterment of this particular type of
Though the total spending on health insurance in
Pakistan is low Rs 300 million but one must not forget about the
immense potential that this market of 140 million people offers.
2nd largest insurance company of Pakistan.
Annual Premium Rs. 1.8 bil.
Founded in 1932, one of the oldest insurer in Pakistan.
Branches all over Pakistan
EFU-Life, a sister concern, is the largest private life insurance
EFU General has over 70 branches all over Pakistan.
EFU Life has more than 1000 agents countrywide.
Largest composite Insurer in the World.
Founded in 1890, in Germany
Operating in over 70+ countries
Annual Premium at $55+ billion
Annual Profit at $2 billion
Assets under management over $650 billion.
Highest rating of 'AAA' by Standard & Poors.
Extensive presence in Asia Pacific Region.