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The First Foreign Investment in Health Insurance Sector in Pakistan

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 month.

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 another edge.

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 insurance market.

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 Pakistan?

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 medical complications.

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 solutions.

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 health.

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 of time.

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 play?

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 insurance.

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 co.
• 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.