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Science & Technology

By Syed M. Aslam
May 14 - 20, 2001

Muhammad Idrees Ansari's association with insurance dates back to over half a century. Better known as M.I. Ansari in the insurance circles, he completed his education from Islamia College Badayun, UP, India and migrated to the then new-born Pakistan in 1949. After a two-month stint in Navy he joined the Department of Insurance in a junior position the same year and worked his way up through various positions ultimately retiring as the Deputy Controller of Insurance forty years later in 1989. Today he is the managing director of a private non-life insurance company, Agro General, and at the same time remains an avid advocate of private sector insurance. He is the chairman of Insurance Association of Pakistan, the representative body of some five dozen private insurance companies both local and foreign. In the recent past he has also served as Vice Chairman of IAP and has been elected many a time a member of its central executive committee.

PAGE: Are you satisfied with the status of insurance here in Pakistan?

M.I. Ansari: No. Insurance the worldover is treated as one of the most important service industry. However, in Pakistan it has never been accorded the importance it deserves due primarily to the lowest priority accorded to it by the successive governments. Insurance has never been allowed to flourish as an independent industry which is obvious from the fact that it is being regulated through the now defunct Department of Insurance in the Ministry of Finance. There has been cosmetic changes but not much else has changed. For instance, from January 1 this year insurance business is regulated by Security Exchange Commission of Pakistan instead of Department of Insurance and yet it has failed to bring any positive change as SECP, though autonomous, is hardly independent to carry out its functions as it has to report to Ministry of Finance.

PAGE: What's your views on the new Insurance Ordinance 2000?

M.I. Ansari: Though the Insurance Ordinance 2000 fails to amend and modify the outdated Insurance Act 1938, a proposal strongly backed by the IAP, it does aim at protecting the interests of the insurees better than any time in the past. This has been done by increasing the minimum paid-up capital for both the life and non-life insurance companies. For instance, the minimum paid up capital for general insurance companies is increased from just Rs 1.5 million to Rs 80 million while that for the life insurance companies from Rs 60 million to Rs 150 million. Similarly, security deposit has also been increased from a low Rs 350,000 to Rs 10 million. Most importantly, the rules governing solvency margins for insurance companies are made much stricter: motor vehicles are no more treated as assets, only a certain percentage of investment in shares is admissible as assets which is also true for real estate.

PAGE: What does mean in term of benefits to the people?

M.I. Ansari: It means that only the financially strong companies would now be allowed to engage in insurance business. It also means that the changes would ensure the availability of more liquid funds with the insurance companies to help settle claims promptly. However, the above rules remain more or less unimplemented a good nine months since August 19 last year as they are yet to be prescribed and also published.

PAGE: What major issues still remain unchanged?

M.I. Ansari: The Ordinance has failed to effectively address the widespread issue of state monopoly which is depriving the private insurance companies of immense business on the one hand and reinsurance problems on the other. Public sector keeps on enjoying a crushing monopoly over insurance business as National Insurance Corporation keeps on enjoying complete monopoly on the insurance of all public property while the former Pakistan Insurance Corporation has changed only in name Pakistan Re-Insurance Company (PRC) under the Ordinance. PRC keeps enjoying all the previous privileges including a fixed compulsory cession down from 20 previously to 15 per cent at present which would be abolished by 2004 and 35 per cent of the obligatory cession which may or may not be abolished by 2004. PRC keeps enjoying the captive business at its own terms and conditions. In fact section 43 of the Ordinance allows it to ask whatever information it may feel necessary to keep on delaying or altogether refusing to pay claims.

PAGE: What could be done?

M.I. Ansari: If the government is really interested to see PIC and NRC flourish in the long run they should not be allowed to enjoy any statutory privileges such as the ones mentioned above. They should be allowed to run strictly on professional and commercial lines like any and all other businesses.

PAGE: What do you say about the abundant presence of fake Third-Party insurance which offers no relief to thousands of traffic related deaths and injuries every year?

M.I. Ansari: Yes, we are aware of the massive fraud going on under the cover of useless Third Party insurance primarily to meet only the legality. I suggest that IAP should be allowed to operate a co-insurance on behalf of its member companies which would not only protect but also uniform rates across the country unlike the situation at present. It would also earn government a substantial revenue as it collects 3 per cent excise duty and one per cent Federal Insurance Fee on every single insurance policy written in the country. We estimate that the volume of Third Party insurance premiums in the country exceeds over Rs 1 billion annually.