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
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2000 fails to amend and modify the outdated Insurance Act 1938, a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
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