PAKISTAN'S LIFE INSURANCE INDUSTRY
By Kamran Channa
Aug 18 - 24, 2003
Life in general is prone to insecurities and threats that has a direct bearing on individual and the society. The concept of life insurance has emerged much earlier in the pre-industrial revolution era. The human life value is central to protection against "Loss", virtually life insurance aims to provide "protection" against all odds.Life insurance industry in Pakistan had witnessed radical transition since 1947. The period from 50's to 60's was commanded by private life insurers who were engaged in marketing and selling their life insurance plans and policies in the country.
The nationalisation of economy in 1972 also affected the insurance sector, that ultimately resulted in the nationalisation of life insurance industry. On November 1st 1972, State Life Insurance Corporation of Pakistan was established by merging 32 private insurance companies, with a view to run insurance business on sound lines, provide more efficient service to the policyholders, maximise the return to the policyholders by economizing on expenses and increasing the yield on investment, make life insurance a more effective means of mobilizing national savings, widen the area of operation of life insurance and make it available to as large a section of the population as possible, extending it from the comparatively more effluent sections of society to the common man in towns and villages and use the policyholders fund in the wider interest of the community. The main objectives behind the establishment of State Life was to provide the benefits of life insurance to all the sections of society and generate 'savings' at the macro level to help fuel the economic growth of the country. From 1972 to 1992 life industry showed steady trends, whereby State Life maintained its hedge as a single largest life insurer in Pakistan that provided financial protection and savings to millions of policyholders and their families nation wide and to the Pakistani expatriates employed in the Middle East and Gulf region.
Life Insurance industry still went on transition on account of the deregulation and privatization policy followed by the then Government in 1992, when doors were once again opened for private life insurance companies to help promote competition in the insurance sector. Since 1993 four private companies entered in the private sector. All the four private companies are listed on the country's Stock Exchanges, yet they lag behind in market share that just stands over 8% while State Life holds 92% as a corporate leader in life insurance industry.
SLIC — THE INDUSTRY LEADER
In the recent past, State Life has successfully completed 30 years of financial commitment and services to the policyholders and the nation. Given the country's population about 25% of Pakistani families are protected by State Life Group and Individual life insurance, but work has to be done to cover the remaining 75%. Virtually, there is a great market potential for selling life insurance plans so that the benefits of life insurance could be reached to every household and family unit in Pakistan. Seemingly, State Life Insurance Corporation of Pakistan with its sound financials has the ability to deliver the goods. This can be guage from the corporate performance of SLIC. State Life has successfully extended financial protection to 75,765 new policyholders and their families by procuring 65 crore rupees. New business showing the increase of 35.04% during 1st half of 2003. The renewal business stood at 1.8 billion rupees while achieving 61.8% second year persistency. The Life Fund of State Life stands at Rs.86 billion rupees and the Investment Portfolio at 82 billion rupees as at 31st December 2002. State Life remains to be the nation's largest Real Estate holder, whose book value stood at 25.33 billion rupees. Certainly State Life leads its way by effectively providing the quality financial services to its 52 lac policyholders 19 lac individual life and 33 lac group-life policyholders. Since its inception in 1972 upto August 2002 State Life had paid 17 billion rupees on account of maturity and death claims that benefited 4,55,393 policyholders and their families in individual life, while on the Group Life side State Life paid more than 15 billion rupees as Group claims during the same period. According to an estimate, State Life is paying 30 lacs rupees per working hour to its policyholders on account of maturity and death claims. State Life aims to settle the policyholders claims within 90 days time period that will be heavily compensated with all the benefits. The four P's of marketing i.e. product, price, place and promotion forms the core marketing philosophy at State Life. Presently there are 26 Zonal Offices that run under four Regional Offices geographically. The North, South, Central and Multan Region are fully operative and well netted with the trained marketing force committed to the excellence of procuring quality business and perpetually involved in providing the services to the policyholders at their door steps.
Despite its immense presence at every level of the economy; be it Industrial, Commercial or Individual, insurance still remains an involuntary expanse in Pakistan, considered good only if necessitated by the Law.
THE INSURANCE ORDINANCE 2000
To safe guard the interest of policyholders streamline the insurance sector and promote good corporate governance in the insurance sector the Government promulgated Insurance Ordinance 2000, by repealing the Insurance Act of 1938. Now all the insurance companies operating in Pakistan are liable to abide by the Insurance Ordinance 2000. The Insurance business is being regulated by the Securities and Exchange Commission of Pakistan (SECP). However the policy making powers still remain with the Ministry. The Ordinance has tried to address the concerns of the insurers amid increasing complaints about the payment of claims. The Ordinance has also laid down a well-defined criteria for the recruitment of insurance agents, brokers, surveyors, to encourage professionalism within the industry to better protect the interests of the policyholders. By effectively implementing the insurance ordinance, State Life has achieved tremendous corporate success during the last three years. With the changing global political scenario, there is a great opportunity for all the life insurers to expand their operations. While its true that years of neglect, low savings rate and non-conducive business environment over the years have been some of the major factors that impeded the growth of life insurance industry.
There is a greater need felt on the part of government and corporate level to ensure that optimistic number of families be provided with the benefits of their hard earned money through life insurance that could ultimately raise the 'saving' ratio and contribute much to the economic development of the country. For instance, during the period 1985 to 1987, government successfully launched the "National Accidental Death Benefit Scheme" through State Life Insurance Corporation of Pakistan. All the breadwinners of the country between the age of 20 to 60 years were covered under "National Accidental Death Benefit Scheme", while in case of 'accidental death' an amount of Rs.10,000/- was paid to the heirs of the deceased. The amount was later raised to Rs.15,000/-. Due to the change in the government policies, the scheme was abandoned. However "National Accidental Death Benefit" did extremely well as it provided the financial protection and risk cover to general public in the country. The present government can revive the "The National Accidental Death Benefit Scheme" if only a fractional amount of a rupee is levied on a liter of petrol, so that the people could benefit from the scheme. The coverage limit can be raised from 15,000/- to 50,000/- which will be paid to the family of the deceased in case if accidental death occurs reportedly any where in the country. The revival of "National Accidental Death Benefit Scheme" will certainly nurture governmental efforts in its war against poverty alleviation in the country. The idea of providing the life insurance coverage through "National Health Insurance Scheme" can also work well for the people in Pakistan if implemented with letter and spirit.