Managing growth

Dec 11 - 17, 2006

The insurance industry did not lag behind and grabbed its due share out of the overall economic turnaround achieved during the recent years, however, a healthy competition and innovative products also contributed significantly to the stellar growth of this sub-sector.

The figures which speak louder than the words revealed that during the financial year 2005-06, the two major segments of the industry - life and non-life insurance - registered exceptional growth in profits i.e. 26.2 percent by life sector and 27 percent by non-life segment.

People attached to this business are of the view that with the growth of industry, especially textile and automobile, which plan to invest Rs.60 billion in next five years, the insurance sector is bound to grow by leaps and bound.

However, there are some critics on the performance of the insurance industry as they feel that the premium of 5 percent being charged on locally manufactured or imported cars was too high and needed to be rationalized.

Mohammad Nasim Khan, Chief Executive and Managing Director Sigma Leasing, however, did not agree with this notion, saying that the industry has to deal with heavy claims which at one time used to erode at least 70 percent of the income of this industry.

Mohammad Nasim Khan said that the situation is showing signs of improvement in terms of law and order and claims of snatching of vehicles are coming down. Actually, insurance is important in its nature and gives confidence to the owner. However, there is no hard and fast rule for premium charges as they vary on cases to case basis. The rates come down even at 3 percent in case of insurance cover to fleet while it goes up with the insurance cover offered to elders because old age increases the risk of damages or accidents. He was of the view that there is an ample scope for increasing insurance business, especially for non-life insurance which is bound to increase with the growth of large scale manufacturing sector, particularly the automobile sector. He sees that a great market share is yet to be explored by the insurance industry in life segment as the people are not generally prone to insurance due to rigid or religious approach. However, with the growth of the economy, the insurance industry has to grow manifold in Pakistan.

Actually, the increase in profitability of the insurance industry stems from the expansion in business by both life and non-life insurance segments and a fall in the claim ratio. This resulted in a profit of Rs6.9 billion for the overall industry in 2005, as compared to Rs4.0 billion in the preceding year.

Non-life insurance is particularly expanding owing to a surge in industrial and trade activities. Rise in auto-sales on the back of higher credit availability to private sector is resulting in higher motor insurance, whereas the boom in real estate market has led to higher fire insurance and greater involvement of multinational and private firms in the business. The latter has particularly improved health insurance statistics, although this concept is new in Pakistan and presently its share is negligible. Resultantly, net premium income of non-life insurance industry witnessed a 27 percent growth, with all the major areas registering double-digit growth.

The life insurance sector also benefited from a rise in demand for both individual and group insurance. Resultantly, net premium income for life insurance registered a 26.2 percent rise. Despite a 20.6 percent fall in the gross premium as a result of competition faced from foreign firms, domestic reinsurance sector registered higher profits during 2005. The sharp rise of 82.9 percent during 2005 in profits of reinsurance is mainly attributed to a significant increase in investment income as well as a fall in the claims ratio.

According to figures released by the State Bank of Pakistan, among others, insurance was one of the major sectors, which received Foreign Direct Investment (FDI) a little over $300 million each during financial year 2005-06.

Actually, private real investment has led to accelerated growth in finance and insurance sub-sector during financial year 2005-06. As a result, real investment in this sub-sector registered an overall 16.0 percent growth during 2006 against a negligible 0.4 percent last year. This rise is principally driven by both higher FDI, including investment due to incorporation of a new Islamic bank, higher domestic investment as a result of improved profitability of the sector during the last two years as well as privatization proceeds.


The conscious need of securing the future of individual and the family unit and to promote savings through life insurance is one of the prime economic areas the present government is focusing on. The emerging trends of various income classes can help fuel the engine of savings in the country. People in Pakistan are now perceptive that a life insurance policy is a best mode of investment as it ensures risk cover and savings for their own self, children and families.

On 1st November 1972, State Life Insurance Corporation of Pakistan was established with a view to run the insurance business on sound lines, provide more efficient service to the policyholders, maximize the return to the policyholders by economizing on expenses and increasing the yield on investment to 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 affluent sections of society to the common man in towns and villages and use the policyholder's fund in the wider interest of the community.

The main objective behind the establishment of State Life was to provide the benefits of life insurance to all sections of society and generate 'savings' at the macro level to help fuel the economic growth of the country.

State Life has successfully completed 33 years of financial commitment and services to the policyholders and the nation. About 25% of Pakistani families are protected by State Life's Group under individual life insurance, but endeavors are to be undertaken to cover the remaining 75%. There is a great market potential for selling life insurance plans so that the benefits of life insurance could be made available to every household and family unit in Pakistan.

State Life Insurance Cooperation of Pakistan with its sound financial strength has the ability to deliver the goods. This can be gauged from the corporate performance of SLIC. State Life showed robust business performance in 2005. In the year 2005 State Life's First Year Premium (New Business) individual life stood at Rs. 2.66 billion by showing an increase of 20.87% while extending financial protection to 2,53,770 new policyholders and their families nationwide. Business-wise, Central Region topped by securing Rs. 856 million followed by North Region Rs. 695 million, South Region Rs. 625 million and Multan Region Rs.491 million by showing an increase of 20.16%, 19.23%, 16.04% and 31.80%, respectively, during the period January-December 2005. The Renewal Premium of State Life stood to Rs. 8.45 billion while on the Group Life side State Life secured Rs. 2.54 billion by marketing 183 new group life policies. The International Business which comprises UAE, Kuwait and Saudi Arabia stood at 141 million during the period 2005. State Life has showed robust business performance up to June 2006 by securing Rs.1325 million as new business (first year premium) while showing an increase of 19.59% in that period.

Based on the actuarial valuation State Life distributed 97.5% of its surplus as bonuses to its valued policyholders while the 2.5% goes to the Government of Pakistan. These bonuses are declared on yearly basis, as per the actuarial valuation of 2005. State Life has allocated Rs.6.56 billion towards the bonuses on profit policies. The bonuses are based for the policies in force for full sum assured as on 31st December 2005. For Pakistani rupee business the bonus amount will be Rs.6,484.667 million, while for Middle East business State Life will distribute Rs.82.296 million. The total amount towards allocation of 'bonuses' stands at Rs.6,566.963 million. The Life Fund of State Life stood at Rs.123 billion and the Investment Portfolio at 124,983 million rupees, while the investment income stood at Rs.13,106 million as on 31st December 2005. State Life remains the nation's largest real estate holder, whose market value stood at 21 billion rupees. State Life has shown robust business performance during the 3rd quarter i.e. January to September 2006. State Life's new business stood at Rs.1895 million by covering 170,242 policyholders and their families nationwide thus showing an increase of 19.37% during the period January-September 2006. Region-wise Central Region topped by securing Rs.630 million new business followed by North Region securing Rs. 530 million, South Region Rs.420 million and Multan Region Rs.315 million - showing an increase of 24.30%, 17.60%, 12.53% and 19.37%, respectively. The renewal premium of State Life stood at Rs.4.73 billion while second year and third year persistency stood at Rs.82.19% and 92.52% during the period January to September 2006. State Life leads its way by effectively providing the quality financial services to its 60 lac policyholders, 21 lac individual life and 39 lac group-life policyholders. Since its inception in 1972 till to date State Life has paid billions of rupees on account of maturity and death claims that had benefited millions of policyholders and their families both in the individual and group life. State Life's paid-up capital is Rs.900 million which is highest in the life insurance industry.

In a bid to provide better quality services to its valued policyholders with diverse range of product line, State Life has taken a leap forward by computerization drive throughout its 26 zonal offices that are now well equipped with state-of-the-art networking to ensure optimum facilities to the existing and prospective policyholders. An interactive web-site, is redesigned and developed that will be an effective marketing tool, besides providing the wide range of information on the corporate structure of State Life, products, plans, policies, services, real estate and investment portfolio etc.

As a responsible corporate entity State Life has launched from time to time its public service advertising campaign in the print media to create mass awareness on various civic and socio-cultural issues of society. Virtually the public service campaign has greatly contributed to the image building of State Life. The public service advertising campaigns are being re-launched with new designs, concepts and themes. To help support the marketing force various advertising campaigns on product and corporate image building are released in the print and electronic media. As an area that cannot be ignored, State Life has taken a leap forward for the promotion of arts, literature and diverse culture of the country. The literary works of the intellectual writers, poets, artists are well supported through various promotional means. State Life philanthropically contributed Rs.2.5 million to National Academy of Performing Arts (NAPA) for the promotion of country's rich legacy of traditional, classical and contemporary arts, music and literature. Recently during the third Pakistan Music Conference, State Life participated with other corporate entities. On October 8, 2005, Pakistan had faced a worse devastation when an earthquake struck the Northern Pakistan, Kashmir and NWFP. State Life stood with the nation by contributing Rs.100 million to the President's Relief Fund for earthquake victims, in addition to voluntarily contribution of one day salary by officers and staff and Rs. 5 million by sales force. Besides, special teams were formed which visited the calamity-hit areas for extending necessary assistance in claim payments to beneficiaries of the deceased policyholders. State Life has taken stringent measures in settling the death claims cases of the deceased policyholders and their families by giving optimum relief/relaxation of claims and premiums to the victims of earthquake in affected areas. Up to August 2006, State Life has paid Rs.37, 761,004.00 on account of 256 death claim cases of policyholders and their families who had lost their lives in the earthquake. Documentary requirement has been made foolproof to avoid fraudulent reporting of death claims.

The four pillars of marketing i.e. product, price, place and promotion forms the core marketing philosophy at State Life. Presently there are 26 Zonal Offices and four Regional Offices located geographically beside the Gulf Zone in the Middle East.

The North, South, Central and Multan regions are fully operative and well netted with the 40,000 actively trained marketing force committed to the excellence of procuring quality business and perpetually involved in providing after sales services to the policyholders at their door steps.

To safeguard the interest of policyholders, streamline the insurance sector and promote good corporate governance in 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 State Life's Board of Directors.

The Ordinance has tried to address the concern of the insurance agents, brokers and 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 State Life to expand its marketing operations throughout the country keeping in view the prevailing market competition from the private life insurance companies. The low savings propensity of individuals and non-conducive business environment over the years had been the major factors that impeded the growth of life insurance industry.

Product research is an ongoing area at State Life, which is manifested, in the innovative solutions to continue product development. In a bid to provide value added life insurance plans and policies to its prospective and millions of existing valued policyholders State Life is introducing a new plan titled 'Sadabahar' with its unique features and product attributes.

There is a greater need felt on the part of State Life's higher management to provide state-of-the-art training and groom its marketing force to create mass awareness about the benefit of life insurance with State Life so as to ensure that optimum number of families across the country be provided the benefits of financial coverage to their hard earned money through life insurance that could ultimately raise the 'saving' ratio and contribute meaningfully to the economic development of the country. As a matter of fact, as a market leader in life insurance industry State Life has the ability to deliver the goods. The prudent investment initiatives of the present State Life management has resulted in better returns to its million of policyholders in terms of 'bonuses' that grows from year to year in billions of rupees.

(Direct premiums written, U.S. $ millions)













Canada (3)










China, People's Republic of





India (5)










Iran (6)





Malaysia (5)




















Saudi Arabia





Sri Lanka





United Arab Emirates





United Kingdom





United States (8)





(3) Life business expressed in net premiums.
(5) April 1, 2005 - March 31, 2006.
(6) March 21, 2005 - March 20, 2006..
(8) Life premiums include an estimate of group pension premiums.  Non life insurance includes state funds. Source: Swiss Re, sigma, 2006.