EFU THE MARKET LEADER

AN EXCLUSIVE INTERVIEW WITH SAIFUDDIN ZOOMKAWALA, MANAGING DIRECTOR, EFU GENERAL INSURANCE

SHABBIR H. KAZMI
Apr 14 - 20, 2008

EFU General Insurance was incorporated as a Public Limited Company in September 1932. It is engaged in general insurance business comprising of fire, marine, motor and engineering etc. The shares of the company are quoted at local stock exchanges. Its principal office is located at EFU House, M.A. Jinnah Road, Karachi, Pakistan with over 60 branches throughout the country. EFU is one of the few Pakistani organizations run totally by professional management and highly motivated field force.

It enjoys Insurer Financial Strength Rating of AA Stable Outlook assigned by JCR-VIS. Client-base comprises of many leading business houses and multinational companies.

Another unique feature of EFU is a voluntary review mechanism by professionals of international repute. The independent reviews by these professionals enable the company to keep abreast of international changes in the industry as well as ensure that management adopts the best international practices.

Another pillar of EFU's strength is its very close and over 50 years relationship with its main reinsurer, "Munich Re", one of the largest reinsurance companies in the world. EFU leads the emerging insurance industry of Pakistan.

PAGE: EFU Group has the largest stake in insurance business, what are the key areas of business?

ZOOMKAWALA: EFU Group is the only insurer providing cover for Life, General and Health insurance business.

Today, it is the largest Insurer in Pakistan and growing at a rapid pace. The premium income of the Group in 2002 was Rupees 4.0 billion and in 2006 it has increased to Rupees 14.5 billion in 2007.

This reflects the confidence of customers, stakeholders and employees for the Group, as it celebrates 75 years of caring and sharing.

PAGE: What factors are driving the insurance business?

ZOOMKAWALA: Driving forces for insurance business like any other business are stable political climate, friendly investment opportunities and image of the industry. Further, Gross Domestic Product (GDP) growth and it penetration to insurance sector.

Currently insurance premium contributes only 0.8% of Pakistan's GDP. This shows very low penetration of insurance market, as compared to our neighboring countries, India 4.7% and Sri Lanka 1.5%.

As per study report, it is anticipated that insurance penetration in Pakistan, in near future, will rise at 0.06% per year and it will touch 1.0% in 2010. However, it will much depend upon disposable income available to the public.

PAGE: Why life and heath business has remained subdued?

ZOOMKAWALA: The insurance awareness level in Pakistan is low, in general. Disparity in earnings and lack of developed financial market has resulted in low demand for insurance.

Traditionally, life insurance has been sold through tied agents; therefore, growth for this sector remained subdued due to the slow rate of expansion of this distribution channel, as it is expensive and requires time and effort.

Further, nationalization has its pros and cons. Monopoly of business withdraws the desire to provide, the needed change as per the business climate, and lacks the will to offer the products, to keep pace with the time.

The health insurance business has historically been conducted as non-core line of business, providing covers only to valued clients from having other general insurance business.

PAGE: Is EFU using alternate delivery channels?

ZOOMKAWALA: Yes. As explained, agency system is expensive and time consuming; therefore, the recently developed and tested alternative distribution channels are keys to sell Life, Health, and personal lines of General insurance business, like Banc assurance and Ecommerce.

Experience in Europe, Far East and India proves that Bancassurance is ideal distribution channel, for selling insurance products.

We are using this channel extensively specially for life assurance products and personal line products of general insurance business. We have entered into banc assurance partnership with many banks in Pakistan to sell these products, which have produced desired results.

PAGE: Now the business groups having controlling stake in commercial banks are also establishing insurance companies. How does EFU plan to beat the competition?

ZOOMKAWALA: EFU is brand name for Insurance. We have achieved this milestone by providing excellent service to masses, since creation of Pakistan. We are investing in Human Resources and Products, are key to retaining leadership position.

EFU is an institution built by devoted people of insurance profession and is fully equipped with technical, marketing and managerial skills supported by reinsurance arrangements with a number of European firms of international repute to cater for all classes of specialized insurance and provide customer service of the highest quality.

The four factors are attributable to our success: Sound claim paying ability; Professionalism and commitment to the market; Developing and providing the market with innovation products; and after sale service and speedy settlement of claims.

PAGE: Can establishment of Takaful windows by the conventional insurance companies help the conventional insurance companies to offer Shariah compliant products?

ZOOMKAWALA: Yes. I think it will help the promotion of Takaful business at much faster pace as conventional insurance companies have resources and experience. Here I may add that, the industry is anxiously waiting for the Government announcement in this regard.

PAGE: Can formation of alliance between banks and insurance companies help in promoting crop insurance in Pakistan?

ZOOMKAWALA: Yes, to a certain extent. I feel Government involvement (encouragement and contribution) would be a key to promotion of this cause, as previous attempts have failed due to its absence.

Currently, non - life private sector companies are working on the proposal for agriculture insurance with stakeholders. If this scheme, when finalized, and does not have the full backing of the Government, at key stages, then I am afraid it will be again drain of resources and futile exercise.

PAGE: What factors are hindering creation of Pakistan Insurance Regulatory Authority (PIRA)?

ZOOMKAWALA: I feel the Government priority for this sector. It is desirable that PIRA should be established as early as possible. This will help the industry in many ways, especially in attracting fresh investment and promoting image of the industry.