Apr 14 - 20, 2008

At present there are four private and one public sector life insurance or assurance companies operating in Pakistan. Of them while State Life Insurance holds the major market share in private sector New Jubilee Life has been posting a sustained growth rate since over a half century among its three arch rivals in terms of its capital standing and gross premium collection. Since the life insurance sector of the nation is on its initial stage of development the penetration of life insurance products has yet be realized. It was only after 2005 that life insurance sector had caught its actual speed; otherwise since then it was moving at a snail pace, said Faisal Shehzad Abbasi, Head of Bancassurance, NJI Life during an interview with PAGE.

Sporting a hallmarked calmness on his face, he remained hell-bent on attributing public unawareness to untapped potential of life insurance market throughout session. Besides, he insisted, lowest outreach of insurance products altogether has turned out to be a principal obstacle to make insurance sector attain its full bloom. By virtue of this, insurance sector has not yet attracted its due share of investments. Over all insurance sector has been performing well for last three years, he opined and added the cost of acquisition in life insurance sector has not dashed concerns of investors over earlier return on investment. It would take at least three years to get back profits from life insurance business. During that period, normally companies operate on break even, he underscored.


The concept of outsourcing in service delivery or taking assistance of outsider middlemen (agents/institutions) has enthused expansion in outreach of insurance products but absence of sophistication in systematic progress keeps the effectual outcomes on a far distance. Sale of insurance products through banks now has become an alternative way to expand the outreach of life insurance products. Along with 52 branches all over the country, NJI Life in collaboration with Standard Chartered Bank, Habib Bank, and Soneri Bank has developed a strong sales-outlet network nationwide to explore the life insurance market. Our company is planning to expand this network further, Faisal said.

Initially, the idea of bancassurance was conceived in France that is a developed market of insurance business. Recalling the modalities of bank assurance in Pakistan, Faisal said, agreements with banks about selling insurance policies are strictly stipulated under corporate ethics. Sale outlets including of insurers' own have to adhere on the principle of complete disclosure of information to the client about the policies according to the Insurance Ordinance 2000. A minor lapse in it is neither negligible nor legal. While bank referring insurance products to its clients is less likely to indulge in any kind of information concealment, individual selling is difficult to be distanced from misrepresentation of products. Therefore, institutional assistance for generating leads is fairly suitable, he consented.


Responding to a question, he said, insurance sector regulations of Pakistan minimize the chances of unfair practices adding the need is to implement them in a letter and spirit. "Indeed, there are few loopholes in the rules and regulations but again trimming is an ongoing process." However, adapting to the dynamics can bring standardization in regulatory frameworks. He said we are far behind in growth of insurance sector regional wise. Giving an example, he explained, India introduced sector reformations in 2001 and since then 17 life insurance companies have set up there while numbers of life insurance companies in Pakistan still revolves around pentose. About SECP Insurance Rules-2002, he said, it misses corporate regulations. It can slue agents out of aberration but it has yet to prescribe rules for corporations in the wake of emerging and flourishing bank-insurer tie-ups, Faisal emphasized. About the incongruence of regulations with the sector dynamics, he said SECP has lack of qualified human resources in insurance and therefore belated application of laws seems to be in vogue.

To a question about the calculation of premium, he said, due to the absence of updated mortality table life insurance companies determine tariffs on rough estimates extrapolated by expert actuaries. While SECP is well conversant of the outdated table and claimed in its announcement to update it in outgoing year, guesswork for calculating premium is still in practice. Designing of mortality table requires great expertise of as few as 20 actuaries. With a total 16 to 17 actuaries in the country how soon would this be done, he enquired.

When asked do insurance companies have profit sharing understanding with their policy holders, he replied, it depends on the nature of agreement. Term insurance invalidates amount deposited as premium if claim does not lodge before maturity of the policy. Life insurance companies have the arrangement of sharing profits with its policyholders, Faisal said. Upon maturity of policy, unit linked insurance-a product of life insurance-reimburses certain amount to the policy holders if financial security has not been called on. Individual Life Unit linked was the major revenue generator for NJI Life in 2007, earning gross premium of Rs. 2 billion (net of reinsurance).

While talking about the penetration of life insurance, he said, Pakistan has the lowest penetration in relation to premium as compared to other regional and global markets. Faisal argues IAP has to reactivate its efforts in promoting insurance sector of the country. "Like other financial sector bodies, IAP should also be activated to strengthen its relationship with stakeholders of the insurance sector." Let alone of life insurers, he thinks, collective and combined struggle of whole sector should be gathered at a single plate form to make the "cause" public and to create public awareness about the insurance sector. He also said proactive approach in reformation is highly needed.

Established in 1953, NJI is a subsidiary of Aga Khan Fund for Economic Development. It is also listed on the Karachi & Lahore Stock Exchanges. Its gross premium in 2007 was Rs. 2.9 billion, 30 % increase over 2.2 billion in 2006 while net of reinsurance was 2.7 billion. It has a facultative reinsurance arrangement with Munich Re of Germany. Only above Rs. 0.5 million loss is to be sustained by its reinsurer.