Aug 18 - 24, 2008

Despite having a regulatory structure ought to be brought in order on the long run insurance sector in Pakistan is at present thriving on the dynamic social and economic circumstances and progresses of other industrial sectors few which go cahoots in increasing premiums underwritten by insurance companies. The transformation in social life style caused mainly because of mass media is attributed to popularize concept of insurance in public to a degree that at least now participation of people in this mode of saving is increasing gradually.

Except life insurance which has unresolved religious and societal taboos ascribed with it general insurance is permeating in the market as known service compensating unpredicted loss with money. Either willingly or unwillingly people are circled in its net in case of non life insurance of automobile. No other industry has as much contributed in insurance sector expansion as consumer financing has. Consumer financing or auto loan has massively fuelled in revenue growth of insurance companies nationwide. Making of insurance mandatory on leased commercial or private vehicles has substantially increased premium collection by general insurers.

Insurance provides economic safety to the society by promoting an alternative way of saving. But the current economic conditions that distance low income group from real income saving is signalling a halt in operation of overall industrial manufacturing, hit by stumpy buying power and declining saving trend. Certainly, this regression in economic development is prone to jeopardize both manufacturing and services setups.

Nonetheless according to extant records few genres of insurance businesses like marine, third party, newcomer Takaful are making headways to preclude economic bumpy ride impact over underwriting revenues of whole insurance sector. Aside from separate instances of profitability incising confronted by few general insurance companies, cumulative growth rate of premium is showing year on year upward trend. The profit was slowed down following the unexpected claims attributable to worsened law and order situation last year.

Barring marine insurance, which is based on bottom or contract serving niche market and may have faced premium slash due to low traffic of voyages or cargo shipments for instance, preceding years in consecution invited contiguous unprecedented progress in national insurance sector along with prospering other service industries. In terms of annual income, profitability, and assets both private and government insurance companies have been expanding for last few years. Almost all 32 non-life insurance companies have been registering desirable profit multiplication. Near to 100% growth in assets of private general insurers at previous year closure is just a glimpse of fast expanding insurance sector of the country. The volume of assets has grown to Rs. 100 billion from Rs. 55 billion on December 2006 while premium to Rs. 33.1 billion from 28.3 billion. Insurance experts believe that as long as people befriend ways of securing future and saving to the mutual benefits of society and economy, premium growth rate will further be accelerated.

Since many years misconduct of some so called insurers and absence of vigilant framework to curb hoodwinking of policyholders have been etching suspicion in public mind about the credibility of the insurance sector. Under the guise of corporate societies bogus insurers have been overtly accumulating premiums from individual and corporations and managing to have long standing moratorium over claim payments. This image has played a major role in creating stumbling stone in flow of communication by insurance companies to educate people who could not be aware of the full services of insurance policy and consider insurance as its providing mere for long term security with no return on investment in short term. Subsequently, it is taking time for insurers to rectify public perception.

Security and Exchange Commission of Pakistan has formulated rules and guidelines to navigate progress of life and general insurance companies under the illustrative provisions of Insurance Ordinance-2000. There is a general impression firmly advocated by many industry experts that implementation of provisions in letter and sprit would bring positive change in the insurance sector of the country. However, arguments against this contend that while existing rules and regulations are alike to international standards there is a spacious room to bring legislative reforms to introduce transparency and minimize malpractices in insurance sector of Pakistan.

Motivated by lacklustre approach of the regulator to improve the structure of insurance sector at least where and when it could be possible the criticisms suspected existence of officials with ulterior motives in rank and file since vested interests could only impede improvement in mechanism of rules enforcement. Much-hyped operation cleanup against bogus third party insurers still lingers on as fake motor third party insurance certificates are sold openly at different places across the country. That what prevents SECP from stopping illegal insurance business is incomprehensible. It is worthwhile to note that SECP considers provincial governments responsible at par to control bogus third party insurance. Source privy to the insurance sector told this scribe that a large scale operation against such insurers was about to be launched. Hopefully, this would happen to hold back fleecing of policyholders.

Indeed, regulatory framework of the insurance sector needs to undergo some sort of procedural upgrades so that not only surveillance be impeccable but also application of rules be strictly ensured. Consisted of legislative or applicative reforms these upgrades are necessary to broaden the premises of insurance sector to integrate diversity, such as in the form of Takaful, which is different from conventional insurance and can lose its identity in case of inefficient financial engineering.