Dec 14 - 20, 2009

Insurance sector can play a major role in driving growth of the economy as it can reduce investment gap, says Saifuddin Zoomkawala. 'The saving insurance companies mobilize from the market is to be invested in the productive sector of the economy.' Insurance sector's growth is directly linked to the mood of the economy, says managing director Eastern Federal Union General Insurance (EFU), and chairman of its sister concerns dealing in life insurance (EFU Life Assurance Limited) and health insurance in collaboration with Allianz of Germany (Allianz EFU Health Insurance Limited). 'If economy performs well so does the insurance sector and vice versa.'

That insurance sector is the savior of the economy has been proven in many recent incidents, which would have triggered chain reaction of collapse in the economy had there not been insulation provided by the insurance. The wave of violence in the end of 2007 that played havocs to commercial and domestic properties had full potential to incite widespread financial breakdown, yet Rs5 billion payouts against insurance claims toned down its intensity. Against the net claims, insurance companies wrote premiums of Rs28 billion. Insurance sector, thus, remains a source of funds notwithstanding crisis.

While the annual growth of general insurance is remarkable when compared to the banking sector- until 2007 the rate outpaced with considerable difference the growth rate of banking -the critics attribute it to low assets base in comparison to the banking. The economic slowdown, however, creates a doubt about the growth prospects of overall insurance sector. Against this standpoint, some optimists are seeing robustness in the sector, basing their arguments on increasing variety of covers and corresponding up in premiums.

"It is not real growth the developments give off," says Saifuddin. Can you describe high inflation, deprecating value of currency, and escalating terrorism as right causes of up in premiums? asks he. "These are not." Rate of premium is pegged with exchange rate among other things. Business line constitutes significantly a larger part of EFU general insurance business while personal line (individual customers) makes 3 to 4 percent of the total business. As the rupee value decreases and cost of imported machineries inches up, premium gains its weight. EFU general's written premium for the nine months ended 30th September 2009 was Rs 7,797 million as against Rs 7,755 million in the corresponding period of last year. The net claims for the period were Rs3,012 million compared to Rs3,288 million. The after tax profit for the nine months was Rs693 million as against Rs345 million.

Saifuddin has been serving EFU for 45 years. Recently, EFU celebrated its 75th anniversary. Saifuddin is a firm believer of destiny. The things unfold in a way they were fated, he believes. 'Nevertheless, a person should not submit to the vicissitudes of life and must not be overpowered by them. I never bow down to ups and downs.' "Saifuddin's is a story that has served to inspire many generations of young executives, and will no doubt continue to do so well into the future," comments the author in his biography titled 'business and economic visionaries of Pakistan'.

Trained under the mentorship of Roshan Ali Bhimjee, a connoisseur of insurance industry in the subcontinent, he took a giant stride from a time agent and trainee officer in EFU to the top position in the company but with slow pace. Having him appointed as chief executive and managing director of EFU Insurance Company in 1990, Bhimjee was sure that he would not have to worry about EFU general because of the Saifuddin's strong technical credentials as graduate of the executive officers' training scheme and at the back of his fourteen years of successful operation of company's extension in Dubai.

Clinched to its decades-old tradition of creating executives, EFU still recruits raw talents from the cross-sectional occupations and trains them in accordance with the dynamics of the insurance industry. The company trains 20 to 25 post-graduates or professional engineers every year. They are placed on jobs after one year. 'I understand this is not a significant number,' he admits, adding but I think there is galore a need of training and retraining of insurance agents, those who are already in the field. He is very much concerned about the scarcity of skilled workers in the insurance industry. When asked whether there is a need to develop insurance programmes in education centers, he made other factors responsible for lack of what he called technical expertise in insurance agents. 'Insurance is a neglected sector and within financial sector this sector has been given a least importance,' he says. 'The support banking sector has received from the government is missing for the insurance sector.'

He expressed his dissatisfaction over the quality of graduates in insurance. 'A business graduate from a reputable institute is far better than so-called graduate specialized in insurance.' He also attributed low penetration of insurance to foul plays in the market. The no-fault scheme ended in the initial period of its launch because of mafias, remembers Saifuddin while referring to the third party insurance cover of all parties. 'Government's apathy towards insurance sector is furthered by spoiling of fair market by mafias who can not risk genuine insurance replacing their fake policies.' The legal glitches encourage unlawful operators to continue unjust operation of insurance without fear, he says.

About ways of extending reach of insurance, he says bancassurance and online selling will be cost effective channel of distribution. 'Managing sales team costs heavily on administration. Bancassurance is another effective way.' He says that local insurance companies prefer to take cover abroad because of lengthy claim entertainment process of Pakistan Reinsurance Company, the only local reinsurance company owned by the government.