Feb 22 - 28, 2010

Securing future of family is a desire of every person and one who wants to protect his children from the vagaries of financial problems and keep their education safe of financial troubles, must try to find ways of building up the shield.

Education and health are two of the sectors in Pakistan, which are under sheer neglects. While budgetary allocation for the sectors is equivalent to three percent of gross of development product, yet even allocated funds are not spent properly. This heightens the degree of a desire to seek after protection in individual capacity.

Unfortunately, the time when financial assistances are mostly required can likely be spoiled by the unavailability of funds. Quality education is commercial commodity in Pakistan and not everybody can afford it. Higher learning is another feat very few can attain in the country. Higher education cannot be achieved without investment. And, competitive and employable education needs sacrifices both monetary and others all the more. When price of education is high, a plan must be there to insulate students against run-up. Education insurance policy is thus needed to atone with paucity of funds at the time of higher learning. A cover built up by policyholder with investments of money in periods in education insurance plan meets the educational needs of his or her adolescents in case of his inability to do so. The lump sum benefits against the premiums are payable to child at the age predetermined at the time of policy design.

Pakistan has youth over sixty percent of its population. There are various local and international scholarship programmes for students aspiring college and higher education. However, such programmes put tough criteria to handpick only extraordinary candidates therefore not all with determination of doing better in future are filtered out. With this mushrooming population, education funding should come from a pool.

The cost of higher education is increasing rapidly. Public sector universities have less expensive programmes but they cannot absorb all the students. Private sector institutions offer programme at fees that are affordable to few people. Low-income group cannot bear luxury of seeing children studying in private institutes. Even middle-income group has public sector universities as first choice for their children's higher learning. In Pakistan, quality education means heavy burden on pockets of parents. A cease of the pockets imply end to higher education chapter of most of the college-going students. The lucky ones are to continue their education with worries of finances following parental income shutdown.

Importance of higher education cannot be denied in social and economic turnarounds and achieving competitiveness. Pakistan is in the fiscal morass and government is cutting public expenditures coldly to reduce budget deficit. This cut would affect pro-poor public sector developments. Already, government brought down spending on higher education much below from earmarks of yesteryears. Last fiscal year, it had cut 73 percent funds to higher education sector putting into danger academic careers of students on state funded scholarships in foreign universities. Only fiver percent youths of 17 to 23 years age have access to higher education in Pakistan.


At this budget trimming time, one cannot expect from the government to initiate public funded education insurances of public sector employees, most of whom could not afford to pay insurance premiums, yet sanity demands of it to set conditional education insurance for government employees. Employees old-age benefits institution underwrites old-age pension, survivor's pension, invalidity pension, and old-age grant to the insured. Five percent of minimum wage of employees of all industrial and commercial organizations under EOB Act 1979 is taken as contribution. However, the cover can hardly meet the financial needs of insured children in case of his demise or inability. Government must fund education security of children of salaried class that is primary victim of the inflation, and suffers from the high cost of education and health. Changes in regulations are needed to extend outreach of insurance sector in the country. Security and exchange commission of Pakistan has hardened rules for insurance companies by increasing paid-up capital requirements. It should also pay heed to how insurers manage portfolios and how much they have liquid investments. Liquid is imperative to pay off claims. Islamic insurance should increase its presence in family insurance products since it can tap a large market nationwide. Takaful needs to bring its premium down to make insurance products more attractive to masses. State life insurance has the major share in the life insurance business.


In the developed countries where education budgets are over five percent of GDP people prefer education insurance policy for their children's education. Education insurance is a subject of life insurance companies and therefore only a limited number of insurers in Pakistan underwrite education insurance policy. General insurance protects the monetary needs of insured within his lifespan however, life insurance requires trigger point to be activated or before it compensates monetary losses of insured. Such trigger point is provided by the mortality of policyholder.

In education policy, death or disability of insured is a trigger point that activates the reimbursement of covered amount to the beneficiary or beneficiaries of policy for their education. There are seven life insurance companies operating in Pakistan. If policyholder passes away, his child gets the family income benefits until completion of term.

Insurance has a low penetration ratio in Pakistan and is the undersized subsector in financial sector, although there is a latent potential for insurance products in the country. Some insurance companies are collaborating with life insurers to extend outreach of education insurance plans in the market. Known as bancassurance, such plan is popular in general insurance.