Insurance business generally grows on risk perception in a society. Larger the risk level, higher the growth of insurance industry. The risk perception — risks to life, assets and public and private properties — has been higher and widely prevalent in Balochistan where the incidents of target killings and attacks on public and private properties have witnessed a phenomenal growth over the past five years. The reason is the poor law and order situation in the province, which is facing an insurgency-like situation. The other reasons include weak financial system, nominal industrial growth and inconsistent policies, which have so far hampered the growth of insurance industry in Balochistan.
Though Balochistan has vast potential in insurance sector, yet the sector could not play its due role in the local economy. Balochistan is the country’s poorest province. Agriculture, the mainstay of local economy, employs 67 percent of province’s total work force. The local work force and their dependents live in miserable socio-economic conditions. The insurance pay out can provide them some sort of monetary shield and lessen their sufferings to an extent.
Ship-breaking is the province’s biggest industry at Gaddani with over 5,000 employees. The workers at the shipbreaking yard work in permanent danger. On board gasses cause fires and explosions. The incidents take place frequently due to fires and explosion, suffocation and inhaling CO2 and the steel plates and other material, which may hit the workers while falling off the ships. As a result of frequent accidents at the shipbreaking yard, many workers have lost their lives. The local work force should be offered a monetary safety in the shape of insurance pay out. Free life insurance benefit may be extended by the employer to the poor workers. In this regard, the premium cost should be borne by the employer. The amount of insurance in case of death, compensation or permanent disability should already be fixed by the employer in accordance with the intensity of the damage caused by the accident.
Balochistan has tremendous potential in all economic sectors. Banks can help exploit the potential opportunities of industrial development in fisheries, agriculture, livestock and other sectors of local economy. Overall, the provincial economy must perform well, as the performance of insurance industry is linked with the performance of the economy.
There are two major reasons behind limited growth of insurance industry in the province; first, the lack of public awareness and second, the government’s neglect. Insurance sector operations have two main categories: life insurance and non-life insurance. The life insurance is primarily aimed at providing money to meet financial losses caused by death and illnesses. Fire, marine, motor and miscellaneous are the four main classes of non-life insurance. The growth of non-life insurance depends on industrial development in the province, which even lacks a sound industrial base. The life-insurance business can be flourished through an effective mass awareness program in the province.
Balochistan is a society of tribal, traditional and religious-minded people. Generally, the local people abstain from purchasing insurance policies on religious grounds, as they are more inclined to buying Shariah-complaint products. The people believe that Islam forbids insurance due to involvement of fixed rate of interest. The concept of Islamic insurance needs to be introduced for the growth of insurance industry in the province.
Support to life insurance products
The development of Shariah-compliant life insurance products by the banks can not only promote life insurance business but also the Islamic banking in the province. As a regulatory authority of the insurance sector, the Securities and Exchange Commission of Pakistan (SECP) should take initiatives to tap the Balochistan enormous potential in the sector by providing level playing fields to government and private sector.
Lack of awareness about the insurance business has been the biggest the constraint in the growth and development of insurance industry in Balochistan. There is need to highlight the importance of life insurance, which provides income and security for dependents after the death of the life-insured person. State Life is the country’s largest life insurance organization with its largest market network and geographic presence across the four provinces. It provides financial services and protection to millions of valued policy-holders and their families countrywide by marketing life insurance policies and plans that are guaranteed by the government. The State Life is yet to tap the vast potential in life insurance market of Balochistan. It should work out a special plan for the province to provide the benefits and financial coverage to the people through life insurance of their hard earned money. This will raise the saving ratio and contribute to economic development of the province.
The insurance penetration in Balochistan economy is subject to growth of banking and development of financial system in Balochistan. There is a dire need to develop banking and financial system in the province, as with a more developed financial system, the province will tend to accumulate more premiums. The commercial banks perform significant functions like channelizing resources to different sectors of economy, mobilizing the savings, promoting investment, accelerating industrialization and helping the government by providing it source of earning. Unfortunately, the commercial banks in the province could not promote industrialization by advancing loans to entrepreneurs.
The banks flourish a saving culture among the people by introducing different saving schemes. The saving environment could not be created due to the lack of banking facilities in the province. The banks, nationalized and commercialized, did not play their key role in developing the local economy. There has also been a dearth of professional and skilled bankers in the province. Most of the bankers were unaware of the mechanism of banking system. There has been no concept of investment bank in Balochistan
Banks can play a key role in the growth of insurance industry in Balochistan. For instance, the banks can develop some insurance based products. The beneficiaries of such products should be the small depositors and borrowers, who may be insured by the banks without involving them in any sort of complicated documentation and formalities. In such a scheme of the things, the insurance companies may offer a very competitive premium rate to the banks, which may bear the premium expense. The legal heirs of the deceased depositor may get an amount equal to the amount of deposit in his account at the time of his death. The development of life insurance products by the banks can not only promote life insurance business but also the banking in the province.