Ongoing trends and review of insurance sector and future recommendations.


Byline: Alifiya Aun Ali

Insurance is the second-largest sector in the financial industry and constitutes 5.3 percent of Pakistan's total financial sector assets. According to SBP Financial Stability Review 2017, the Insurance sector's asset base and gross premiums have registered an increase of 12 percent during 2017. The assets of the non-life insurance sector have increased by 4.8 percent to PKR 179.6 billion in 2017. Overall the sector has a positive float, which allows money to be used for further investing activities, which has been increasing over recent years boding well for the industry.

It has one of the lowest penetration percentages in the region. The Insurance penetration of a country represents the premium volume collected by the companies as a percentage of GDP.

According to the Tahir Ahmed Managing Director and Chief Executive of Jubilee General Insurance "Insurance penetration in Pakistan is just about 1% which is the lowest among countries like India, Iran, UAE, Saudi Arabia etc. However, it also means that there is a tremendous potential to grow especially in personal products like personal motor, personal health, personal accident, home and travel. In developed countries, personal products represent almost 40-45% of total non-life premium whereas in Pakistan it is only 10-12%. There are many reasons for low insurance penetration of personal insurance in Pakistan but couple of reasons stand out namely; lack of awareness/availability of such products and lack of digitalization. Sharia aspect too plays on the minds of individuals but by and large Takaful has taken care of that."

This has been the reflection on the poor business environment in the country, stringent government regulations not encouraging the insurance industry, a large rural population and low income and literacy rates which mean that people don't understand the importance of insurance or cannot afford it.

"By its very definition, inflation has reduced the purchasing power of individuals. Prices of consumables and non-consumables have sky rocketed. Car sales are substantially down and more so financing cost has escalated as policy rate has climbed to 13.25%. Obviously, this is not good news for motor insurers but then there is more of sale-purchase activity in old/used car segment.

The latter presents an opportunity but asks for far more vigorous sales effort. Along with education, health is one area where we in Pakistan are probably nearer to the bottom rung of the ladder. In high inflation environment, while people hold on to their money but rising medical costs gives rise to anxiety and sense of helplessness. Some effort to reach out to masses by individual health insurer like Jubilee General can act as a...

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