After global recession that hit almost all major economies, the insurance growth rate has significantly improved in the Saarc region that depicts healthy prospects of insurance industry in Pakistan.
During a panel interview with a select group of media persons on Monday, Arup Chatterjee, a Senior Financial Sector Specialist at the Asian Development Bank, said that during the recession period, insurance growth had shifted to Asia where Japan, China, South Korea, Singapore and India had witnessed a positive growth after a global financial meltdown.
Due to slow economic growth, non-life insurance is not picking up momentum in developing countries like Pakistan. "The major factor is economic growth for the increase in general insurance's premium. The sector can perform well in case of economic growth and foreign investments in countries," he said.
He said insurance industry of the region is very lucrative in the sense that there's a huge untapped potential. "The level of insurance penetration in the member countries is very low indicating that much population does not have access to insurance and if accessed in an organised manner, can significantly contribute to the insurance penetration level," he said.
Chatterjee was of the opinion that insurance premiums can be grown faster if the companies focus on "Personal Lines of Insurance" like health insurance. Due to poverty and rising inflation masses in developing countries do not take health insurance policies which are the major reason behind less growth in non-life sector.
He was upbeat over the fact that Securities Exchange Commission of Pakistan (SECP) is making efforts towards deepening the micro-insurance industry in Pakistan. Chatterjee also mentioned that people of Pakistan usually consider conventional insurance 'Haram' so they have a confidence in Sharia-compliant policies - Takaful - due to their religious beliefs. "SECP is focusing on Takaful (Sharia-compliant insurance) to overcome religious barriers in the country," he added.
Citing the insurance penetration ratio in SAARC counties, Chatterjee said that India has the highest penetration in insurance which is more than 4 percent. "General or non-life insurance in India is getting a boom as health insurance contributes 42 percent of the total industry," he said.
"Innovation is a key factor to make the insurance industry more viable," he suggested, adding that companies should incorporate more innovation for selling their insurance products. To a question, Martin P Endleman, Principal Financial Sector Specialist, Asian Development Bank (ADB), Pakistan, said ADB is assisting Pakistani government on different issues. "I cannot comment on the privatisation of national insurance entities of Pakistan but ADB does support a competitive market," he said.
He said there is need is to abandon the stereotypic styles of selling insurance and adopt innovative and ground-breaking styles of accessing the masses including, but not limited to, the technological introductions. The ADB representative said that life insurance has seen a double-digit growth in the region besides life insurance growth is much better than non-life insurance.
For Chatterjee, technology has much significance to extend the reach of common people towards insurance sector. "Insurance policies are being sold with help of mobile technology," he said He stressed upon the need to respond to customers' claims rapidly. "Insurance policies are being sold and premiums of companies are increasing. The industry should give the value to its customers in terms of whether their claims are being settled.
To a question, he admitted that because of bad claim experiences insurance companies had stopped selling insurance for bikes even in India some twenty years back. "It all happened due to poor law and order situation," he said. On Agriculture Insurance, Chatterjee said crop insurance is debatable issue, adding that arrangements could be made for the sharing of the risk. "The agriculture insurance has been done in different countries and can be negotiated in SAARC countries also," he added.
Meanwhile, in another panel interview, Jeanna Holtz of International Labour Office (ILO) and Dr Antonis Malagardis, Programme Director, Gesellschaft fuer Internationale Zusammen-arbeit (GIZ), said that technology has a high role to play in encouraging people to purchase insurance policies. They said that Pakistan has a huge potential in insurance sector, adding that motivating the people towards insurance is a tricky business. "Micro-insurance can be used as tool for people empowerment," Jeanna Holtz said.
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