'We are seeking to access the masses through innovation and technology,' CEO, Premier Insurance

From being Pakistan's first insurance company and a market leader till early 80s, due to shift in focus Premier could not retain its position over the last two decades. Now the company is again pursuing a growth strategy. This is the story of the firm's turnaround in making, told by the man who is making that turnaround happen.

<B>BR Research: Can you share the history of Premier Insurance?</B>

<B>Muhammad Asif Arif:</B> This was the first insurance company established after the creation of Pakistan. After the independence, the then governor of State Bank, Zahid Hussain called a meeting of business houses and there they felt that there was no infrastructure for insurance or a bank other than the State Bank that could cater to business needs. So the decision was taken to form National Bank of Pakistan as well as Premier Insurance. Subsequently in the 60's, Crescent group took over the company.

Up until the early 80s, Premier was the market leader and the whole complex belonged to the company (State Life Building 2 complex at II Chundrigar Road Karachi). But what happened was this land was acquired by Premier Life, and the buildings were owned by Premier General. So when the Life business was taken over by SLIC group, the buildings became their property.

Insurance is a very personalised and service oriented business. Premier has a history of serving its clients to their satisfaction and this is one of the reasons that even today it has a long list of clients dealing for over five decades. We have very strong presence in Lahore, Faisalabad, Multan and rest of the Punjab.

When I took office in April last year, I realised that although Premier Insurance has very good brand equity, over past few years it has not been able to keep the pace with the industry in terms of premium growth, although it had a strong balance sheet and credit rating of A by JCR. I strongly felt if we want to grow, we need to change. We need to be offering full range of products, improve our service standards and increase our reach in other areas of the country.

<B>BRR: What are you doing about it then?</B>

<B>MAA:</B> We had detailed brainstorming sessions on the growth strategy and prepared the new business plan which envisage using not only conventional channels for marketing full range of products, but to use alternate distribution channels.

The challenge was, how to use our brand equity for future growth. It was imperative that we strengthen our human resource and IT system.
We need to have well defined operational policies so that we don't have chaos when the business grows.

We restructured the company on modern lines, and hired professional who not only have the experience and educational qualification, but also the passion for growth. We chalked out detailed training plan, and all the employees were given training in their areas of operations to enhance their skill sets. Some of the employees were send to International Conferences and Seminars to broaden their vision, which can help us to offer more bespoke solutions for our customers.

Similarly, we needed to have strong IT infrastructure to support our growth plans thus we upgraded our IT structure and brought it in line with the best in the industry.

Now all our 23 branches are real-time online via fibre optic, and they don't have to rely on head office for issuance of documents or processing of claims. Similarly, reinsurance is the backbone of an insurance company, hence we focussed on improving not only our existing reinsurance arrangements but now have reinsurance support for the new products as well. We can claim that we have the world's top rated reinsurance companies on our panel, which gives us the capacity to provide insurance cover of any magnitude in any sector.

<B>BRR: What is your turnaround strategy?</B>

<B>MAA:</B> We are working on a three pronged strategy. One, further strengthening of our financial position by increasing the capital base to have a large investment base. During the past year we have increased our paid up capital from Rs300 million to Rs400 million. Our EPS has increased to Rs3.19 in 2015 from Rs0.90 in 2014. Second, to provide the best possible service to our clients and offer not only the standard products but customised solution to meet their specific requirements as well. Third is to explore the untapped personal lines market, offering various products online to suit the requirements of masses. Since we already have the Takaful license, it will help us to reach to those people who do not take insurance policies as they believe it to be un-Islamic. Although micro insurance is in its infancy in Pakistan, it has huge potential; we have decided to offer various micro insurance products soon.

<B>BRR: What about covering the mega projects and riding the CPEC wave?</B>

<B>MAA:</B> We have just started working on being part of mega projects and have developed the team to handle these projects; simultaneously we have also made arrangements with reinsurers not only from Europe or Far East but from China as well to cater to the requirements of these projects. Similarly, we have very talented team to handle the insurances of Power/ Energy projects. We have all requisites to handle large construction and engineering projects in most efficient manner.

<B>BRR: Given your background as a regulator previously, where does the future lie?</B>

<B>MAA:</B> Pakistan's insurance penetration and density is very low. There are 3 factors: religious belief, that insurance is un-Islamic, the issue of reach and access and disposable income.

Now if you look at the first factor, Takaful is the solution. And now most of the conventional insurers are also offering Takaful through Window operations, this problem is resolved up to a large extent.
With expansion of Internet and Mobile phone network the structure is there to reach the client over internet but insurance companies need to educate and motivate the people to buy insurance products online. There is an issue of trust deficit/fear factor among the masses while buying insurance online. During past few years SECP has taken steps for the consumer protection, and this is one area where further work needs to be done to give confidence to the masses to buy insurance online. If insurance companies can win the trust of the people and give them the habit of buying insurance online, it will be a game changer for the industry.

The disposable income of people of Pakistan has increased many fold over last few decades, which is evident from growth of FMCG sector or consumer durables/electronics. Now it's time for insurance companies to channel this income towards insurance as well.

If you see at the two sectors I mentioned they have presence in every nook and corner of the country, according to one distributor they reach more than 4000 towns/villages/cities of the country, whereas you will see the presence of insurance companies only in few major cities.

This constraint is because of the channel that is being used for selling insurance and the type of products that are offered. If insurance companies have to reach to these towns/villages/cities, they need to have different type of products; other than those that are offered to commercial enterprises or educated people of large cities. Secondly they have to look towards cost effective alternate distribution channels. The present branch/zone/agents network cannot be used due to capacity and cost efficiency issues.

<B>BRR: Does Premier plan to tap the masses then?</B>

<B>MAA:</B> We are working on an online system. We are creating a dedicated portal and there are a number of projects that we intend to launch and go to the people. When you go to people, there will be no issues of reinsurance capacity, credit ratings or bank limits. But you need to access the masses. Previously it was very difficult but with the advancement in IT and mobile phone availability you can reach the masses.

I have learnt a lot from SECP and my international exposure that I have not been able to utilise in the first year because my focus was on restructuring. So the core strategy from here on would be to access the masses by being more technology oriented and at the same time we will be coming up with alternate distribution channels.

<B>BRR: How does one integrate technology and insurance?</B>

<B>MAA:</B> For instance, in Indonesia there is an earthquake almost every year and there is a big market for insurance. They launched a plastic card with different denominations that you could buy from any grocery stores. You buy that card and there is a call centre number on it where you call and register your property with them.

The moment there is an earthquake, the company announces that in a specific area all cards have been activated. Now you go to the bank, present your card and get the compensation irrespective of any loss assessment and surveys being done. They felt that the survey cost outweighed the benefits and that claim settlement would be more efficient.

You can now purchase travel insurance at kiosks at airports around the globe now. So why can't we come up with such innovative products aimed at facilitating the masses? You will be surprised to learn that in South Africa people are insuring their burial because burial costs are very high.

<B>BRR: Have you worked on something innovative in Pakistan?</B>

<B>MAA:</B> While in SECP I was instrumental in introduction of Micro Insurance in Pakistan and laid the legal basis for it with the focus on consumer protection. During my tenure, we allowed the window Takaful operations by conventional insurance companies.

While permitting the window operations it was ensured that a proper mechanism should be laid to ensure with Shariah compliance. This model was then studied by many countries to allow window Takaful operations by conventional insurers.

We worked with the Pakistan Poverty Alleviation Fund (PPAF) on two projects. One was the weather index based insurance for crops. So far in this area, only the bank loans are covered and the State Bank subsidises the premium, and that is it.

But the farmer does not receive any compensation. In this scheme 30 years' weather data was taken for a specific area as part of a pilot project.

The farmers were offered compensation based on the level of rainfall that was either short or more than expected which effected their yield. Second one was market value based Live Stock insurance project. This was also a pilot project which was very successful.

Both these pilot projects were successful, but to take it to the country level we need investment in infrastructure that can be available from multilateral agencies. However, no single company is in a position to take advantage of these project on its own. It calls for united efforts and government indulgenc,e which can prove to be the game changer not only for insurance sector but also for agriculture sector as well.

<B>BRR: But the fact is most of these areas lie in the informal and undocumented sectors, and that can prove to be a major hindrance.</B>

<B>MAA:</B> For us to effectively operate in these areas, we have to partner with alternate distribution channels. You cannot work in isolation. I have given you examples such as PPAF, then there is the Pakistan Microfinance Network, Micro Finance Banks, NGO's and the list goes on. These institutions have a presence in the informal sector and they are willing to subsidise the premium and the infrastructure.

<B>BRR: How do you see the future of Premier Insurance?</B>

<B>MAA:</B> I am very positive and the type of support I am getting from my Board of Directors, I am sure very soon you will see Premier Insurance again in the list of top insurance companies not only in terms of gross premium, but also in terms of financial strength, customer orientation and innovation.