‘We are reinventing the entire process of getting insurance in Pakistan’, CEO TPL Life Insurance

Faisal Abbasi is Chief Executive Officer of TPL Life Insurance, a fairly recent life insurance venture of TPL Holdings with a vision to become the most preferred and trusted customer choice for life and health insurance.

Mr Faisal has more than 20 years of diversified working experience spanning across Life Insurance, Actuarial Consultancy and Banking sector in Pakistan. He is a pioneer in setting up the largest Bancassurance Distribution Model “Habib Bank Limited” in Pakistan, and Direct Sales Force for Jubilee Life. He is the former Group Head Customer Services, Marketing & Products for Jubilee Life Insurance.

BR Research had an enlightening discussion with him regarding life insurance segment in general, and how things at TPL Life insurance are being done differently. Following are the edited excerpts:

BR Research: What is your view of the life insurance sector in Pakistan?

Faisal Abbasi: The Pakistani market is very under-penetrated for insurance. It is a country with one of the least insurance penetrations, probably because of low public awareness and the existence a very small number of life insurance players in the market. My back-of-the-envelope calculations show that there is one life insurance company for every two crore people in the country. This issue of public awareness is generally considered as an inhibiting factor for the insurance industry, be it life or non-life. All around the world, it’s a known fact that whether you are making financial plans, taking out loans or have liabilities, you back them up with matching insurances; but this does not happen in Pakistan.

BRR: Can we say that number of insurance companies per populations is a good metric to gauge the existence of the industry?

FA: I would say that population plays a key role in determining life insurance business. In this respect, Pakistan’s potential in the insurance market is huge. On top of that, we have a growing middle income and also an established micro-segment.

BRR: Despite all the challenges, life insurance has seen growth in the last five years compared to the general insurance companies. Can you shed some light on the growth numbers?

FA :Yes, life insurance has been able to grow faster than the non-life insurance companies. We started off with 0.35 percent penetration of GDP; and now we have reached 0.56 percent over the last seven years. this growth has largely come from bancassurance. However, this is not reflective of what can be achieved; there is much more potential as banking penetration still remains low in the country.

BRR: What are the distribution channels that are being used in the insurance sector?

FA: Bancassurance is one major distribution channel; 50 percent of the growth in the life insurance segment is being driven by bancassurance. But as I said earlier, there still is huge potential in how the insurance market is tapped, whether it is from the product development point of view, or customer communication or marketing point of view. Online channel is also a good option on the retail side for the insurance sector.

BRR: What is the investment strategy of life insurance sector?

FA: Investment income is not the only significant component in life insurance revenues as it is in the non-life insurance segment. This is because in general insurance contracts are short term e.g. a year and claim frequency is high; therefore, you need that cushion in general insurance to overcome the underwriting risk. On the other hand, life insurance businesses have relatively lower claim frequency, and they invest in long term assets. Yet, investment income is an important component of earnings of life insurance as you have to pass on the maximum benefit to the client and shareholders.

BRR: What are the key risks for life insurance segment? What are the key life insurance products in Pakistan?

FA: The single most important risk globally for life insurance is the mortality rate; premiums are adjusted by the reinsurers as changes in mortality rates occur. Then we have health risk for insurance companies that deal in life and health; pricing of health risk is becoming smarter with advanced medical technology, and premiums move in tandem internationally, which push the premiums at home in the same direction eventually.

As far as the products are concerned, there are basically two categories of life insurance products in Pakistan: one is ‘conventional’ which is majorly being sold by the State Life, and the other one is largely sold by the private sector like the unit linked endowment policies. Unit linked endowments covers not only the mortality risk, but also provide investment returns where the premium is invested in units of a unitised insurance fund (like mutual funds). These endowments move with the market and are hence with-profit polices. Conventional products differ from unit linked as they do not move with the market and they have with-profit component where there are built in profits that can be encashed at the end of the policy.

BRR: How do you describe the claims in life insurance segment in Pakistan when compared to the developed world?

FA: Pakistan does not have a very high mortality rate from life insurance perspective. Hence I would say that our claim frequency in life insurance is at par with the global trend. However, we lag behind in health, and it this subsector that has high claim frequency than the global benchmarks due to many issues like poor working environment, weaker safety standards, improper health conditions, etc.

BRR: Has micro-insurance taken off in Pakistan? What distributional channels can be used here?

FA: We have an established micro-segment. So ideally, we should have presence. I definitely see it growing. However, I don’t agree with the term micro-insurance. For me its derogatory. We should have a different name for it, or categorise it internally for the sector, but not call it micro for the world.  Having conventional bancassurance model in this segment will be difficult as most of the prospective clients come from the rural population; non-governmental organisations and microfinance agencies can play a pivotal role here.

BRR: With so many challenges, what made TPL Holdings come into life insurance? What makes you so hopeful? And how are you doing things differently?

FA: TPL Holdings has a very good track record with general insurance franchise and that encourages them to consider life insurance as an option. The opportunity was there; before us, there were eight players; out of these, two were dedicated Takaful and six were conventional life insurance companies. There has been quite a buzz in the insurance sector due to the recent growth numbers and market appetite, be it the growing population or growing middle income segment, increasing consumption and positive future potential of the economy. All the indicators have been positive and strong, and we realised that it’s the right time to get into the market. If we had waited for the economy to boom, the cost of getting into the market and a share of the pie would have been too high.

What do we want to do? We are not trying to do anything different; we are trying to do the basic things differently; that’s what I call disrupting the market. The essence of the brand is to be the easiest company to deal with, because people associate insurance with difficulty. Our aim is to make all the procedures, paper work and dealings with the client so easy and digitalised that they can be comfortable to use our services and our application.

Also, TPL does not rely only on insurance agents; they think of relying on multiple access points the insurance company. We are the first life insurance company to offer scratch-card-based mass retail products; we are the first life insurance company to sell accidental-based insurance through its website. We are also the first company to introduce the concept of lounges in hospitals. We have dedicated TPL Lounge in Ziauddin Hospital, Clifton and OMI in Karachi that facilitate the visitors and patients with the regular procedures.

We are also taking our training online. We can actually enrol our customers off location as well; they can testify themselves; we can educate them about our products and developments and get in touch with them digitally. This is again where we are working differently: Our agents should not just be relying on physical premises to come and get certified and acquainted with insurance products and processes; they can have all the information at the comfort of their home.

We are naturally innovating the entire process of having an insurance policy; we are digitalising all the steps even though there are certain regulatory bars.

BRR: How responsive has been the regulatory environment been in all this?

FA: The driver of the change has been both the insurance sector and the regulator. Whatever we think of, we share the idea with the regulator and they welcome our suggestions. Mass retail products are one example.

BRR: Can you share some of your key targets?

FA: We took over a company called AsiaCare Health and Life Insurance Company in July 2016, and we got the approvals for life operations from the SECP in Dec 2016. Before that we were into health only. Our focus is not to capture another player’s share, but to create our own niche. I am targeting a market share of 4-5 percent in the next 5 years in terms of growth of the industry. These are our aspirations, but I have a strong belief that we can achieve it since we are doing things in an unconventional way. Our model is based on disrupting the market. We also plan to go public sometime in the future to raise funds to upgrade our offerings and services.