Pakistan’s general insurance sector lags behind its Asian peers due to several factors, including low financial literacy, limited awareness, and lack of trust in the industry.
To stimulate growth, Pakistan must prioritize financial literacy campaigns to educate the public about the benefits of insurance. Regulatory reforms are also essential to creating a conducive environment for industry growth.
Additionally, product innovation, digital transformation, and public-private partnerships can help attract new customers and improve efficiency. By addressing these factors, Pakistan can significantly boost its insurance sector and contribute to economic development.
Pakistan’s general insurance penetration in 2023 was approximately 0.8% of GDP, significantly below the global non-life insurance average of 4%. India while also at 4%, and advanced Asian markets like Singapore and South Korea, with rates exceeding 5%, demonstrated superior penetration. In terms of insurance density, Pakistan’s figure stood at approximately USD 2.20 per capita, compared to India’s USD 22. More developed markets, such as Singapore, reported densities exceeding USD 500 (IAP, 2023).
On October 25, 2024, the Securities and Exchange Commission of Pakistan (SECP) released the Insurance Industry Statistics for 2023. The report indicates that the life insurance segment accounted for 64% of the industry’s gross written premiums, while the non-life segment comprised 36%. In 2023, the total assets of the insurance industry increased from Rs 2,421 billion to Rs. 2,900 billion.
A gross premium of Rs 631 billion was written in 2023, reflecting a 14% year-on-year growth compared to Rs. 553 billion in 2022.
The SECP highlighted several key initiatives to address the challenges faced by the insurance sector. These include the adoption of five-year strategic plans by insurers, support from the Federal Government in enacting proposed legal reforms, the enforcement and provision of compulsory and essential insurance schemes at the provincial level, and the simplification of regulatory approval processes by the SECP.
The economic prosperity of a nation is inextricably linked to its security and political stability. While private sector insurance plays a crucial role in safeguarding individual assets, a robust public sector insurance framework is indispensable for shielding the nation’s collective wealth from unforeseen calamities. The public sector, the backbone of a nation, is responsible for delivering essential services to its nation.
To ensure the uninterrupted delivery of these services, it is imperative to safeguard public assets, which encompass a wide range of infrastructure, including public buildings, roads, bridges, vehicles, and power projects. These assets are vulnerable to a myriad of risks, such as natural disasters, accidents, and cyber threats.
In an era of increasing global interconnectedness and volatile economic landscapes, the potential for systemic shocks has intensified. Natural disasters, pandemics, and geopolitical tensions can have devastating consequences for economies, leaving individuals and businesses vulnerable to significant financial losses. Recent years, particularly from 2019 to 2023, have underscored this vulnerability:
Given the increasing frequency and severity of systemic shocks, the Government of Pakistan should issue directives to all public organizations that have not yet insured their assets. These organizations should immediately obtain comprehensive insurance coverage, including catastrophic risk coverage.
To mitigate risks and protect public funds, it is imperative that public sector organizations prioritize insurance coverage for their assets. By doing so, they can safeguard national assets and minimize the financial burden on taxpayers in the event of a disaster. Section 166 of the Insurance Ordinance mandates that public sector organizations secure comprehensive insurance coverage for their properties through a government-owned insurance company. It is the responsibility of these organizations to leverage this opportunity and ensure the protection of public assets.
The imperative of public sector insurance company
Led by a visionary management team and professional leadership, the Government of Pakistan-owned insurance company is well-positioned to address the evolving challenges of the general insurance industry.
As a trailblazer in Insure-Tech, the company is committed to leveraging advanced technology to enhance customer experience, streamline operations, and improve risk assessment. By providing comprehensive and reliable insurance solutions, the company contributes to economic growth and social equity, solidifying its position as a trusted partner to the public sector.
This strategic approach mitigates catastrophic risks and ensures the uninterrupted functioning of the nation’s economic infrastructure, while offering competitive rates and sustainable insurance services.
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Natural Disasters: A Growing Threat to Pakistan's Fiscal Stability
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Perils/Hazard People Affected Fatalities Total Damages
$Million, 2024
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Floods 98,439,110 20,264 57,591
Earthquake 7,340,006 78,329 8,905
Drought 6,88,012 220 755
Cyclones 3,327,955 1,274 2,527
Heat waves 2,531,646 768 24
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Total: 111,638,717 100,855 69,802
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Source: ADB, GoP, and World Bank Damage and Needs Assessment,
World Bank, https://public.emdat.be
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Copyright Business Recorder, 2024
The writer is an economist and works in the insurance sector. Email: [email protected]
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