Taher G. Sachak is the Managing Director and Chief Executive of EFU Life. He joined the firm in 1994, after working in UK with Allied Dunbar, Trident Life and Century Life. He is also a Director of EFU General Insurance, Vice Chairman of Allianz EFU Health, Director of Institute of Capital Markets and a Certified Director from Pakistan Institute of Corporate Governance. BR Research met with Mr. Sachak to discuss the impact of Takaful on life insurance industry and the way forward to tackle the sector's biggest challenge - poor penetration rates.
Pakistan remains one of the weakest markets in the region for insurers. With only six private players in the life insurance industry, the insurance penetration is a mere 0.5 percent (of GDP), which pales in comparison to peer countries such as India where the comparable metric stands at 2.6 percent.
That said, the life insurance industry in Pakistan has been growing at an average pace of 25 percent per year in the last five years. However, there still remains huge potential for growth with the market still being relatively untapped. With the addition of Takaful (Shariah-compliant insurance) products to the insurers' arsenal, the future looks more appealing.
Earlier this year, EFU Life - the largest life insurance firm in the private sector - became the first conventional insurer to receive license for window Takaful operations from SECP. The company started its Takaful operations under the brand name 'Hemayah', which in Arabic means "protection". The firm believes its Takaful segment will account for 15-20 percent of the gross premiums in five years' time.
By now, most of EFU Life's peers have the license too, coming eight years after Takaful pure-plays, Pak Qatar and Dawood, started dealing in Shariah-compliant products.
"We got our window Takaful license in February this year and have made a good start. We are setting up a dedicated Takaful sales force, which in the last few months has grown to 300 and we have opened 27 dedicated Takaful branches. Our goal is to become the largest Takaful player in five years, and that is including the dedicated Takaful players." Sachak said.
To compare, the firm's sales force for conventional business is around 4,000. On the products side, the chief executive said there are already five Takaful products that the dedicated sales team is offering, on top of a few more that are part of bancatakaful distribution channel (offered in collaboration with banks). Conventional life insurance has over 10 products that the company markets itself, plus around 35 offered by banks (bancassurance).
Sachak said, "The primary focus of all the players operating in the market is to increase the penetration in the existing markets. Therefore, a lot of emphasis is on the distribution channels."
Unlike non-life insurance, the growth of which has much to do with economic expansion, life insurance has a greater dependency on distribution efforts. "In the last few years, we have expanded aggressively by opening up numerous branches and recruiting individuals for our sales force nation-wide. Presently, we have more than 175 branches and have formed business alliances with leading banks to market our individual life products," he added.
Life Insurance business predominantly comes from the individual policyholders. A major chunk of these customers reside second and third tier cities of Pakistan. Sachak believes that apart from the arrival of Takaful, growing middle class, soaring Bancassurance and introduction of small ticket insurance schemes will all aid the cause for life insurers in coming years. He added that another key would be "regulation that is conducive to growth, rather than over regulation."
In Pakistan, much of the middle class is unaware of even the idea of life insurance. EFU Life's marketing campaign "Izzat Se Nazrain Milain" aims to curb that. Sachak believes that such initiatives are integral for spreading the awareness among the masses about the need and value of life insurance and looks forward to getting the support from other industry peers for this national cause.
Commenting on the future of the life insurance industry, Sachak said that there is massive potential in the industry and it is bound to grow in the coming years. Launch of Takaful operations by conventional companies, greater use of technology, product innovation and new distribution channels will result in the market continuing to grow exponentially.
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