The Securities and Exchange Commission of Pakistan (SECP) is set to unveil a 5-year strategic draft plan to help increase the insurance penetration rate in the country to 1.5% from currently 0.87% of the gross domestic product (GDP), Business Recorder has learnt.
In the plan, SECP has set a target to increase the share of takaful - an islamised version of insurance - in the overall insurance sector to above 30% from currently around 11%.
Pakistan has one of the worst penetration of insurance in the world and takaful will have better acceptability, SECP Commissioner Insurance Aamir Khan said.
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Khan was speaking to journalists at the Central Depository Company head office in Karachi on Tuesday, a curtain raiser event for the SECP-organised International InsureImpact Conference 2023 to be held in Karachi on December 13 and 14.
“There is a significant transition of Pakistan’s financial system towards Shariah compliance.
“This shift, aligned with the cultural and religious values of the people, is expected to provide a significant boost to takaful in the country, as indicated by the recent decision of the Federal Shariah Court of Pakistan,” he said.
Khan stressed on the increasing potential for Islamic financial systems, citing the growth of Islamic assets in the country.
“Takaful segment, generating a total revenue of Rs62 billion, representing an 11% growth over the previous year,” he said.
Khan added that the Commission aims to utilise technology to boost the insurance penetration, raising awareness about insurance products, and promoting crop and disaster risk insurance.
Speaking about the insurance sector’s enormous growth potential, he informed attendees that there are 42 insurance companies in Pakistan, with a total premium of Rs552 billion and 10 million active policies.
Aamir Khan cited data from the SECP’s studies on different sectors, which revealed that out of 30 million registered vehicles in Pakistan, barely 3% are insured, and out of 241 million people, less than 8 million have life insurance. Crop insurance is used by less than 10% of the 8 million farmers, and less than 500 thousand of the 32 million registered properties are insured.
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In a presentation, Waseem Khan, Director Insurance Division at SECP, outlined the five-year strategic plan to be proposed by the SECP for the insurance sector, with the aim of raising the insurance penetration rate from 0.87% to 1.5% of the GDP.
“The plan is drawn to overcome major challenges being faced by insurance companies and policyholders and to develop and align the market with international standards by 2028,” Waseem Khan said.
Through the plan, he added, the number of lives covered can be raised to over 15 million individuals, insurance penetration is targeted at up to 1.5%, the share of digital distribution will rise to 5%, the share of takaful in the overall insurance sector is targeted at above 30%, and motor third party insurance coverage will be above 20%.
The plan aims to increase the local retention ratio of insurance to below 60% and the private health insurance premium to over 15% of the total premium.
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The strategic plan also includes a programme to ensure the availability of agriculture insurance for non-loanee farmers, the availability of disaster insurance products, and the availability of annuity products for VPS investors and individual retirees, with a target premium growth of Rs553 billion to Rs1,221 billion by 2028.
Also present on the occasion, SECP Chairman Akif Saeed said the insurance industry is an important component of Pakistan’s financial sector and that the sector needs to be reenergised and steered to meet the future needs of the modern insurance industry.
“The vast unexplored market is a tremendous opportunity, and the International Insure Impact Conference provides critical insights into the most recent global strategies, solutions, and innovations,” he said.
Policymakers and experts in the global insurance and ancillary industries from Turkey, the Philippines, Saudi Arabia, the UAE, Bahrain, and Luxembourg are expected to participate in the conference.