People generally perceive life insurance as a vehicle for savings and investments instead of its core purpose of providing financial support to family in the event of death, disability or disease.
Saving is actually an add-on feature of any investment linked life insurance plan, which is generally overshadowed during the sales process. Therefore, Policy, which literally means Promise taken from a Latin word Palliza, suffers most at the time of its realization. This usually occurs due to lack of awareness of the public and prospects particularly at the time of purchase.
In India where life insurance penetration percentage is 7 times of Pakistan, a recent survey shows that the first motivation to have life insurance is income tax relief, then as a tool of investment, life insurance comes at number 3.
In Pakistan, unfortunately tax incentives are withdrawn and sales tax is being imposed, which will further erode the value of money after a massive devaluation of 57% in 5 years between December 2017-2022. In the same period, Life insurance gross premium grew by 80% in rupees but in dollar terms, it decreased by 13%.
Life insurance industry is passing through product & regulatory challenges besides distribution hurdles and is ripe for change after experiencing two generations of public sector and one generation of private sector.
SECP statistics reflect that after 5 decades of cultivation, industry is able to have nearly 8 million policies in force i.e. 3% of population. One of the main reasons behind low penetration is lack of awareness, outreach of the insurers, beliefs and recycling of policies.
Recycling increased due to recycling of sales agents from one insurer to another. Sales agent on commission particularly in life insurance is generally not a sought after job. As agent turnover is very high, it deprives the insurers an opportunity to focus on their training, skill development, grooming and retention.
After the emergence of the private sector and a new channel of bancassurance, perception about life insurance somewhat started to change.
About 54% of private sector premium comes through banks by 80% sale of Unit Linked Investment plans. Unit Linked though claimed as transparent & flexible yet complicated for a commoner as financial literacy is very low and investment risk is not insured.
Many recent regulatory directives to address this gap are laudable, particularly fixing minimum investment allocation for the benefit of the policyholders, default selection of secure investment strategy having lower risk and compulsory call back confirmation from the policyholder about the understanding of the product.
However, some micro level regulations should have been avoided, as regulations should be purpose focused aimed at safeguarding the policyholders’ interest. We may learn from Indian insurance regulator IRDAI who has introduced principles based regulations. Regulators to set the outcomes after deep deliberation and rest should be left up to the industry.
Time has come to focus on protection, which is the core ability of life insurers on which nobody else can compete. Sales remuneration may be based upon Cover Multiple which may gradually be enhanced from existing min 5 to 20.
Products be simple and easy to understand having more inclusions than exclusions. Definition of disability also needs attention; it should be based upon the functionality of body parts and its economic & social impact.
Illustration of Benefits should be simple, single page, single rate, showing how premium is trifurcated into Risk pool, Investment besides servicing expenses. Issuance up to PKR 50,000 premium and PKR 500,000 coverage should be immediate.
Almost 2/3 policies come under that range. Need based sales should be ensured. People should understand that life insurance is good for life but not free at all; having a cost like the salary of a chowkidar who protects you from thieves and trespassers.
State Life Empowering, Protecting and Securing Lives; Pioneering a Comprehensive Life and Health Insurance Solution in Pakistan
Under the visionary leadership of Mr. Shoaib Javed Hussain, CEO of State Life Insurance Corporation of Pakistan (SLIC), the corporation has established itself as a trailblazer in the insurance industry, strategically aligning technology, data, and a human-centric approach to strengthen the nation's economy. State Life has soared, capturing an impressive 69 percent market share.
In the pivotal year of 2022, the corporation achieved extraordinary milestones with a 67 percent year-on-year surge in total premium sales and an astonishing 143 percent growth in new business sales. Moreover, growth momentum continues with progress already evident in SLIC’s strong half-yearly January to June 2023 results.
Comprehensive Life, Health, Takaful and Corporate Group Insurance Solutions
Innovative Plans:
In a year marked by innovation, SLIC has launched more than 20 new products covering life, retirement, health, takaful, and group plans, including the groundbreaking Golden Endowment plan. The company has embraced the digital frontier with the introduction of digital health and accidental products, as well as the first-ever digital Ride Protection Plan.
Additionally, the venture into Takaful Insurance and the strategic expansion of Banca highlights the company's commitment to growth and accessibility. Notably, State Life has unveiled five innovative health insurance plans, catering to diverse medical needs.
These plans, such as the Sahara Family Health Insurance Plan and Sehat Salamat Health Insurance Plan, underscore the company's dedication to providing cutting-edge and comprehensive insurance solutions for its valued clients.
State Life's commitment to health insurance:
Exemplified by its extensive coverage, encompassing everything from in-patient hospitalization to emergency services, renal transplant, cardiac surgeries, and specialized medical investigations.
The company goes above and beyond to ensure accessibility to high-quality healthcare, boasting a vast network of over 1,000+ hospitals nationwide. At the heart of State Life's operations is a dedication to transparency and efficiency, driven by cutting-edge data processing tools, including a 3-tier gatekeeping and facilitation system, a state-of-the-art data center, and the largest e-claim repository in Pakistan.
Prioritizing customer convenience, State Life offers cashless hospitalization facilities, emergency medical services, and operates a streamlined, paperless claims management system. This commitment guarantees timely and seamless claim payments, emphasizing State Life's unwavering dedication to providing a superior health insurance experience for its valued customers.
Digital Innovation:
With the Health Mobile App, a state-of-the-art data center, and the largest e-claim repository in Pakistan, SLIC provides customers with convenient access to insurance services, including e-payments, e-claims, and streamlined processes, elevating the overall customer experience.
Industry Leader:
SLIC has emerged as a pivotal contributor to the nation's GDP, exemplifying its commitment to reinforcing the economy's backbone.
TOTAL GROSS PREMIUM - RS. IN CRORES
Unmatched Claims Payout:
Demonstrating an unwavering commitment to policyholders, SLIC accounted for an impressive 65% of the total claims of the entire industry, amounting to over PKR 17,500 crores. This highlights SLIC’s robust financial standing and dedication to meeting the needs of its valued customers.
Annual Benefits to Policyholders:
SLIC announces bonuses annually based on actuarial valuation, distributing 97.5% of surplus as bonuses to all with-profit policies, providing policyholders with confidence in their investment's affordability and value. For 2022, SLIC announced a gigantic Rs 9,749 crores in profit back to its policyholders making it the largest bonus announcement in history.
AAA-Rated Excellence:
As the only AAA-rated insurance company in Pakistan, SLIC’s product offerings are carefully tailored to provide excellent value for money. The corporation offers the highest payouts in terms of claims and survival benefits, ensuring policyholders are shielded from market volatility.
Mr. Hussain, the driving force propelling SLIC to new heights, expressed his deep sense of pride in the corporation's accomplishments stating.
“At State Life, our purpose transcends insurance; it is about weaving a safety net for the citizens of Pakistan. We empower individuals and families with the unwavering confidence that stems from protecting them against life's uncertainties.
Our commitment is deeply rooted in providing comprehensive Life and Health Insurance solutions, positioning ourselves as the trusted partner on every Pakistani's life path to a secure and prosperous future. By harnessing the power of technology, we are dedicated to enhancing the well-being of our policyholders and contributing to the prosperity of our nation.”
Copyright Business Recorder, 2023