BR research recently sat down with Javed Ahmed. Ahmed is Managing Director and Chief Executive of Jubilee Life Insurance Company. He is a Fellow of the Society of Actuaries (USA) and has extensive experience of life and health insurance business.
Following is a brief transcript of the conversation that took place during the meeting.
BR Research: Give us a brief overview about the recent performance of Jubilee Life Insurance!
Javed Ahmed: Jubilee Life Insurance performs well. In 2013, we achieved a growth of 41 percent in top line and bottom line increased by 20 percent. We have consolidated our lead as the largest private insurer in Pakistan. Moreover, with improvement in bottom line, we are also the most profitable and most valuable life insurance company on the stock exchange. We have done well in the past and our actual growth has been in line with our expectations.
BRR: What has actually triggered this substantial growth?
JA: If you look at last 5-6 years of the company, we have grown at 38 percent per year. So, it's not something unusual for the company. It's our strategy to focus on growth avenues which is actually resulting in this growth.
We are focused on developing new distribution channels. Life insurance has been one success story in which we have mastered after we initiated this concept in Pakistan. And now, we are working on some other distribution channels as well. Last year, we launched a scheme with Telenor, where their subscribers were insured by Jubilee Life Insurance. Apart from this, we are looking for different avenues to spread our wings. We are also developing micro-insurance segment.
Customer service has been one area where we have focused and showed better service than others, we try to do things a little differently so that has helped us in developing an image which is helping us grow.
The point is that there is a lot of potential in the market as the penetration is still quite low. All you need is to make sure that you are geared up to realise this potential.
BRR: Do you also see the need to change the perception of insurance amongst the consumers or you believe creating just the basic awareness can help achieve the purpose?
JA: Changing the perception is also important.
There are two primary issues. First, awareness level is very low in Pakistan and second, even if people are aware, they don't think highly of insurance company. So, I think the perception cannot just be changed by advertising. Companies are working very hard to build their images and to improve their services, they are adopting all these new ways of communicating with the customers. As you can see, all the companies have websites now, policy portals, SMS services and call centres. They are adopting every possible way to communicate with their customers. So I think this will definitely help the industry.
Moreover, creating awareness is a long-term game and has to be done through mass media, ie television and newspapers. So, all the companies have to work on that front.
BRR: Has the penetration level changed in the recent past? If yes, how significantly has it changed and how do you see further progress in the next 5 years?
JA: It has not changed much, except that the life insurance penetration has increased over the last few years. That is primarily because of the growth of life insurance companies. Unfortunately, non-life sector has not grown much because their growth is linked more to the economic growth of the country, as its primarily corporate business, I would say!
Sadly, our economy hasn't done well in the last few years. So, that's why the growth isn't there and the penetration hasn't been increased. But, the life penetration level has been increased at a faster pace. Having said that, the insurance penetration is still very low (not even one percent of GDP), which is lower than even Bangladesh and India. In effect, ours is one of the lowest penetrations in the region. The industry has to work really hard to boost the penetration level.
BRR: Take us through the distribution network in place. How has it evolved so far? What's your focus amongst all the channels?
JA: In the recent past, the main distribution channel has been the Bancassurance, because it has grown very well. And when we started this channel, nobody expected that it will turn out to be so successful. But, it turned out to be well for us and we are still endeavouring to grow it further. I don't think it has reached its saturation point, it's just the beginning and there is a lot of potential in this channel.
Apart from Bancassurance, we have a direct sales force channel. And now we are working on creating something new. I think that within a year or two, everyone will know what we have done. Just like Bancassurance, I am sure, that three to five years down the line people will see what the company has done in terms of developing other distribution channels.
BRR: So, apart from Banncassurance and direct sales force, what other channels do you have?
JA: We have a corporate distribution channel as well which applies to group health. We are the largest health insurer in Pakistan!
We have some other channels as well which are in pilot stage, I would say. One is called WSM (Work Side Marketing), which is the selling of individual life policies to corporate customers and corporate employees. The other is priority channel. Just like in banking, there is a priority segment in which you try to tap your customers through a different channel. We are trying to develop another sales force which shall tap that particular market.
BRR: Has the growth of Bancassurance resulted in lesser focus on other channels?
JA: I don't think so because our business from other channels has also increased. Growth in life insurance industry is not just because of Bancassurance. It's because other channels also have done a good job. For example, in our case, our corporate business which has nothing to do with Bancassurance, achieved 80 percent growth in last year. So, Bancassurance has been an accelerator, a contributor to growth, but it has not been the sole factor.
BRR: Having said that, Bancassurance is a low-cost channel. Has it been more profitable than other distribution channels?
JA: The dynamics are very different. The profitability of life insurance business cannot be determined in one year or so; therefore, I cannot say if it is more profitable or less profitable. It may be the same as other channels or it may be even less profitable in the long term, but nobody can say that for sure at this point of time.
BRR: Is there some perception issue especially in the rural areas that people are more rigid towards insurance because of religion?
JA: Again, that is a misconception about Pakistan that people don't buy insurance because of religion. It's totally wrong. It's the problem with insurance companies that they have not developed the networks to reach to those customers.
Saying that people don't buy insurance because of religion is a very easy excuse. In fact it's the easiest excuse. If you ask our sales force in their day-to-day meetings with customers about how many cases are rejected on the basis of this religious excuse, they would say 'hardly very few'.
As I mentioned previously, no company has taken a view on the market and everybody thought that Pakistan is a Muslim country and people don't buy insurance here because of religion, that people don't have money and that nobody understands why insurance is needed. Hence, nobody tried to overcome these mental fears which were created on our own. If it was ever true, we wouldn't have been able to experience such growth in Pakistan.
BRR: Can we say that this mindset is the only reason behind this low penetration level in Pakistan?
JA: I think one of the major reasons for low penetration is that insurance companies are content with whatever growth they were getting, be it 20 percent or 30 percent. But any industry in Pakistan can achieve that level of growth. If you look at the opportunity available, even achieving a 50 percent growth is not sufficient. If you want to increase penetration then you have to remove all these mental barriers that we have created by ourselves.
In a survey that we conducted for micro-insurance, targeting the lower segment of the market-which is more religious, more fundamental I would say-only 10 percent of people said that they would not buy insurance because of religion. And, if you talk about the entire population, it will only be 5 percent or so. In short, 95 percent of the market does not consider religion to be a problem.
BRR: How has been the relationship with the regulator?
JA: It's been co-operative. SECP has always followed a consultative approach in making regulations and I think they have helped in setting regulations that have proved to be good for the industry. And I look forward to continue working well with the regulator in future.
BRR: So, do they take into account the recommendations or suggestions of the insurance companies?
JA: Yes, they listen to the industry and incorporate the suggestions which they consider to be suitable for the industry. But their first job is to protect the consumers and at the same time, they have to ensure that they don't set any regulation that hampers the growth of the industry. They have to balance it out. So, they are doing their jobs very well and have incorporated every major concern of the industry into the regulations.
SECP is taking the right approach. They listen to the issues that the industry is facing and at the same time, they have explained the issues that they are facing or their customers are facing. So, it has been a win-win situation for all of us.