Insurance industry plays vital role in economy’

KARACHI: The insurance industry plays an important role in the financial system by providing indemnification of financial risk in the economy and also serves as an institutional investor for both capital and money market instruments. Despite its relatively small size, the sector is supported by strong and transparent accounting and actuarial infrastructure. Similarly, the reinsurance requirements for the sector are also very clear and well-defined. This was stated by Securities and Exchange Commission of Pakistan (SECP) Insurance Division Executive Director Nasreen Rashid while addressing a seminar as the chief guest held on the topic of ‘Insurance as a Tool to Minimize Business Risk’. The seminar was organised by Karachi Branch Council (KBC) under the aegis of the Institute of Cost and Management Accountants of Pakistan Monday.
She elaborated that like many other developing countries, the size of Pakistan’s insurance industry is relatively small in proportion to its gross domestic product.Currently, the insurance penetration in the country is only 0.7 percent of the GDP, which is one of the lowest in the world. The insurance density is also a mere 6.5 dollars per capita. These figures reflect a tremendous scope for substantial development, if the right macro environment is established and an appropriate regulatory framework is developed.

She informed that the insurance industry in Pakistan could enhance its outreach penetration in the market by leveraging state of the art technology and accessing multiple channels of distribution. We are confident that despite the economic recession in the country and the reduced purchasing power of the consumers, if the B2C selling approach is adopted by the insurance companies and small ticket size products are developed, which meet the demand in the retail market, the insurance density and penetration in the country can increase dramatically, thus providing an impetus to the sagging economy.

Ms Rashid said that it is the SECP’s vision to promote the orderly development of a financially strong and transparent insurance industry, thereby increasing the insurance penetration in the country. We see our role not only as a regulator but as a facilitator. We are taking many important steps in order to translate our vision into reality including development of micro insurance, creation of terrorism insurance pool and mandatory third party motor liability.

Renowned speakers EFU Life Insurance GM Muhammad Ali, Pak Qatar Family Takaful CEO P Ahmed, EFU General Insurance Company Ltd Head of Underwriting Khurram Ali Khan, New Jubilee Life Insurance Co Ltd MD & CE Jawed Ahmed and Insurance Association of Pakistan Chairman Hasanali Abdullah said that insurers must improve profitability while meeting demands of regulators to reduce risk and customers for improved products and customer service.

Also, insurers in the annuities, pensions, and non-life markets are rationalising product portfolios and reviewing distribution strategies.