News Life and Health28 Oct 2024

Pakistan:Insurance market growth slowed by challenges

| 28 Oct 2024

The Pakistani insurance industry posted total gross premium written of PKR631bn ($2.27bn) in 2023, reflecting 14% growth compared to PKR553bn in 2022, according to the Securities and Exchange Commission of Pakistan (SECP), which indicates that growth could have been more rapid.

In its report, “Insurance Industry Statistics 2023”, SECP says that the life insurance sector accounted for 64% of the industry’s gross premiums written in 2023, while the non-life sector comprises 36%.

Claims paid during 2023 amounted to PKR373bn (2022: PKR276bn), with life insurance companies accounting for PKR289bn and non-life companies paying PKR84bn.

In 2023, the total assets of the industry grew from PKR2,421bn to PKR2,900bn.

Mr Aamir Khan, Commissioner of Insurance, in his message published in the report, said, “The 2023 statistics, though, suggest stagnation when solely viewed through the lens of premiums, particularly in the life insurance sector where growth has remained at less than 10%. I would, however, also draw attention to the increase of 20% in total assets and 36% in claim payment figures.

The slower growth is attributable to challenges confronting the sector, including ineffective enforcement of motor third-party insurance with only 3% of vehicles insured; low adoption of agriculture and livestock insurance; an unfavourable taxation regime; limited local reinsurance capacity with retention levels at 42%, and a shortage of skilled human resources.”

Answer to challenges

Mr Khan added that the answer to the challenges lies in:

(a) Whole-hearted adoption of the five-year strategic plan by the insurers, including use of technology;

(b) Federal government’s support in passing the long-overdue essential legislative changes;

(c) Provincial governments' focus on strict enforcement of compulsory insurance schemes and use of insurance for managing risks to public assets, securing livelihoods of those engaged in the agriculture/livestock sectors, and providing health and associated covers strictly through insurers in pool structures; and

(d) SECP should simplify its regulatory approval processes, develop a digital ecosystem for capturing, storing, sharing, and using insurance sector data for all stakeholders, and support innovation and product development.

Mr Khan also said, “The current demographics of our market also call for the transition from conventional distributional channels to the digitalized modes which may not only boost the premium coming from digital channels (currently at less than 1%), but also the overall pie of the sector.”

He said, “I strongly believe that through modernised legislation, harnessing technological advancements, establishing insurance pools, attracting skilled professionals to the sector ,and increasing awareness, we can rapidly advance towards achieving the outcomes identified in the five-year strategic plan.”

In December 2023, the SECP unveiled a five-year strategic plan for the insurance industry with a target to increase the number of insured people from about 8m then to 15m and total premiums of PKR1.3tn by 2028.

As of the end of 2023, there were 41 (re)insurance companies operating in Pakistan, comprising 27 non-life insurers, eight life insurers, two general takaful companies, three family takaful companies, and one reinsurer.

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