The majority of insurers have yet to take significant steps towards digitalisation, according to the findings of a survey by the Securities and Exchange Commission of Pakistan (SECP) on digitalisation in the insurance industry in the country.
In a report titled “Insured Pakistan through Digitalization: Gaps, Potential & Roadmap”, SECP states that the insurance industry is still in its infancy stage of digitalisation, evidenced by only a few companies starting their digital journey and digitalisation efforts being primarily focused on the distribution side.
Premiums generated from digital distribution channels for less than 1% of the total premiums. Among the few digitally offered products, travel, accident, motor, and health insurance are the main contributors.
The SECP notes that some insurers are hesitant to even participate in the regulatory initiatives.
Roadmap
The report also outlines the roadmap to be followed to realise the objectives of the “Insured Pakistan” five-year Strategic Plan.
Blueprint needed for the digital infrastructure in the insurance sector
Digital initiatives introduced by regulatory authorities and digital activities within the insurance sector are fragmented and not linked with the national digital strategy. To build a centralised and cohesive approach, a blueprint is required which should cover digital distribution, payment, KYC, repository, clearing and settlement, identity, information sharing, and data points, etc.
Adopting a holistic approach to digital adoption
Although an inclination towards digitalisation can be observed among insurance companies, efforts are made in bits and pieces. At such a pace, the insurance sector cannot leverage the true benefits of digitalisation. Hence, there is a dire need for the adoption of a holistic approach to digitalisation.
Regulatory support is crucial
Approval of the proposed amendments in the Insurance Ordinance will be the starting point for regulatory support of digital initiatives. Although there has been a number of initiatives by the regulator, a more proactive role is required which can be achieved by continuous engagement with stakeholders.
Identification of fragmented data sources and establishment of linkages
Data sources vary for different insurance classes. The fragmented data sources are to be identified and linked together. The concept of open insurance can be introduced for data sharing among insurers, third-party providers, and other stakeholders. Open insurance can significantly improve the digital landscape of insurance in Pakistan by fostering innovation, enhancing customer experience, and increasing market transparency.
New integrated data centres
Once the various data sources are identified, they need to be linked and gathered into new data centres. There should be integrated data centres for health, inclusive insurance, a disaster insurance programme, and national crop insurance programme. Based on the data available through these data centres, insurers could provide data-driven products with improved underwriting and pricing.
Insurance clearing house
An insurance clearing house is a centralised entity that streamlines the processing, verification, and settlement of insurance transactions between insurers, reinsurers, brokers, and policyholders. Automating claims processing, premium collection, data management, and regulatory compliance, reduces administrative overheads and operational costs, enhances accuracy and transparency, and improves customer satisfaction through faster and more reliable services.
System design and infrastructure
The formation of a comprehensive digital infrastructure is essential for the adoption of digitalisation in the insurance sector. A robust infrastructure will enable the seamless integration of advanced technologies, enhance data security, and improve customer experience.
Public awareness
Pakistan has over 190m mobile phone subscriptions and 155m Internet subscriptions. This presents an ideal opportunity for insurers to educate the public about the need for insurance through financial and digital literacy.
The Commissioner of Insurance, Mr Aamir Khan, in a message in the report says that the current state of digitalisation requires immediate attention from all stakeholders. While the SECP is committed to modernising Pakistan’s insurance sector, other stakeholders must join forces and advance toward a comprehensive digital insurance ecosystem.
Click here to read the report.