Good times seem to have come to mark the insurance industry. Investors are wild-eyed about investing in the sector while mergers and acquisitions are gaining momentum. To recall, in April 2014, IGI Insurance acquired a controlling stake in American Life Insurance (ALICO). Later Rosewood, a Switzerland based venture capital, expressed its intentions to acquire 74.9 percent stake in TPL Direct Insurance, which was then followed Bestway’s expression of interest to attain 12.23 percent stake in UBL Insurers.
Whether the latter two deals materialise or not is another debate; but the point is that Pakistan’s insurance sector is being considered as a sector with huge potential. Thanks to the unfolding regulatory mechanism, the industry is lining up to catch up with the pace. Mind you, owing to sluggish growth and dearth of innovation, Pakistani insurance industry is ill-rated when compared to the growth in insurance industries elsewhere in the world. In terms of insurance penetration, Pakistan is ranked as the lowest in the region.
Low insurance penetration coupled with major attempts taken by the regulator to improve insurance regulations, is helping the insurers to hunt for innovation. In this context, the whopping growth in Bancssruance network, the allowance of takaful window operation for conventional insurers, introduction of microinsurance regulations have been the major triggers.
Moreover, with the insurers collaborating with telecommunication companies and asset management companies to expand their outreach, the industry is unveiling alternative modes and channels to tap the untapped segment of the population, which has remained the key culprit behind insurance industry’s lackluster growth over the past many years.
Also, the recent SAARC conference organized by SECP, where delegates from a number of countries were invited, also warrants some brownie points as it helped the regulators from different countries to share their viewpoints on the potential opportunities and the hurdles in existing mechanism.
Rosewood, Bestway and IGI Insurance seem to be smart enough by deciding to capitalise on the opportunities at the right time. Over the last three years, insurance sector’s aggregate profitability grew by a decent average annual growth of 33 percent and with the insurers entering into takaful and microinsurance along with making use of technological development to introduce alternative distribution mechanisms, the growth rate doubling over the next 5-10 years appears to be within reach.
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