At a time when macroeconomic instability, inflation, and towering power tariffs have weakened financial conditions for the average household, life insurance companies are eyeing better prospects. The sector has exhibited healthy growth over the past six months (ending June 30, 2011), reveals the latest date released by the Insurance Association of Pakistan. Rising sales of savings plans via bancassurance - selling through the banking channel; have helped shore up this sectors growth. The accident and health insurance sectors have also contributed to the improving bottom line. A substantial decrease was seen in the claims ratio (ratio of net claims to net premium) in 1HCY11, the ratio stood 24 percent compared to 32 percent in the same period last year. The improvement was seen as there was a large increase of 47 percent in net premium and a fairly small increase in net claims of 9 percent in 1HCY11 on a year-on-year basis. The ratio of gross administrative expenses to net premium also improved from 8 percent in 1HCY2010 to 7 percent. Altogether, the hefty return from bank deposits and rental income along with a nominal increase in expenses resulted in a significant jump of 272 percent in the sectors cumulative profit after tax. With most of the increase in net premium plausibly attributable to bancassurance, the development is a welcome one, especially in a country starved for variety in financial products. Besides bancassurance, a likely reason could be the wary attitudes of the Pakistani citizenry, in general, vis-à-vis the security situation in the country, instigating them to turn towards insurance as a way of safeguarding themselves against ad times.In fact, there is tremendous room for improvement in the sector, especially with the rise of Islamic finance in Pakistan. Shariah-compliant insurance is bound to have an even brighter future in a country where 97 percent of the population is Muslim. Being ranked amongst the most populous countries of the world, and having roughly 60 percent of the population under the age of 30, the demographics of Pakistan promise a bright future for the sector. In addition, as unfortunate as it may seem, the security loopholes in the country may just be a blessing in disguise for the insurance sector.
================================================== Insurance premium rising ================================================== (Rs mn) 1HCY11 1HCY10 chg ================================================== Adamjee life 270 40 575% ALICO 1,711 720 138% Asia Care Health 88 31 184% East West Life 92 83 11% EFU Life 4,720 3,756 26% NJI Life 3,638 2,512 45% Total 10,523 7,144 47% ==================================================
Source: Insurance Association of Pakistan
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