TEXT: I am delighted to see the Insurance & Takaful fraternity come together to raise awareness about this significant financial sector product. The insurance sector is an important pillar for the stability of the financial sector and has an important dual role within the economy, both in terms of providing a social safety net as well as developing the capital market.
Insurance is the key risk transfer mechanism for individuals, small businesses and corporates. The right insurance and takaful policies can safeguard against unforeseen financial losses. However, with the Insurance and takaful penetration in Pakistan of less than 1 %, there is a wide protection gap that needs to be closed.
SECP remains committed to developing the sector, and has in consultation with the Industry formalized an action plan to help achieve its objectives. This action plan revolves around four components; ensuring the ease of doing business for the industry by reducing the regulatory burden, by focusing on market development to introduce new standardized products, to enhance digitization by encouraging online distribution mechanisms and finally improving governance standards to reduce the risk of malfeasance.
The digital ecosystem in the country is ripe for the enhanced outreach of the insurance industry. Technology, can play a major role by making insurance accessible to those financially excluded. With the advent of end- to-end digitalization in the insurance services, it is possible to cost-effectively deliver insurance to the most remote areas. The availability of innovative technology tools such as artificial intelligence, machine learning and data analytics enable designing tailor-made products suitable to the needs of specific segments. With modern tools, it is also easier to bridge the information gap between insurance providers and the target market, and build public trust by demonstrating value of insurance through timely claims payment. This, along with the curtailing of misselling practices can substantially reduce the trust deficit.
Cognizant of the emerging opportunities in the business ecosystem, the SECP has taken a number of steps to facilitate the insurance industry. The Digital Only and Micro Insurers regulatory framework, by reducing the barriers to entry is expected to enhance competition and increase the innovative product range. Along with this, the SECP has been testing new innovative products and services through its Sandbox facility, has facilitated the digital aggregation of insurance and takaful products through IT Minds, has been developing the insurance repository with CDC and focusing on enhancing RegTech solutions for enhancing its own supervisory capabilities.
The recent reforms such as improvement to Unit Linked Products and Fund Rules, amendments to the Corporate Governance framework, and consolidation of regulatory instructions for issuance of unified Master Circular, are taken in pursuance of the same objective. The SECP is also providing guidance to the industry for implementation of new insurance accounting standard IFRS – 17 with the support of technical experts.
With all these initiatives, the expectations from the industry are simple; to provide transparent products, priced according to risks, suitable to customer needs and sold through efficient channels using the highest ethical standards.
The Insurance Association of Pakistan (IAP) has an important role of enhancing public awareness about insurance and should run image building programs on regular basis. The IAP also needs to create self-regulatory role for developing and implementing code of conduct for industry participants.
It is our hope that with seamless coordination between the industry and the regulators, we will be able to develop a dynamic insurance industry which is financially stable, innovative, and focused on expanding the product range and outreach. This is essential for enhancing the insurance penetration and reducing the protection gap in the country.
Copyright Business Recorder, 2022
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