The Future of Insurance in Pakistan, Navigating Challenges, Fostering Resilience: Mohammed Ali Ahmed, Managing Director & Chief Executive EFU Life Assurance Ltd

“I congratulate the Chairman, Commissioner (Insurance), and the Insurance Division SECP for organizing the inaugural International Insure Impact Conference 2023. This conference will play a pivotal role in showcasing SECP’s 5-year strategic plan and create the necessary discussions and dialogues amongst all stakeholders to help tap into the potential of the insurance industry, fostering innovation and growth.

I am optimistic that SECP’s strategic plan for the Insurance sector will provide the necessary impetus to pave the way for transformative advancements and improving the insurance penetration in Pakistan”.

A few key aspects of Pakistan’s demographics, i.e. a population of 240 million, median age of 20.6 years and two-thirds population under the age of 30 years – the youth bulge – all point towards a market full of potential for life and health insurance. The key is to create an enabling environment, both by the industry players and the regulator, that creates opportunities to take advantage of the favourable demographics of the country. An insurance penetration rate of 0.9% is one of the lowest in the world and seen by many as an indication of the lack of success of the insurance industry to move the needle on various indicators of financial inclusion. I see this low penetration rate as an exciting and promising opportunity to make a difference in the insurance landscape of the country.

Let me touch upon a few important areas which I believe can help the insurance industry move forward in the next five years.

The Two A’s of insurance – Awareness and Acceptance

Lack of awareness about insurance is a major impediment in the growth of business and one of the important factors for the low penetration rate. The insurance industry in its limited capacity needs to continue with marketing and awareness campaigns, utilizing all mediums such as mainstream media, digital platforms, on-ground engagements, and at the same time address this matter at grassroot levels by collaborating with educational institutions to introduce the concept of insurance and risk management from an early stage. The direct impact of greater awareness and higher financial literacy is the increase in the acceptance of insurance as a key part of any individual and family’s financial planning. Collaborative efforts between the regulator and SECP will also play an important role in addressing both these aspects.

Increasing outreach

To have any meaningful impact on the insurance penetration rate, the message about the benefits of insurance need to reach every corner of Pakistan, bridging the protection gap and empowering marginalized communities. Whilst insurers continue to invest in their distribution capabilities by building and expanding the agency sales force, deepening bancassurance ties, penetrating the corporate sector, mass level outreach is what will bring millions of Pakistanis into the insurance net, most of them being first time users of any insurance product. Creating additional unconventional distribution channels will make a difference in achieving the goal of higher financial inclusion. A key performance indicator needs to be the number of lives insured, and not just the premium income.

Collaboration

Fostering cooperation between the SECP, insurance companies, and other stakeholders will create a fertile ground for collective problem-solving, knowledge exchange, and innovation. Insurance companies need to take advantage of various eco-systems that have evolved over the last decade, creating ease of access to larger segments of our population. Collaboration to support in various areas of insurers’ business model, such as distribution, payments, data analytics, financial literacy and advocacy, to name a few, can help augment the efforts of insurers. Such collaborations will help bridge the protection gap and ensure that insurance is not a privilege, but a fundamental pillar of financial security for all Pakistanis.

The two S’s of insurance – Solutions for Segments

The insurance sector needs to have the right financial planning solutions for the right segments to effectively tap the socio-economic pyramid. The philosophy of one-size-fits-all needs to evolve. An insurance solution for a high-net-worth segment will vary greatly from a solution for the middle-income segment.

Similarly, the solution for low income and marginalized segments will have its own dynamics. Data segmentation, whether it is the insurers' own database, or a subset of the country’s population, will play a fundamental role in the insurance solutions of the future.

Customer journey

At the heart of the insurance sector’s strategy needs to lie an unwavering commitment to safeguarding policyholder interests. Robust regulatory frameworks, enhanced consumer protection measures, and transparent claim settlements will foster trust and confidence in the insurance system, encouraging individuals and businesses to embrace the transformative power of insurance. All touch points of a customer’s journey with an insurer, from enrolment to claim, need to focus on ease, understanding and where required, even handholding, so that a customer is fully able to benefit from the insurance solution. An insurance claim is a culminating step of the customers’ relationship with an insurer and needs to be handled with sensitivity, promptness, and a mindset of care. A positive customer journey is in itself a critical success factor for the insurance industry.

Technology as an enabler

Encouraging technology adoption, data analytics, and artificial intelligence will enable the development of personalized, cost-effective products and streamlined processes, catering to the evolving needs of policyholders. It is important for insurers to view technology as an enabler to do more, better – rather than an all-encompassing solution for all needs. Investment in technology will continue in the future and focus will be on tools that can support financial literacy, improve customer acquisition, facilitate all parts of the customer journey, create cost efficiencies and enforce data analytics. Prudent use of technology to add value to the business model will define the direction of the insurance sector.

Climate change resilience

Pakistan ranks as the fifth most climate-vulnerable country in the world as per the Global Climate Risk Index. Our country has been severely impacted over the years due to droughts and floods - the mega flood of 2022 impacted over 30 million Pakistanis with economic losses and infrastructure damages of USD 30 billion. Unfortunately, due to being a high-risk country, we will continue to face such disasters every few years into the future. The insurance sector along with the regulator and various government agencies can play its role in supporting a disaster risk financing and insurance fund to mitigate the impact of such future events. This is a task of gigantic proportions and will require the collective muscle of the insurance industry and the government. The sector can leverage on the expertise and experience of development and donor agencies which have set up such funds in other countries.

The journey towards a thriving insurance sector in Pakistan will not be without its challenges. Climate change, evolving demographics, and technological disruptions demand a sector adept at adapting and innovating. Deeper collaboration of the industry and SECP will help in supportive policy making and a regulatory framework geared for development of the sector and moving towards an “Insured Pakistan”.

Salaam Takaful Limited:

Pioneering a Technological Revolution in Islamic Insurance

In the realm of Islamic insurance, Salaam Takaful Limited has emerged as a trailblazer, spearheading a transformative wave through its innovative tech-based products to become the first Islamic Insurtech in Pakistan. The company's commitment to reshaping the landscape of the Islamic insurance / takaful industry is evident in its groundbreaking offerings.

Salaam Takaful Limited stands out for its innovative "Pay-As-You-Drive" Motor Takaful, a unique product that harmonizes with Islamic finance principles while harnessing modern technology. This inventive offering presents a dynamic and equitable pricing model, enabling policyholders to contribute based on their actual kilometers driven. Through telematics technology, the company gathers real-time data on the covered vehicle's usage, including distance, speed, and driving patterns, fostering transparency, and ensuring policyholders receive fair benefits. In agriculture, Salaam Takaful addresses farmers' vulnerabilities with Parametric-based Crop Takaful, leveraging advanced data analytics and satellite technology to protect against specific weather-related risks. The company's commitment extends to the travel sector with Flight Disruption coverage, employing advanced risk modeling and real-time data analysis to provide comprehensive protection for unexpected disruptions, reflecting Salaam Takaful Limited's dedication to offering holistic and responsive Islamic insurance solutions aligned with the dynamic needs of modern travellers and contributing to the stability of Pakistan's agricultural sector.

Salaam Takaful Limited is not just at the forefront of introducing innovative tech-based products but is also actively transforming traditional processes, demonstrating a commitment to efficiency and policyholder convenience. The company has shifted from conventional paper-based operations to digital platforms, streamlining workflows and reducing environmental impact. Additionally, Salaam Takaful has embraced modern communication channels by introducing a WhatsApp feature, providing policyholders with instant access to product information and policy details. The all-new Salaam App serves as a comprehensive insurtech ecosystem, offering policyholders a multifaceted experience. Beyond the convenience of lodging claims digitally, the app provides access to exclusive discounts at merchants, hospitals, clinics, and pharmacies. Furthermore, the Salaam Virtual Clinic feature within the app allows policyholders to avail themselves of free outpatient consultation services through audio and video calls, highlighting Salaam Takaful's dedication to leveraging technology for the holistic benefit of its policyholders.

As the first Islamic Insurtech in Pakistan, Salaam Takaful Limited is steadfast in its commitment to revolutionizing the insurance and Takaful industry. Continuously pushing the boundaries of innovation, the company stands as a beacon of change, introducing cutting-edge tech-driven products and processes that redefine the policyholders’ experience. Salaam Takaful's proactive approach reflects a dedication to not only meet but exceed the evolving needs of policyholders. By leveraging advancements in data analytics, artificial intelligence, and other emerging technologies, Salaam Takaful aspires to not only set new industry standards but also foster a culture of innovation that positively impacts the entire insurance and Takaful landscape in Pakistan.

Copyright Business Recorder, 2023