Insurance sector: CCP flags the irritants limiting competition

ISLAMABAD: Pakistan’s insurance market has significant room for expansion, but legacy protections, weak consumer confidence and uneven enforcement are limiting competition and keeping millions outside the financial safety net, according to a sector assessment by the Competition Commission of Pakistan (CCP).

The assessment, being refined through stakeholder consultations, is expected to form the basis of recommendations to the federal government.

The issues were discussed at a Competition Consultative Group meeting on strengthening competition in the insurance sector. Participants identified digitalisation, better claims management, consumer safeguards and wider market access as essential for growth.

CCP Chairman Farid Ahmad Tarar said insurance supports economic activity by managing risk and mobilising long-term savings. Pakistan’s low penetration, he noted, should also be viewed as a growth opportunity achievable through innovation, improved service and greater consumer choice.

The draft assessment places insurance penetration at 0.87 percent of GDP and density at about USD 14 per capita, compared with USD 82 in India and USD 134 in Türkiye.

It also points to market distortions arising from preferential arrangements. State Life Insurance Corporation holds around 55 percent of the life market and benefits from a federal guarantee. National Insurance Company Limited retains exclusive access to public-property insurance, while insurers must offer at least 35 percent of treaty reinsurance business to Pakistan Reinsurance Company Limited, with the first right of refusal.

The assessment says reviewing such arrangements could improve market contestability and encourage competition on pricing, products, service quality and claims performance.

Consumer confidence remains another critical challenge. Private life insurers distribute around 54 percent of policies through banks, yet bancassurance accounted for 2,729 of the 4,579 life-insurance complaints handled by the Federal Insurance Ombudsman in 2022. Complaints include policies allegedly presented as deposits or investment products without adequate disclosure of risks and surrender charges.

The report also highlights fragmented grievance mechanisms and weak enforcement of compulsory motor third-party insurance. Despite more than 30 million vehicles on Pakistan’s roads, only about three percent are reportedly insured.

Provincial sales tax on insurance and reinsurance premiums, together with the one-percent federal insurance fee on non-life policies, adds to costs.

The consultation is examining competition-neutral regulation, clearer disclosures, coordinated complaint handling, digital verification, better data and effective enforcement of mandatory cover.

The assessment suggests that such reforms could unlock opportunities in agriculture, health, Takaful, micro-insurance, SMEs and rural markets, turning Pakistan’s low insurance base into a platform for financial inclusion, investment and sustainable growth.

Copyright Business Recorder, 2026