Microinsurance: Draft regulations unveiled

SECP invites stakeholders to review proposed draft of SECP Micro Insurance Rules 2011.

Mobin Nasir January 14, 2011

KARACHI: High instances of claims against existing microinsurance plans coupled with high administrative costs of selling these policies are the two biggest hurdles to expansion of microinsurance in the country.

Participants at a business policy round table on microinsurance organised by the Securities and Exchange Commission of Pakistan (SECP) and Centre for International Private Enterprise (Cipe) laid down possible solutions for overcoming hinderances to microinsurance in the country.

There are currently about four million microinsurance policyholders in Pakistan, majority of who reside in the northern areas. “Previously the size of this market was negligible but with a view of expanding insurance so that it may reach the masses, the regulator is formulating regulations for this segment,” explained an SECP official.

The draft of SECP Micro Insurance Rules 2011 was unveiled to stakeholders from insurance companies, financial institutions, non-governmental organisations and the media here on Thursday.

“A pilot project for microinsurance will be launched by June this year,” Asia Care Insurance CEO Mehdi Kazmi informed the participants. The pilot project will be jointly executed by Asia Care, Allianz-EFU, Adamjee and State Life insurance companies with logistical support from Tameer Bank and First Micro Insurance Agency (FMIA).

“The project must seek linkages with technology and build upon the work already completed by existing microinsurance providers,” stressed chief executive FMIA Tariq Khan Baloch. Other participants suggested that there should be no minimum limit for coverage in the proposed regulations.

They argued that stipulating cover of Rs10,000 per asset should be repealed and market dynamics should be observed before deciding on minimum limits for coverage through microinsurance.

“No one in Pakistan knows how to make microinsurance viable in the long run,” warned Kazmi.

He explained that at the moment cost of selling policies with low premiums is high, while increasing levels of claims have been witnessed against these policies. He also pointed out that there is a lack of healthcare providers, particularly in rural areas.

“But insurance cover for primary healthcare can help incentivise providers to improve the quality of services, given the prospects of guaranteed payments through insurance.”

Those in attendance concurred that offering complex packages of life and non-life insurance in the country may be difficult to rationalise for companies at the moment.

Published in The Express Tribune, January 14th, 2011.


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Adnan Malik | 10 years ago | Reply Dear Sir, Please let me forward following suggestions for the furtherence of microinsurance among the masses of Pakistan: 1) Use of technology can discourage antiselection at one side while cost will decrease on the other side. For e.g NADRA keeps district wise data of nearly every pakistani with complete family profile. Micro life products can be given to any model by using data of NADRA. If it proves successful, it can be extended to micro health coverage. 2) Distribution channel of microfinance institutions (MFI's) can be utilized under Partner Agent model which will bring down the distribution cost. It will e just like presently clicked product of BANCASSURANCE. Such products can be introduced through MFI''s which help in promoting their credit. 3) Data of houses can be arranged from different city development authorities and smart coverage can be offered across the board to all houses registered with that particular authority with nominal premiums against the risk of fire, earthquake and floods (atmospheric disturbance) 4) For distribution in addition to MFI's,shops, post offices, schools can be utilized 5) As microinsurance is seen as a tool in reducing poverty by saving the savings of poor from being wasted on health and funeral expense, therefore, the approach of insurer should be giving claims not by avoiding claims with the help of exclusions, waiting periods, incomplete covers Thanks
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