Alvi warns against deceptive practices

Directs SECP to meet needs for disaster risk financing in case of calamity

KARACHI:

President of Pakistan Dr Arif Alvi has directed the insurance regulatory body and companies to come up with schemes and products that could provide protection to households and businesses against risks of disaster and calamity, and urged them to improve their public image to increase insurance penetration from the current level of less than 1%.

In his online address on the second day of the “International InsureImpact Conference 2023”, organised by the Securities and Exchange Commission of Pakistan (SECP), Alvi highlighted the importance of insurance in times of crisis. According to an SECP statement, the president underlined that the “deceptive marketing methods” of insurance companies remained a key impediment in the way of promoting insurance coverage across the country.

He directed the SECP to focus on low insurance penetration and come up with schemes and products to meet the need for disaster risk financing in the case of a calamity. Pointing to the risk calculation used by insurance firms, he emphasised the importance of ensuring cost transparency as the high cost of insurance coverage as well as deceptive marketing methods were the key difficulties. “Insurance business must endeavour to improve its public image.”

The president stressed the need for disaster insurance during natural calamities. “The government does its utmost to assist those affected by natural disasters, but expenses are borne by taxation. The situation would have been considerably better had people purchased insurance plans.”

Alvi praised the SECP for taking the initiative and developing a five-year strategy with precise goals, adding that the plan was a step in the right direction, the need and possibilities were great, and it was critical to give social security coverage to Pakistanis through insurance penetration.

While creating awareness among the masses, he said, the industry should adopt a swift complaint addressing mechanism and “resolve the issue of misleading marketing practices by insurance agents.”

In his address, Institute of Business Administration’s Centre for Excellence in Islamic Finance (IBA-CEIF) Chairman and former adviser to the prime minister for institutional reforms and austerity Dr Ishrat Husain advocated the need for regulators to adopt a two-track approach: “a lighter regulatory oversight for running businesses and handholding for start-ups and new ventures.”

He urged the SECP to identify the stumbling blocks and provide a supportive ecosystem for developing the NBFC (non-banking finance companies) sector and nurturing new businesses. Husain pointed out that the share of banks and development finance institutions (DFIs) had increased from 73% in FY2012 to 81% whereas the share of NBFCs was static at 9.4%.

Read 

SECP warning on false investment scheme

He asked the SECP to take steps to ramp up the share of non-banking financial sector, including the insurance sector, to achieve the objective of greater financial inclusion. The ex-adviser was of the view that the SECP, being a unique regulator with dynamic jurisdiction, had a huge potential to mobilise household savings as well as corporate savings by developing and energising the NBFCs.

He urged the private sector to leverage technology to digitalise distribution channels to tap the huge business potential in the areas of crop insurance, health insurance and disaster risk insurance.

Caretaker Sindh Chief Minister Justice (Retired) Maqbool Baqir assured the audience that the government of Sindh would work closely with the SECP and industry to improve crop and livestock insurance and develop some strategy for disaster risk insurance in the province. He stressed that the insurance sector held the potential to shape the future of Pakistan and acknowledged the importance of crop insurance, micro-insurance, insurance pool, Takaful and technology.

He hoped that the SECP would successfully implement its five-year strategic plan to make the insurance sector sustainable by the year 2028. A panel discussion talked about the adoption of International Financial Reporting Standards (IFRS) and Risk Based Capital Regime. Speakers discussed the limitations faced by industry players in implementing the IFRS-17 and the possible approach for its smooth adoption.

They also deliberated on the synergies to be achieved in the adoption of Risk Based Capital Regime, post-IFRS-17 implementation.

The SECP presented its draft report on “Unlocking the Potential of Micro and Inclusive Insurance in Pakistan”. Asian Development Bank (ADB) official Andres McCartney briefed about the bank’s programme of supporting the initiative of increasing the insurance coverage in Pakistan. SECP Chairman Akif Saeed asked participants to carry forward the high spirit seen at the conference and come up with new products like disaster risk financing and to cover the risks posed by climate change.

Published in The Express Tribune, December 15^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.