Life insurance: Technology investments drive growth at Pak-Qatar Family Takaful
Company obsessed with improving its customer experience in growing market.
KARACHI:
Twenty-two years after he started working as an insurance company trainee, Pervaiz Ahmed, now CEO of Pak-Qatar Family Takaful (an Islamic insurance company), is still obsessed with his customer’s experience of his company’s services.
As executives rise through the ranks, they tend to begin thinking about “strategic” matters – how the industry is doing, what their competitors are up to, etc. Not Ahmed. To him, the single biggest imperative for the insurance industry is the customer experience. “If a customer does not like the quality of service, he will run away and never come back.”
That focus on the customer has shaped nearly everything Ahmed has done with Pak-Qatar since he was recruited in 2006 by the Qatari royal family to launch their life insurance company in Pakistan. The company began with a capital base of just over Rs500 million, a significant portion of which Pak-Qatar’s management spent on its technology infrastructure, going to the expense of hiring SAP, the German software giant, for the project.
That investment certainly seems to have begun paying off: customers can get an insurance policy of up to Rs24 million in as little as 20 minutes, very often without even requiring a medical exam. Some quotes can even be obtained online (others within minutes from a customer service representative).
The ease with which customers can sign up has resulted in high growth for the company, which grew its asset base by 122% in 2010 and expects to grow by between 70% and 80% in 2011. Pak-Qatar is not yet a profitable firm but expects to make an operational profit for the first time in 2011, its third full year. Most insurance companies typically take six to seven years to hit operational break-even.
Somewhat oddly for an Islamic company, Pak-Qatar says it does not want Shariah compliance to be its unique selling point but rather simply an added benefit to its customers. None of the product names, for example, are in Arabic, a typical habit among most Islamic finance firms.
The company has no problem partnering with conventional banks to distribute their product through the branch network, for example. Standard Chartered Bank and Faysal Bank are among their leading distributors. Pak-Qatar does, however, have its own sales force of around 1,450 members spread across 32 cities.
It is, however, important to put the company’s achievements in context: the entire life insurance industry in Pakistan has just Rs50 billion in assets ($560 million), less than 0.3% of the total size of the economy. By comparison, Malaysia’s ratio is as high as 6%. Nonetheless, the industry has been growing at a pace of over 35% per year for the last three years.
The problem, claims Ahmed, is that the government has far too low a capital requirement for insurance companies, requiring only Rs500 million to set one up, compared to Rs7 billion required for setting up a bank. The low capital requirements, says Ahmed, means that companies do not bring in enough capital to invest in a large enough sales force and distribution mechanism that would cause the insurance industry as a whole to grow.
Ahmed also acknowledges several problems, foremost of which is training a sales force, often from scratch and then getting them to educate the customer.
Pak-Qatar had been considering listing itself on the Karachi Stock Exchange in order to raise more capital, even going so far as to hire KASB Securities, a leading investment bank, to underwrite the transaction before finally pulling the plug owing to poor market conditions. The CEO now says that while the company still plans on listing itself in the future (and already offers as much disclosure as one), it does not plan to do so in the near future.
Published in The Express Tribune, October 23rd, 2011.
Twenty-two years after he started working as an insurance company trainee, Pervaiz Ahmed, now CEO of Pak-Qatar Family Takaful (an Islamic insurance company), is still obsessed with his customer’s experience of his company’s services.
As executives rise through the ranks, they tend to begin thinking about “strategic” matters – how the industry is doing, what their competitors are up to, etc. Not Ahmed. To him, the single biggest imperative for the insurance industry is the customer experience. “If a customer does not like the quality of service, he will run away and never come back.”
That focus on the customer has shaped nearly everything Ahmed has done with Pak-Qatar since he was recruited in 2006 by the Qatari royal family to launch their life insurance company in Pakistan. The company began with a capital base of just over Rs500 million, a significant portion of which Pak-Qatar’s management spent on its technology infrastructure, going to the expense of hiring SAP, the German software giant, for the project.
That investment certainly seems to have begun paying off: customers can get an insurance policy of up to Rs24 million in as little as 20 minutes, very often without even requiring a medical exam. Some quotes can even be obtained online (others within minutes from a customer service representative).
The ease with which customers can sign up has resulted in high growth for the company, which grew its asset base by 122% in 2010 and expects to grow by between 70% and 80% in 2011. Pak-Qatar is not yet a profitable firm but expects to make an operational profit for the first time in 2011, its third full year. Most insurance companies typically take six to seven years to hit operational break-even.
Somewhat oddly for an Islamic company, Pak-Qatar says it does not want Shariah compliance to be its unique selling point but rather simply an added benefit to its customers. None of the product names, for example, are in Arabic, a typical habit among most Islamic finance firms.
The company has no problem partnering with conventional banks to distribute their product through the branch network, for example. Standard Chartered Bank and Faysal Bank are among their leading distributors. Pak-Qatar does, however, have its own sales force of around 1,450 members spread across 32 cities.
It is, however, important to put the company’s achievements in context: the entire life insurance industry in Pakistan has just Rs50 billion in assets ($560 million), less than 0.3% of the total size of the economy. By comparison, Malaysia’s ratio is as high as 6%. Nonetheless, the industry has been growing at a pace of over 35% per year for the last three years.
The problem, claims Ahmed, is that the government has far too low a capital requirement for insurance companies, requiring only Rs500 million to set one up, compared to Rs7 billion required for setting up a bank. The low capital requirements, says Ahmed, means that companies do not bring in enough capital to invest in a large enough sales force and distribution mechanism that would cause the insurance industry as a whole to grow.
Ahmed also acknowledges several problems, foremost of which is training a sales force, often from scratch and then getting them to educate the customer.
Pak-Qatar had been considering listing itself on the Karachi Stock Exchange in order to raise more capital, even going so far as to hire KASB Securities, a leading investment bank, to underwrite the transaction before finally pulling the plug owing to poor market conditions. The CEO now says that while the company still plans on listing itself in the future (and already offers as much disclosure as one), it does not plan to do so in the near future.
Published in The Express Tribune, October 23rd, 2011.