Pakistan could be ranked ‘most lucrative’ to sell life policies
Country’s share is lowest in the region, pointing towards untapped potential.
KARACHI:
If all countries of the world were ‘profiled’ from the perspective of an insurance agent looking to sell life policies, Pakistan should rank among the most lucrative markets.
According to Swiss Re Group – a global wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer – life insurance in Pakistan was significantly small even when compared to its peers in the region.
Life insurance penetration – defined as the collective share of gross premiums collected by all life insurance companies in the gross domestic product (GDP) of the country – was only 0.3% in Pakistan during 2010. However, for India, Sri Lanka and Bangladesh, life insurance penetration remained 4.4%, 0.6% and 0.7%, respectively, in the same year.
Out of the seven life insurers operating in Pakistan, six belong to the private sector with a collective market share of 36% in 2011. The two largest private life insurers – EFU Life Assurance and Jubilee Life Insurance – had a combined market share of 26%, which left the remaining four private companies with a collective share of only 10%.
Although the market share of the state-owned State Life Insurance Corporation of Pakistan (SLICP) had remained stable in the last five years, private companies in the life insurance sector have shown remarkable growth. For example, while total assets of the SLICP grew at an annualised rate of 14.5% during the last five years, the aggregate growth in the assets of private-sector companies for the same period had been a staggering 30.8% per annum.
Speaking to The Express Tribune, EFU Life Assurance Chief Strategy Officer Mohammed Ali Ahmed said three factors differentiated private-sector life insurance companies from the state-owned insurance giant that controlled 64% market share.
“I believe the differentiating factors are the product value and flexibility pre- and post-sales client experience with the company, and the comfort that the insurance company is financially sound and will pay the insurance claim when it is needed the most by the beneficiary,” Ali said.
EFU Life Assurance was the largest private-sector company in the country’s life insurance sector in terms of total assets. With assets of over Rs28 billion, its share in the combined assets of all private-sector life insurance companies was over 53% at the end of 2011.
Its individual clients increased from approximately 100,000 in 2006 to close to 250,000 in 2011, which translated into an annualised growth rate of 20.1%. On the contrary, the number of individual life insurance policies of the SLICP increased at an average rate of 11.5% per annum during the same fiver-year period.
Statistics show that life insurance companies in the private sector had also been more profitable than the SLICP. While profits of the state-owned company increased by 13% on average in the last five years, the bottom line of EFU Life Assurance grew at an annualised average of 19.6% during the same period. Moreover, the aggregate growth in the profits of all private-sector life insurance companies during the same period also remained 24%, nearly twice that of the SLICP.
“Such a low penetration rate for a population of over 170 million individuals simply points us in the direction of the huge opportunity which is waiting to be tapped,” Ali said. “There is nowhere to go but up.”
Despite repeated attempts, nobody from Jubilee Life Insurance was available for comment.
Published in The Express Tribune, October 22nd, 2012.
If all countries of the world were ‘profiled’ from the perspective of an insurance agent looking to sell life policies, Pakistan should rank among the most lucrative markets.
According to Swiss Re Group – a global wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer – life insurance in Pakistan was significantly small even when compared to its peers in the region.
Life insurance penetration – defined as the collective share of gross premiums collected by all life insurance companies in the gross domestic product (GDP) of the country – was only 0.3% in Pakistan during 2010. However, for India, Sri Lanka and Bangladesh, life insurance penetration remained 4.4%, 0.6% and 0.7%, respectively, in the same year.
Out of the seven life insurers operating in Pakistan, six belong to the private sector with a collective market share of 36% in 2011. The two largest private life insurers – EFU Life Assurance and Jubilee Life Insurance – had a combined market share of 26%, which left the remaining four private companies with a collective share of only 10%.
Although the market share of the state-owned State Life Insurance Corporation of Pakistan (SLICP) had remained stable in the last five years, private companies in the life insurance sector have shown remarkable growth. For example, while total assets of the SLICP grew at an annualised rate of 14.5% during the last five years, the aggregate growth in the assets of private-sector companies for the same period had been a staggering 30.8% per annum.
Speaking to The Express Tribune, EFU Life Assurance Chief Strategy Officer Mohammed Ali Ahmed said three factors differentiated private-sector life insurance companies from the state-owned insurance giant that controlled 64% market share.
“I believe the differentiating factors are the product value and flexibility pre- and post-sales client experience with the company, and the comfort that the insurance company is financially sound and will pay the insurance claim when it is needed the most by the beneficiary,” Ali said.
EFU Life Assurance was the largest private-sector company in the country’s life insurance sector in terms of total assets. With assets of over Rs28 billion, its share in the combined assets of all private-sector life insurance companies was over 53% at the end of 2011.
Its individual clients increased from approximately 100,000 in 2006 to close to 250,000 in 2011, which translated into an annualised growth rate of 20.1%. On the contrary, the number of individual life insurance policies of the SLICP increased at an average rate of 11.5% per annum during the same fiver-year period.
Statistics show that life insurance companies in the private sector had also been more profitable than the SLICP. While profits of the state-owned company increased by 13% on average in the last five years, the bottom line of EFU Life Assurance grew at an annualised average of 19.6% during the same period. Moreover, the aggregate growth in the profits of all private-sector life insurance companies during the same period also remained 24%, nearly twice that of the SLICP.
“Such a low penetration rate for a population of over 170 million individuals simply points us in the direction of the huge opportunity which is waiting to be tapped,” Ali said. “There is nowhere to go but up.”
Despite repeated attempts, nobody from Jubilee Life Insurance was available for comment.
Published in The Express Tribune, October 22nd, 2012.