Although six out of seven life insurance companies operating in Pakistan have fared equally well by and large in terms of gross premiums since 2006, one company clearly stands out for achieving substantially higher growth in annual profits compared to its rivals.
Profits of Jubilee Life Insurance increased on average by 35.3% annually between 2006 and 2011 while the corresponding figure for the entire life insurance industry of Pakistan over the same period was 19.7%. The after-tax profit of Jubilee Life Insurance increased to Rs361 million for nine months ended on September 30, 2012, which is 66% higher than the comparable period in 2011.
Following the decision of its parent company Aga Khan Fund for Economic Development to adopt a single name for all its insurance subsidiaries operating in different parts of the world, New Jubilee Life Insurance Company – mostly referred to as NJI – recently became Jubilee Life Insurance in the course of a major rebranding campaign.
“From virtually no advertisement expense three years ago, it reached Rs40 million in 2011,” Jubilee Life Insurance CEO Javed Ahmed said while talking to The Express Tribune in an interview. He added it was likely to more than double by the end of the current year.
Despite rapid growth in recent years, insurance penetration in Pakistan is the lowest among regional countries. Life insurance penetration – gross life insurance premiums shown as a percentage of gross domestic product (GDP) – in Pakistan is 0.33%. It is significantly lower than life insurance penetration in India, where it was 4.4% in 2010-11.
One reason for low life insurance penetration in the country is private companies’ inability to reach out to the rural population through their traditional sales force. To overcome this logistical problem, Jubilee Life Insurance introduced bancassurance – sale of insurance policies through local bank branches – nine years ago.
From one bank in 2003, Jubilee Life Insurance has increased its bancassurance network to 11 banks in 2012. Almost 75% of individual life insurance premiums that the company now receives are via bancassurance, according to Ahmed.
He says out of the four broad categories of individual life insurance products that the company offers, savings-cum-protection plans constitute the most popular one. Approximately 36% of its current policyholders have bought savings-cum-protection products.
The second most popular category among the company’s policyholders consists of retirement plans (27%). It is followed by education and marriage plans (19%) and wealth accumulation plans (11%), Ahmed said.
After the banking sector, life insurance companies are the largest investors in government securities, whose higher return on investments was instrumental in improving the industry’s earnings profile, according to the State Bank.
In view of the State Bank’s observation, it is interesting to note that 80% of policyholders of Jubilee Life Insurance prefer to allocate their premiums to the company’s Managed Fund, which has a balanced portfolio of shares, government and other fixed income securities. Besides the Managed Fund, Jubilee Life Insurance manages three other funds and gives its policyholders the right to allocate their premiums to any of them.
Saying that Jubilee Life Insurance will launch its Islamic insurance window within six months after the court allows conventional life insurance companies to set up Takaful subsidiaries, Ahmed added conventional insurance companies could play a vital role in expanding Islamic insurance in Pakistan because of their existing infrastructure. The family Takaful business grew by 75.8% in 2011 in Pakistan, according to the State Bank.
“I can say confidently that Jubilee Life Insurance is going to be the largest private sector life insurance company of Pakistan in 2013,” Ahmed said.
Published in The Express Tribune, November 30th, 2012.
COMMENTS (2)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
1714024018-0/ModiLara-(1)1714024018-0-270x192.webp)
It is always good to know when any positive measures take place in our country. Though reading the news story regarding life insurance, instantly brought the story to my mind about the fire incident that caused the death of 300 people. Truly a heart breaking story! If those people were insured, at lease it would have helped their unfortunate families in some way as most of them belonged to lower class. I would like to say that it is admiring to know that life insurance sector is growing at such an increasing rate, supporting/backing our economy in such time of crisis. Though the life insurance culture is extremely low in our country, it is good to see that people have started understanding its importance. What amazed me most was that insurance companies are doing efforts to penetrate this culture among rural population who are unable to afford such facilities. I appreciate the works of the insurance companies like Jubilee Life of reaching out to the negligible part of the population. I hope that people realize the uncertainties of life and start thinking about insuring their lives now.
Kind Regards
Good informative article Kazim. Please investigate a bit more and establish the following in a follow-up article: (a) When did the Aga Khan Fund purchase Habib Bank Limited? (b) When did Jubilee Life tie up with Habib Bank Limited for bancassurance? (c) What proportion of total bancassurance premiums of Jubilee Life came from Habib Bank Limited each year since then? (d) Which other life companies channel their bancassurance products through Habib Bank Limited? (e) What proportion of total bancassurance revenue of Habib Bank Limited comes from Jubilee Life in each year? (f) Is the SECP looking into these tied relationships between insurance companies and banks? Thanks