Value-added lives: Micro insurance for macro insecurity

Jubilee Life Insurance looks to make sector sustainable.


Kazim Alam January 28, 2014
Excluding social micro-insurance, it is estimated that the country has approximately 5.3 million individuals and properties insured under the micro-insurance segment. PHOTO: FIE

KARACHI:


For a lower middle-income country like Pakistan with a per-capita GDP of only $1,257, the importance of micro-insurance cannot be overemphasised.


Micro-insurance – whose sum insured for a single life policy cannot exceed 25 times of the minimum monthly wage prescribed by the government – is the fastest-growing insurance segment worldwide in terms of number of lives covered.

However, it is still considered a feel-good exercise in Pakistan that most insurance companies carry out to fulfil their corporate social responsibility (CSR) benchmarks.

In other words, micro-insurance has yet to become a self-sustaining, viable business activity in Pakistan.

 photo 70_zpsaff62c25.jpg

“We entered the micro-insurance segment in line with the guidelines of our board of directors. Micro-insurance is not profitable on purely a commercial basis. But in the longer run, we think we can make it sustainable,” Jubilee Life Insurance Head of Corporate Distribution M Sohail Fakhar told The Express Tribune in a recent interview.

Saying that no insurance company is making a profit out of its micro-insurance business, he noted Jubilee Life expects to turn it profitable in the next three years depending on the volume of business it is able to generate.

Although no authentic, sector-wide database is available for micro-insurance in Pakistan, Fakhar says his company is the market leader in terms of the number of lives covered. Jubilee Life had about 1.15 million lives insured for micro-insurance (life) benefits and about 57,000 lives insured for (health) micro-insurance benefits at the end of 2013, according to Fakhar.

Excluding social micro-insurance, it is estimated that the country has approximately 5.3 million individuals and properties insured under the micro-insurance segment. This means the share of Jubilee Life in the country’s micro-insurance sector is 22.7%.

http://i888.photobucket.com/albums/ac89/etwebdesk/etwebdesk001/MSohailFakhar_zpsb6b20c1c.jpg

Micro-insurance is a simplified form of group insurance. Given that the total number of lives covered in group life and group health segment of Jubilee Life is 2.2 million, the share of number of lives covered under micro-insurance (1.2 million) comes around 55%. On a year-on-year basis, the increase in the number of lives covered under the company’s micro-insurance segment at the end of 2013 was 24%.

However, given the small premiums that micro-insurance products typically have, its share in the company’s gross premium contribution in group portfolio was only 9% in 2013.

Fakhar says the lack of quality healthcare infrastructure is a primary hurdle in making micro-insurance widespread in the country.

For example, he says over 70% of Jubilee Life’s clientele lives in rural and semi-urban areas. In most cases, they have no private hospitals or clinics, he said.

“Government hospitals cannot be empanelled by private-sector insurance companies, although they charge for many medical procedures and medicines. The government should develop a mechanism to facilitate public-private partnership in this regard,” he said.

Published in The Express Tribune, January 29th, 2014.

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

COMMENTS

Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ