KARACHI, April 2: The entire income of the non-life insurance industry from premium was wiped out on payment of claims against the vehicls and factories burned during violence erupted after the assassination of Benazir Bhutto.

Surprisingly, the non-life insurance industry still booked huge profits but all of their profits came from the stocks business.

The insurance companies have not earned profits through the real insurance business.The annual reports of the non-life insurance companies showed that their collective profits increased by 102 per cent in 2007 but it was all because of investment in stocks business.

“The non-life insurance industry could have devastated impact had the booming stocks business not saved the investments made by the companies,” said Atif Malik, head of research at JS Company.

His findings showed that the non-life insurance industry collectively earned a profit of Rs27.2 billion against Rs13.4 billion in 2006.

“The industry earned an investement income of Rs27.7 billion in 2007, which means that the entire profit of the non-life insurance industry came from the booming stocks business,” said Atif.

Insurance industry sources said that the impact of events of December 27, when Benazir Bhutto was assassinated, has not been fully accommodated this year as the payment on claims are still going on.The violence, erruped after the assassination, resulted in burning of over 700 vehicles in Karachi alone, while dozens of banks’ branches and factories were set on fire.

The non-life insurance industry collected 12 per cent higher premium in 2007 but the claims increased by 26 per cent. The companies collectively paid Rs13.265 billion as net claims against Rs10.505 billion in 2006.

Non-life insurance business has grown substantially high during a decade mainly on account of deteriorating law and order situation in the country. However, the non-life insurance penetration is just 0.4 per cent of the Gross Domestic Product (GDP).

The situation is pathetic for the industry as it has to take protection of the stocks business for survival. The sector had earned an investment income of Rs12.8 billion last year showing the insurance business trend.

The claim ratio of the industry increased to 71 per cent compared to 63 per cent of last year. The ratio itself is alarming reflecting the rising deterriorating law and order situation.

“Almost all non-life insurance companies have been paying heavily against claims regarding the auto sector,” said M.S. Kaleem, the manager of a large insurance company.

He said the cases of car theft has been rising for last five years and there was no apparent decline in this trend, which absorbs huge amount of the insurance sector.

The theft of vehiclas also resulted into very high premium rate for new vehicles, which has more than doubled in last five years.