Insurance penetration less than 1pc of GDP: regulator
ISLAMABAD: The insurance sector penetration has stagnated for years at less than one per cent of GDP, while several categories, including micro insurance, livestock insurance, and insurance against losses due to disaster and terrorism, were almost nonexistent.
This was highlighted in a media engagement held by the Securities and Exchange Commission of Pakistan (SECP) on Tuesday.
The gross premium in the country was only Rs553 billion, with Rs375bn only in the life insurance sector. There are 42 insurance companies, the majority (27 per cent) in the non-life sector. Of the remaining, 23pc are in fire protection, 17pc in motor vehicle tax, 13pc in marine and aviation, and 12pc in accidents and health.
The SECP officials highlighted that insurance penetration in Pakistan was low mainly due to outdated laws, which, in many cases, have become irrelevant in current times. There is also a lack of implementation of laws, a lack of public awareness and even lack of regulatory oversight on insurance companies by the regulator.
SECP calls for increased awareness, overhauling laws
SECP Chairman Akif Saeed affirmed the regulator’s commitment to the insurance sector’s growth and said it was a “complicated sector with too many stakeholders”.
“SECP is striving to make the entire sector’s architecture systematic and self-sustainable.”
Amir Khan, the SECP’s insurance commissioner, highlighted critical objectives for the next five years, which revolved around the areas of policyholder protection, building resilience, innovation, cooperation and transformation and improved insurance coverage.
Mr Khan cited the example of Motor vehicle Third Party Insurance and said the prevailing law was enacted in 1939, and the compensation to the deceased in road accidents was set at Rs20,000 at that time.
“The system has to be upgraded. The commuters have to be insured,” he said, adding that due to the lack of road transportation insurance, compensation is demanded from governments in case of any eventuality.
Waseem Khan, SECP’s director insurance, said the regulator was working to achieve certain operational and strategic outcomes.
He added that all public buildings have to be insured, especially in view of regular recurrences of natural disasters, and insurance claims should be utilised for reconstruction.
The session was told that the relevant ministry for the insurance sector was commerce, and the SECP was made the sector regulator in 2000.
However, the draft insurance laws have been pending with the government since 2014.
Published in Dawn, November 15th, 2023