Interview with Dr. Syed Arif Hussain — General Manager Marketing and Compliance, Alpha Insurance Company Limited
Dr. Syed Arif Hussain is General Manager Marketing and Compliance at Alpha Insurance Company Limited. He has gotten expertise in management, resource development, marketing and execution of business strategies. His professional experience is spread over 24 years at progressive senior level positions and has the experience of underwriting, reinsurance, claims management and marketing with the State Life Insurance Corporation of Pakistan, Dawood Family Takaful Limited and as a Chief Executive Officer. He also headed Takaful Pakistan Limited a Non-Life Takaful Company and Excel Insurance Company Limited and Head of Takaful of East West Insurance Company Limited. His expertise include Life, Health and project related Insurances/Takaful schemes. He has extensive experience in restructuring, insurance operations and automation. He holds M.B.B.S. and Master’s Degree in Business Administration. He has attended a number of Insurance/Takaful and management related workshops and conferences held locally and internationally.
Alpha Insurance Company Limited is a Subsidiary of State Life Insurance Corporation of Pakistan, registered in 1951 and to underwrite all classes of general insurance businesses. It acquired IFS rating “A” by JCR-VIS. With the objective of providing and delivering the best the organization is operational all over the country. It is a bona fide member of the Insurance Association of Pakistan. The balance sheet reflects the financial soundness of the company with sizeable paid-up capital of Rs. 500 million, Equity 705 million.
PAKISTAN & GULF ECONOMIST had an exclusive conversation with Dr. Syed Arif Hussain vis-à-vis insurance sector. The excerpts of the conversation are as under:
Underwriting is the process by which the Company makes an assessment of the risks to be accepted and determines the terms on which the risks would be acceptable to the Company. The underwriting process generally involves obtaining and managing essential underwriting information on the risks, assessing and accepting risks according to underwriting guidelines and authority levels, and monitoring and reviewing the risks accepted.
“Slow and Steady walks won the race”. It is a long term strategic investment planning, needs patience and vision. In Pakistan insurance sector is regulated by the Securities and Exchange of Pakistan (SECP) under Insurance Ordinance 2000, Insurance Rules 2017 and Takaful Rules 2012. As per rule, SECP issues license for Life and Non-Life insurance/Takaful separately. As per standard the insurance companies reach at breakeven in 5 to 7 years.
Unfortunately the awareness of insurance is very low in our country due to low literacy rate. The awareness among the population may be increased by advertisement especially through social media. However after introduction of Takaful the views are changed but still masses are reluctant to purchase the insurance/Takaful, may be due to lack of confidence on companies or lack of purchasing power, they still do not realize the importance of insurance. But they are shown their interest to take health policies for their families. The estimated 220 million population of Pakistan represents a huge market for Takaful and insurance industry. With this large population the prospects of insurance/Takaful is very bright. The potential of insurance growth in Pakistan is too much in all areas of insurance classes because the penetration of insurance is negligible as compare to the population of the country.
Almost all life insurance companies offer same products with different names and their customers base is in mostly bid cities of the country may be due to more awareness and literacy rate. The all non-life insurance companies offer same class of products, which are mentioned in Insurance Ordinance.
To tap the huge market, injection of creative products is the need of the time. Some of the gaps in the market include crop coverage and livestock coverage or professional indemnity for engineers and doctors. Needless to say it’s an uphill task and perhaps greater effort is needed to create awareness among the users. Given that wealth management is another aspect of life insurance/Takaful, the product plate may be expanded to tweak the existing model.
At the community level, the low income household staff is provided protection in times of medical emergencies and health by their employers. However, the poor are in an invisible bonded labor as they are willing to work for barely sustainable salaries in the hope of getting bailed out when going gets tough, so the health insurance is need of the day for such class of population.
It is a legal obligation to take re-insurance to start the business of insurance, without re-insurance arrangement regulator does not issue business license. It is necessary to transfer the risk to the re-insurer over and above their retention limits. No single insurance company can take whole risk on their own retention; moreover as per law no insurance company can retain risk over and above the 5% of their paid up capital. The life insurance companies may make arrangement with one or two re-insurer but in case of non-life insurers, they have panel of re-insurers for their treaty arrangement.
The insurance companies generate their revenue from premium (customer’s money) and investment returns (shareholder’s money). The life insurance companies sale long term policies which provide risk coverage with surrender and maturity benefits. One portion of the premium provides coverage while other portion of premium invested in different avenue with the consent of customer. The non-life insurance companies sale only short term (one year) policy with no surrender and maturity benefits, the premium only provide risk coverage. The premium received from the customers invested in different avenue under the guidelines of the regulator. If the premium is more than the all management expenses, commission and claims paid or outstanding that’s means insurer earned profit which is known as underwriting profit. Normally, the underwriting profit is ranges from 5 to 10 percent which shows a healthy growth of the company. This underwriting profit is distributed among the shareholders which is an additional return on their investment.