- Pakistan’s insurance industry eyes transformation with tech-driven strategies and renewed government support
Experts revealed that the Insurance is a fundamental component of economy and society. It underpins progress and assists power humanity forward more securely. However, the risk-averse nature of insurers’ cultures and their focus on underwriting margins and solvency have generally reinforced a restrained pace in terms of its own innovation and modernization. This has often resulted in unsustainable or non-optimal strategies to respond to less predictable spikes or dips in specific business lines and profitability.
| Active Borrowers, Active Savers, And Active Policyholders | ||||||
|---|---|---|---|---|---|---|
| Details | Micro-Credit | Micro-Savings | Micro-Insurance | |||
| Active Borrowers | Value (Rs million) |
Active Savers |
Value (Rs million) |
Policy Holders | Sum Insured (Rs million) |
|
| 2023 | 9,397,888 | 546,612.5 | 108,687,815 | 596,618.7 | 8,572,031 | 325,522.7 |
| 2022 | 9,092,247 | 491,262 | 93,957,497 | 514,289 | 8,264,513 | 316,948 |
| Increase/decrease (Net) | 305,641 | 55,350 | 14,730,318 | 82,330 | 307,518 | 8,575 |
| Increase/Decrease (%) | 3.4% | 11.2% | 15.7% | 16.0% | 3.7% | 2.7% |
Over the past few years for example, high inflation and increasingly erratic climate-related losses put pressure on non-life insurance lines’ profitability. Various insurers responded by hiking premium pricing and even pulling back coverage for certain high risks. Moreover, as interest rates rose, life insurance and annuity carriers jockeyed for position in a crowded field to take advantage of the surge in consumer interest in savings-linked products.
Experts also recorded that for an industry focused on mitigating risk and offering protection, the world’s insurers are enduring a mainly volatile age. It is said that the macroeconomic picture is mixed, with inflation stubbornly high and interest rates uncertain. Consumer confidence remains shaky, even though the economic growth cycle appears to have bottomed out. Geopolitical unrest remains a perceived threat to worldwide growth, and trade patterns are shifting amid signs of protectionism. In 2025, the global insurance sector is expected to continue its growth trajectory, driven by rising demand for core protections and value-add services, along with new opportunities in risk assessment and pricing, according to EY.
This sector will also face challenges from shifting worldwide dynamics, requiring insurers to adapt and innovate to stay competitive. Specifically, the worldwide cyber insurance market is projected to reach $16.3 billion in gross premiums by 2025, according to Munich Re. Furthermore, the cyber insurance market is expected to experience substantial growth, with gross premiums reaching $16.3 billion by 2025.
According to NAAT.TECH, insurers will need to invest in technology and innovation to enhance customer service, reduce costs, and enhance risk assessment. Inflation and interest rates will impact the insurance market, affecting premiums and investment income. It is recorded that governments will continue to implement regulations to protect consumers and promote competition, requiring insurers to adapt their operations and strategies. Insurers must adopt proactive risk management strategies to navigate the evolving risk landscape, including geopolitical tensions and climate change. Rising demand for core protections and value-add services will continue to drive growth in both mature and emerging economies. Liquidity positions are expected to remain strong, with primary sources being liquid investments and premium income.
In the developing countries like Pakistan, the insurance sector comprises eleven active life insurers (including three (3) family Takaful operators), thirty active (30) non-life insurers (including three (2) general Takaful operators), and one (1) state-owned national reinsurer, according to the ministry of finance-government of Pakistan. Significant achievements in the insurance sector from July 2023 to March 2024 are as follows:
Launch of a 5-year draft strategic plan for the insurance sector:
The SECP identified challenges of the insurance sector in consultation with all stakeholders and formulated the 5-year draft strategic plan. The plan covers a comprehensive roadmap/sketch for the growth of the insurance sector with a detailed action matrix for the next five years. The ultimate goal is to strengthen the three pillars of the entire insurance ecosystem, i.e., policyholders, insurance providers, and insurance intermediaries.
Holding of International Insure Impact Conference 2023:
The SECP as committed to its vision of committed to its vision of developing an inclusive, innovative, and sound insurance sector by 2028, the National Insure Impact Conference 2023″ to mainstream the discussion around insurance services and products and act as a catalyst for revitalizing Pakistan’s insurance industry.
Implementation of IFRS 17 – Initiation of System Design Phase (Phase III) and announcement of the date of implementation:
For the implementation of IFRS 17 (Insurance Contracts) in Pakistan, the SECP envisaged a four-phase approach, namely Gap Analysis; Financial Impact Assessment (FIA); System Design and Methodology; and Parallel Run Implementation.
Issuance of detailed requirements for grievance handling mechanisms for the insurance sector:
These requirements align with other financial sectors and international best practices to ensure effectiveness, robustness, and uniformity in the grievance-handling function to protect policyholders. These include formulating a grievance handling policy, maintaining a centralized system, defining acceptable complaint modes, categorizing complaints by criticality, setting resolution timelines, communicating with policyholders, raising awareness about grievance handling mechanisms, monitoring for improvement, and reporting complaints data.
In last I would like to mention here, the government of Pakistan is urging the insurance sector to expand its lending activities beyond traditional banks to meet the increasing demand for financial services. Experts in Pakistan reiterated that the government’s commitment to supporting the insurance sector, recognizing its significant potential for private sector investment. There is a need for innovation, increased productivity, and further growth to strengthen the sector’s role in the national economy.