- Grassroots literacy, better outreach, and trust-building can unlock Takaful’s real potential nationwide
- Targeted education, tailored products, and tech-driven access can boost insurance trust and adoption
Views of Dr. Syed Arif Hussain — Chief Executive Officer of Alpha Insurance Company Limited
Profile:
Dr. Syed Arif Hussain serves as the Chief Executive Officer of Alpha Insurance Company Limited, bringing over 25 years of extensive experience in the insurance and Takaful sectors. His expertise encompasses management, resource development, marketing, and the execution of business strategies. Throughout his career, Dr. Hussain has held senior positions in prominent organizations, including State Life Insurance Corporation of Pakistan, Dawood Family Takaful Limited, East West Insurance Company Limited, Takaful Pakistan Limited, and Excel Insurance Company Limited. His proficiency spans life, health, and project-related insurance/Takaful schemes, with a strong background in restructuring, insurance operations, and automation.
Alpha Insurance Company Limited, a subsidiary of State Life Insurance Corporation of Pakistan, was established in 1951 to underwrite all classes of general insurance businesses. The company holds an “A+” IFS rating from JCR-VIS and operates nationwide, offering a range of insurance products, including property, marine, motor, health, and miscellaneous coverage. With a paid-up capital of Rs. 500 million and equity of Rs. 826 million, Alpha Insurance demonstrates financial soundness and is a bona fide member of the Insurance Association of Pakistan.
Under Dr. Hussain’s leadership, Alpha Insurance emphasizes the importance of insurance in mitigating financial risks associated with health, life, auto, and property, particularly in a country like Pakistan, where natural disasters are common. He advocates for increased awareness and accessibility of insurance products to enhance financial security and economic stability.
When PAKISTAN & GULF ECONOMIST approached Dr. Syed Arif Hussain for his views on using insurance services, lack of awareness about actual risk level, insurance coverage and the role of insurance sector for economic growth, he shared the following using several sources:
Key reasons for insurance reluctance in Pakistan:
1- Lack of awareness and financial literacy
A significant portion of the population lacks understanding of what insurance is, how it works, and how it can protect against financial risks. Insurance concepts are often seen as complex or unnecessary, especially in rural areas where financial literacy rates are lower.
2- Cultural and religious perceptions
There’s a common belief that insurance is incompatible with Islamic principles because conventional insurance involves elements of riba (interest), gharar (uncertainty), and maysir (gambling). Although Takaful (Islamic insurance) is gaining ground, it still faces awareness and outreach challenges.
3- Distrust in insurance companies
Past experiences with claim denials, delays, and perceived unfair practices have created a trust deficit.
People often doubt whether claims will actually be paid out when needed, especially in life insurance and health insurance sectors.
4- Economic constraints
With high inflation and a large informal economy, most people prioritize immediate needs like food, shelter, and education over risk protection products like insurance.
The idea of paying premiums for future risks feels like a luxury for many lower- and middle-income families.
Limited product accessibility and relevance
Traditional insurance products are often not tailored to the specific needs of the population — especially rural and low-income groups.
There’s a gap in microinsurance, crop insurance, livestock insurance, and other relevant products that could address everyday risks faced by ordinary people.
Weak regulatory and distribution infrastructure
The insurance sector is relatively under-regulated and lacks aggressive consumer protection measures.
Distribution networks (agents, brokers, bancassurance) are concentrated in urban areas, limiting rural access.
Informal risk management practice
Many communities rely on informal support systems such as extended family networks, community funds, or religious charity (zakat) in times of financial difficulty, reducing the perceived need for formal insurance.
What can be done?
- Boost Financial and Insurance Literacy through grassroots campaigns, especially targeting rural and underserved areas.
- Promote and expand Takaful products with better outreach.
- Develop affordable, simple, and culturally relevant products like microinsurance.
- Improve claims processing transparency and customer service to build public trust.
- Strengthen regulatory oversight and consumer protection through the Securities & Exchange Commission of Pakistan (SECP).
A significant barrier to insurance adoption in Pakistan is the widespread lack of awareness regarding actual risk levels. This misperception leads individuals and businesses to underestimate their vulnerability to various risks, resulting in low demand for insurance products.
Underestimation of risk
Many Pakistanis, particularly in rural areas, perceive insurance as unnecessary, believing that adverse events are unlikely to affect them. This mindset is prevalent even in regions prone to natural disasters, such as floods and earthquakes. The absence of recent personal experiences with such events can reinforce this false sense of security.
Cognitive biases and informal safety nets
Cognitive biases, such as optimism bias, lead individuals to believe they are less likely to experience negative events compared to others. Additionally, reliance on informal safety nets — like family support, community assistance, or religious charities (e.g., zakat) — can diminish the perceived need for formal insurance mechanisms.
Limited risk communication and education
There is a notable deficiency in public education and communication regarding risk exposure and the benefits of insurance. This gap contributes to the public’s limited understanding of how insurance can mitigate financial losses from unforeseen events. Consequently, insurance remains underutilized as a risk management tool.
Recommendations
To address these challenges:
Enhance risk awareness campaigns: Implement targeted educational initiatives to inform the public about prevalent risks and the protective role of insurance.
Develop tailored insurance products: Design insurance solutions that cater to the specific needs and circumstances of different communities, making them more relevant and accessible.
Leverage technology: Utilize digital platforms to disseminate information and facilitate easier access to insurance products, especially in remote areas.
Strengthen trust in insurance providers: Improve transparency and customer service within insurance companies to build public confidence in insurance products. By implementing these strategies, Pakistan can improve public understanding of risk and promote greater adoption of insurance as a vital component of financial resilience.
The disparity in insurance coverage between Pakistan (0.8% penetration) and India (approximately 4%) underscores significant structural and systemic differences in their insurance sectors.
Understanding the gap
Insurance penetration: This metric, representing insurance premiums as a percentage of GDP, was 0.87% for Pakistan in 2022, compared to around 4% for India.
Insurance density: Per capita insurance spending in Pakistan stood at USD 14 in 2022, whereas India’s was USD 82, indicating a broader adoption of insurance products in India.
Factors contributing to the disparity
- Regulatory environment:
Pakistan: The insurance industry has faced challenges due to monopolistic tendencies, particularly with the State Life Insurance Corporation holding a dominant market share. This has potentially stifled competition and innovation.
India: Post-liberalization, India has seen a surge in private insurance players, fostering competition and product diversification.
- Product diversification and accessibility:
Pakistan: Limited product offerings and a lack of tailored insurance solutions for various demographics have hindered market penetration.
India: A broader range of insurance products, including microinsurance and digital insurance platforms, have made insurance more accessible to diverse populations.
- Public awareness and financial literacy:
Pakistan: A significant portion of the population remains unaware of the benefits of insurance, leading to low adoption rates.
India: Concerted efforts in financial literacy campaigns have improved public understanding and trust in insurance products.
Path forward for Pakistan
To bridge this gap, Pakistan could consider:
Regulatory reforms: Encouraging competition by reducing monopolistic structures and fostering a more conducive environment for private insurers.
Product innovation: Developing insurance products that cater to the specific needs of various population segments, including low-income and rural communities.
Digital Transformation: Leveraging technology to enhance accessibility and streamline insurance processes.
Awareness campaigns: Implementing nationwide initiatives to educate the public on the importance and benefits of insurance.
By addressing these areas, Pakistan can work towards increasing insurance penetration, thereby providing greater financial security to its populace and contributing to overall economic stability.
Insurance plays a pivotal role in promoting economic growth by helping businesses remain operational during emergencies. Here’s how:
1- Financial protection during disruptions
Insurance provides businesses with financial support to recover from unforeseen events such as natural disasters, fires, or pandemics. For instance, business interruption insurance covers lost income and ongoing expenses when operations are halted due to covered perils, enabling companies to maintain financial stability during recovery periods.
2- Ensuring business continuity
By transferring risk to insurers, businesses can focus on long-term planning and investment without the constant fear of catastrophic losses. This risk management fosters an environment conducive to entrepreneurship and innovation, as companies are more willing to undertake ventures knowing they have a safety net in place.
3- Supporting economic stability
Insurance contributes to economic resilience by mitigating the financial impact of disasters on businesses. This stability helps preserve jobs, maintain supply chains, and sustain consumer confidence, all of which are essential for a healthy economy. Moreover, insurance companies invest premium funds into various sectors, further stimulating economic growth. Iowa Insurance Institute
4- Facilitating recovery and reconstruction
In the aftermath of disasters, insurance payouts provide the necessary capital for businesses to rebuild and resume operations. This rapid recovery not only benefits the affected companies but also aids in the swift restoration of economic activities in the broader community.
5- Encouraging risk awareness and management
The process of obtaining insurance often involves risk assessments, prompting businesses to identify potential vulnerabilities and implement mitigation strategies. This proactive approach enhances overall preparedness and reduces the likelihood of severe disruptions.
In summary, insurance serves as a crucial mechanism for economic growth by providing financial security, promoting stability, and enabling businesses to navigate and recover from emergencies effectively.