Insurance Industry's Recent Progress & Achievements
Mumtaz A, Hashmi, Economic Review
The insurance sector, until end 2000, was under the regulatory purview of the Ministry of Commerce. During that period, the private sector insurance industry was fragmented and suffered from operational inefficiencies, lack of professionalism and low unacceptable ethical standards, while the public sector insurance companies enjoyed their privileged status and captive business.
During the regulatory regime of the obsolete Insurance Act 1938, the insurance industry was infested with various issues. Capital adequacy requirements for general insurance companies were grossly inadequate, registration/ supervision fees for insurers were modest, and the statutory solvency margins were based on outdated principles.
Unfortunately, since the time Pakistan came into being, insurance industry has never received attention it deserved as an important segment of the financial sector, from the successive governments. The first significant policy change that we witnessed was in 2000 when Insurance Ordinance 2000 ("the Ordinance"), repealing Insurance Act 1938, was promulgated. The new insurance law primarily aims to ensure the protection of insurance policyholders' interest and to promote sound development of the insurance industry.
In the year 2001, the regulatory/supervisory responsibilities of the insurance sector were shifted from the Department of Insurance, Ministry of Commerce to the Securities and Exchange Commission of Pakistan (SECP).
Though the insurance industry in Pakistan is highly underdeveloped relative to its potential, it has shown a promising growth in premiums over the past few years, as under:
Forty Seven (47) insurance/Takaful companies were actively transacting business, out of which forty (40) (including 3 general Takaful, National Insurance Company Limited and Pakistan Reinsurance Company Limited) and seven (7) (including 2 family Takaful and State Life Insurance Corporation of Pakistan) belong to non-life and life sectors, respectively.
Sustainable growth in any segment of commercial and industrial activity is dependent on various factors. As regards insurance being a service providing industry, the author believes that without ensuring quality HR, adherence to best business practices, professional expertise in core business of insurance, and solid financial base, this industry would not be able to fully exploit the tremendous potential challenge for development, and its performance would remain subdued.
SECP has a strategic priority and commitment to strengthen and maintain an effective regulatory environment in which insurance and Takaful business can flourish and prosper priority, and to strengthen SECP's role as an effective facilitator for sound development of the insurance and Takaful industry, commitments were made to the Asian Development Bank and other international donor agencies with regard to certain policy actions in the insurance sector. Targeting towards the underlying objective of raising the insurance penetration level, the following identified key areas have been in locus since late 2005:
* Protection of the interest of insurance policyholders;
* Amendments in the regulatory framework to strengthen SECP's role as an apex insurance regulator;
* Capacity of the insurance industry;
* Regulatory framework for Takaful;
* Development of personal lines business;
* Availability of insurance protection to less privileged segment of the society;
* Human Resource Development; and
* Public image of the insurance industry.
Here onwards the achievements, ongoing initiatives and immediate future plans relating to the areas just mentioned would be shared with the readers.
In the Ordinance, it was provided, for establishment of Insurance Ombudsman's Secretariat, Small Dispute Resolution Committee and Insurance Tribunals. However, these objectives were materialized by the Government after six years. …