KARACHI: The chief financial officer of TPL Insurance, Yousuf Zohaib Ali, highlighted in an interview with The News that customer awareness and reach, pricing, and competition are the main challenges facing the insurance business in Pakistan.
Q. Is Pakistan’s insurance industry doing well in terms of growth and profits?
A. Insurance penetration in Pakistan is lower than 1 percent. As compared to other countries in the region, it is quite low in the industry. Other countries in Asia are in the range of 3 to 5 percent. There are various reasons for lower insurance penetration in our country, including lack of customer awareness, access to customers, regulatory enforcement, and lack of digitalisation - to name a few.
To cover the gap, the strategies to overcome would be to adapt to digital means and reach customers and agents via digital networks which are quick, effective and get a multiplier effect. There is a need to increase customer awareness of risk coverage on personal wealth, health and life.
TPL Insurance in its 18 years journey has pioneered digital innovations and has been leading the markets it operates in. When it comes to ground-breaking achievements in the insurance industry, the company stands out with an impressive list of firsts. Leading the markets we operate in, the company introduced Pakistan's first-ever lifestyle insurance app, offering convenience and tailored coverage for the modern consumer lifestyle.
Q. What are the challenges and opportunities for life and general insurance in a developing country like Pakistan?
A. The key challenges are customer awareness and reach. There is no organised joint effort by the industry to drive awareness among potential urban and rural customers. Take the example of the Tetra pack. They created awareness and the dairy industry benefited as a whole. Similarly, the insurance industry needs to drive awareness of various personal lines including health, motor, home, travel, and life.
There are immense opportunities in the motor segment. With the regulators’ support, data on auto insurance can be centralised and therefore be monitored centrally. There are more than 7 million vehicles registered in Pakistan; however, due to a lack of centralised data, there is no visibility if they are covered.
Third-party insurance is mandatory in Pakistan, but due to a lack of implementation, less than 10 percent of vehicles are covered in Pakistan. This opportunity can be materialised with the help of a central vehicle and insurance database and the regulator’s support.
Another major challenge is pricing and competition. In the absence of a base price by the regulator, there is a price war in the industry amongst competitors with no proper guidance for the customer. Resultantly, the customer opts for the cheapest price but suffers due to below-standard services. E-policy should be encouraged by the regulator and e-stamping and digital signatures to be facilitated and encouraged. There is also a huge market for reinsurance in Pakistan which is underutilised. Most of the premium is ceded out of Pakistan due to a lack of capacities. Regulators need to encourage the creation of capacities within Pakistan to retain business and premiums within Pakistan.
Q. Pakistan’s insurance firms are embracing digitalisation to meet customer needs and keep the relevance of their business models. Is TPL Insurance focused on digitising the process of buying and servicing insurance?
A. Amidst the dynamic landscape of rapid digital transformation, TPL Insurance has embraced innovation, leading to a profound reshaping of how insurance is perceived and experienced in Pakistan. By proactively adopting cutting-edge technologies and pioneering digital solutions, the company has successfully revolutionised the traditional insurance paradigm, making coverage accessible, efficient, and customer-centric. We are in an age of disruption, with the growing use of social media, and digital devices by the millennials, a disruptive innovation would create a new market and value network and eventually disrupt an existing market and value network, displacing established market-leading firms, products, and alliances.
A disruptive process can take longer to develop than the conventional approach and the risk associated with it is higher than the other more incremental or evolutionary forms of innovations, but once it is deployed in the market, it achieves a much faster penetration and a higher degree of impact on the established markets. A network effect would multiply the number of users. Disruptive technologies and innovations are the future for businesses. If any entity organisation or business is not adapting to the latest technological advancement, it would face survival challenges. Common examples are digital photography, taxi business, food Apps, and groceries which aggressively overtook conventional businesses in some areas.
TPL Insurance has introduced the Area Yield Index Insurance (AYII) as a pilot project in collaboration with various partners. This insurance cover protects farmers against historical benchmarks for crop yields and includes coverage for perils such as, floods, droughts, and pests. The initiative focuses on crops in selected districts, with support from the Pakistan Agricultural Coalition (PAC), SCOR, Pula Advisors, Habib Bank Limited, and the Bank of Punjab. The aim is to enhance insurance awareness, drive agricultural innovation, and improve efficiency through digitisation.
Q. Has Pakistan’s insurance industry benefited from the recently announced budget for the fiscal year 2023–24? Has the budget included any tax reform proposals for the insurance industry?
A. Unfortunately, there are no major benefits available to the insurance sector in the budget. The government should support and encourage increasing insurance penetration in Pakistan by allocating amounts for public awareness and providing funds to the regulators to promote the insurance sector in the country. The insurance industry pays taxes in the form of sales tax and income tax to the government. As a result of increased insurance penetration, the government can benefit from the increased tax base.
Q. What is your vision for the company for the next few years in terms of size and impact?
A. Backed by key stakes from TPL Corp Limited, DEG, KfW, Germany, and Finnfund, Finland, TPL Insurance will continue to drive awareness and insurance penetration further, bringing greater accessibility to the people of Pakistan, as well as supporting the economy.
The company’s AA rating reflects a strong financial position, steady growth of premiums, and robust operational capabilities. Customer satisfaction will remain at the core of our values.
Despite a challenging environment, TPL Insurance is progressing in the right direction and growing its digital footprint. TPL Insurance is focused to increase market share in all lines of business by adapting to the latest technologies, and digital channels, reaching out to customers directly, and providing the best customer services at their doorsteps.