CCP calls for insurance sector shakeup to break SOE monopolies

KARACHI: The Competition Commission of Pakistan (CCP) has called for sweeping reforms in the country’s underdeveloped insurance sector, citing entrenched monopolies and regulatory protectionism that stifle competition and suppress market growth.

In a comprehensive report released on Thursday, the competition watchdog highlighted critical structural and regulatory barriers that have hampered insurance penetration, which stood at just 0.87 per cent of GDP in 2022 -- far below the global average of 6.7 per cent and regional peers like India and China at about 4.0 per cent.

Despite the country’s population exceeding 240 million, only 7.8 million life insurance policies were active in 2022. Insurance density remains alarmingly low at $14 per capita, compared to $82 in India.

“The insurance sector is integral to Pakistan’s economic growth, yet it remains hindered by monopolistic tendencies and regulatory protectionist policies entrenched in law,” said Chairperson of Chairman Dr Kabir Ahmad Sidhu.

The report identifies state-owned enterprises (SOEs) such as State Life Insurance Corporation (SLIC), Pakistan Reinsurance Company Ltd (PRCL), and National Insurance Company Ltd (NICL) as key beneficiaries of preferential treatment, backed by legislation that grants them dominant or exclusive rights. SLIC, for example, controls 55 per cent of the life insurance market, leveraging sovereign guarantees to attract policyholders.

PRCL retains a regulatory advantage through a 2007 order that gives it the first right of refusal on at least 35 per cent of reinsurance business, while NICL holds a government-mandated monopoly on insuring public sector property under the Insurance Ordinance 2000.

The CCP also flagged restrictive reinsurance procurement rules, poor bancassurance practices, fragmented regulatory oversight, tax anomalies, and weak enforcement of mandatory third-party motor insurance as serious deterrents to sectoral growth.

To address these issues, the CCP has proposed abolishing exclusive rights for SOEs, amending outdated regulations, liberalizing access to international reinsurance markets, rationalizing taxes, and strengthening consumer protection in bancassurance.

It also recommended eliminating the long-standing 1.0 per cent federal insurance fee on non-life premiums, initially introduced in 1989 to raise public awareness of insurance, but now seen as an unnecessary cost burden.

The CCP’s report is part of its mandate to foster free competition under the Competition Act and is available publicly on its website.