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February 25, 2020

SECP sets ups centralised repository for life insurance to protect consumers

Business

February 25, 2020

KARACHI: Government on Monday launched the country’s first-even electronic centralised repository for life insurance sector to introduce transparency in and speed up settlement of claims for protection of policyholders.

Securities and Exchange Commission of Pakistan (SECP) Chairman Aamir Khan said the initiative would augment technological advancement in the insurance industry, while ensuring facilitation and protection of policyholders. Khan hoped that it would facilitate effective settlement of insurance claims and cause reduction in mis-selling and policy churning. Pakistan’s insurance sector penetration of 0.83 percent to GDP is much lower than the global average of 6.3 percent, the State Bank of Pakistan (SBP) said in a latest financial stability review report.

The asset base for the insurance sector was estimated to have grown by 10.88 percent to Rs1.435 trillion as of December 31, 2018 mainly due to an increase in the life insurance business. Investments and properties registered an increase of 12.11 percent to Rs1.128 trillion as of December 31, 2018.

The assets for the life insurance sector grew 11.92 percent to Rs 1.207 trillion for 2018 as life insurers increased their total investments by 13.52 percent to Rs997 billion. Investments now constitute 82.63 percent of total assets.

The SBP said growth rate comparison of real GDP and real gross premiums for the life sector showed a positive correlation indicating that an increase in economic activity might lead to an increase in gross premiums for Pakistan.

The central bank, however, said improvement in purchasing power of the middle class, the use of bancassurance, window takaful operations, and launch of micro-insurance products would be the main drivers of growth in the insurance sector.

The centralised information repository would complement government’s objectives of providing ease of doing business and enhanced consumer protection. The repository will function under the regulatory authority of SECP and will hold critical data of life insurance policies electronically.

The repository would enable electronic storage of life insurance and family takaful policies and serve as central point for critical policyholder related information. It will aid the underwriting function of the insurers to determine the appropriateness of an insurance policy, the level of insurance coverage and affordability of the insurance policy for the customer, which would result in need-based selling and substantial reduction in mis-selling.

“We, at the SECP, are very mindful of our responsibilities as a progressive regulator that needs to help the industry to develop and grow, and simultaneously, create linkages between its regulated sectors and the real economy,” Khan said. “The centralised documentation of data in digitalised form is critical to achieving transparency, speed and cost effectiveness.”

SECP chief said the commission embarked upon a transformational journey of digitalisation through its recently launched initiative, “leading efficiency through automated prowess”. “This will enable 100 percent end-to-end automation, complete integration with multiple government agencies for one-time registration, and digitalisation and storage of financial statements of companies through introduction of extensible business reporting language.”

Commissioner Insurance Shaukat Hussain, Centralized Depository Company (CDC) Chairman Moin Fudda, CDC Chief Executive Officer Badiuddin Akber, and senior officials attended the launching ceremony.