Wednesday, September 20th, 2017
Home »Brief Recordings » ‘We are reinventing the entire process of getting insurance in Pakistan’, CEO TPL Life Insurance
BR Research: What is your view of the life insurance sector in Pakistan?

The Pakistani market is very under-penetrated for insurance. It is a country with one of the least insurance penetrations probably because of low public awareness and the existence a very small number of life insurance players in the market. My back-of-the-envelope calculations show that there is one insurance company for every two crore people in the country. This issue of public awareness is generally considered as an inhibiting factor for the insurance industry, be it life or non-life. All around the world, it's a known fact that whether you are making financial plans, taking out loans or have liabilities, you back them up with insurances; but this does not happen in Pakistan.

BRR: Can we say that number of insurance companies per populations is a good metric to gauge the existence of the industry?

I would say that population plays a key role in determining life insurance business. In this respect, Pakistan's potential in the insurance market is huge. On top of that we have a growing middle income and also an established micro-segment.

BRR: Despite all the challenges, life insurance has seen growth in the last five years compared to the general insurance companies. Can you shed some light on the growth numbers?

Yes, life insurance has been able to grow faster than the non-life insurance companies. We started off with 0.35 percent penetration of GDP; and now we have reached 0.56 percent over the last seven years. This growth has largely come from bancassurance. However, this is not reflective of what can be achieved; there is much more potential as banking penetration still remains low in the country.

BRR: What are the distribution channels that are being used in the insurance sector?

Bancassurance is one major distribution channel; 50 percent of the growth in the life insurance segment is being driven by bancassurance. But as I said earlier, there still is huge potential in how the insurance market is tapped whether it is from the product development point of view, or customer communication or marketing point of view. Online channel is also a good option on the retail side for the insurance sector.

BRR: What is the investment strategy of life insurance sector?

Investment income is not a major component in life insurance business as it is in the non-life insurance segment. This is because in general insurance contracts are short term eg a year and claim frequency is high; therefore, you need that cushion in general insurance to overcome the underwriting. On the other hand, life insurance businesses have relatively lower claim frequency and they invest in long term assets. Yet, investment income is an important component of earnings of life insurance as you have to pass on the maximum benefit to the client.

BRR: What are the key risks for life insurance segment? What are the key life insurance products in Pakistan?

The single most important risk globally for life insurance is the mortality rate; premiums are adjusted by the reinsurers as changes in mortality rates occur. Then we have health risk for insurance companies that deal in life and health; pricing of health risk is becoming smarter with advanced medical technology, and premiums move in tandem internationally, which push the premiums at home in the same direction eventually.

As far as the products are concerned, there are basically two categories of life insurance products in Pakistan: one is what is being sold by the State Life, and the other is sold by the private sector like the unit linked endowment policies and life policies. Unit linked endowments covers not only the mortality risk, but are also investments where the premium is invested in units of a unitized insurance fund (like mutual fund). These endowments move with the market and are hence with-profit polices. State Life products are not unit linked and do not move with the market, but they are also with-profit policies where there are built in profits that can be encashed at the end of the policy.

BRR: How do you describe the claims in life insurance segment in Pakistan when compared to the developed world?

Pakistan does not have a very high mortality rate. Hence I would say that our claim frequency in life insurance is at par with the global trend. However, we lag behind in health and it this subsector that has high claim frequency than the global benchmarks due to many issues like poor working environment, weaker safety standards, improper health conditions, etc.

BRR: Has micro-insurance taken off in Pakistan? What distributional channels can be used here?

We have an established micro-segment. So ideally, we should have presence. I definitely see it growing. However, I don't agree with the term micro-insurance. For me it's derogatory. We should have a different name for it, or categorize it internally for the sector but not call it micro for the world. Having bancassurance in this segment will be difficult as most of the prospective clients come from the rural population; non-governmental organisations and microfinance agencies can play a pivotal role here.

BRR: With so many challenges, what made TPL Holdings come into life insurance? What makes you so hopeful? And how are you doing things differently?

TPL Holdings has a very good track record with general insurance franchise and that encourages them to consider life insurance as an option. The opportunity was there; before us, there were eight players; out of these, two were dedicated Takaful and six were conventional life insurance companies. There has been quite a buzz in the insurance sector due to the recent growth numbers and market appetite be it the growing population or growing middle income segment, increasing consumption and future potential of the economy. All the indicators have been positive and strong, and we realised that it's the right time to get into the market. If we had waited for the economy to boom, the cost of getting into the market and a share of the pie would have been too high.

What do we want to do? We are not trying to do anything different; we are trying to do the basic things differently; that's what I call disrupting the market. The essence of the brand is to be the easiest company to deal with, because people associate insurance with difficulty. Our aim to make all the procedures, paper work and dealing with the client so easy and digitalized so that they can be comfortable to use our services and our application. Also, TPL does not rely only on insurance agents; they think of relying on multiple access points the insurance company. We are the first life insurance company to offer mass retail products; we are the first life insurance company to sell accidental-based insurance products online. We are also the first company to introduce the concept of lounges in hospitals. We have dedicated TPL Lounge in Ziauddin Hospital and OMI in Karachi that facilitate the visitors and patients with the regular procedure.

We are also taking our training online. We can actually enroll our customers off location as well; they can testify themselves; we can educate them about our products and developments and get in touch with them digitally. This is again where we are working differently: Our agents should not just be relying on physical premises to come and get certified and acquainted with insurance products and processes; they can have all the information at the comfort of their home. We are naturally innovating the entire process of having an insurance policy; we are digitalizing all the steps even though there are certain regulatory bars.

BRR: How responsive has the regulatory environment been in all this?

The driver of the change has been both the insurance sector and the regulator. Whatever we think of, we share the idea with the regulator and they welcome our suggestions. Mass retail products are one example.

BRR: Can you share some of your key targets?

We took over a company called AsiaCare Health and Life Insurance Company in July 2016, and we got the approvals for life operations from the SECP in December 2016. Before that we were into health only. Our focus is not to capture another player's share, but to create our own niche. I am targeting a market share of 4-5 percent in the next 5 years in terms of growth of the industry. These are our aspirations, but I have a strong belief that we can achieve it since we are doing things in an unconventional way. Our model is based on disrupting the market. We also plan to go public sometime in the future to raise funds to upgrade ourselves.



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