INSURANCE: Major problems and opportunities for insurance companies in Pakistan

 

What is insurance: It is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

List of some insurance policies given by insurance companies:

• 1.       Life insurance
• 2.       Health insurance
• 3.       Fire insurance
• 4.       Marine insurance
• 5.       Automobile insurance
• 6.       Accident insurance
• 7.       Fidelity guarantee insurance
• 8.       Employees liability insurance
• 9.       Livestock insurance
• 10.   Credit insurance
• 11.   Aviation insurance                                                                  Insurance in Pakistan:  Insurance in Pakistan is regulated under the Insurance Ordinance, 2000. In the past few years, it has transformed into a developing and fast growing market that is generally divided into three components: life insurance, general insurance and health insurance. The Government of Pakistan established the Department of Insurance in April 1948 as a department of the Ministry of Commerce; the aim of this department is to take care of affairs related to the insurance industry. Out of the 54% that Pakistan's service sector contributes to the national GDP, insurance, along with transport, storage, communications and finance occupy 24% of the sector. The insurance industry in Pakistan is relatively small compared to its peers in the region. The insurance penetration and density remained very modest as compared to other jurisdictions while the insurance sector remained underdeveloped relative to its potential. The Pakistani insurance market has undergone major structural changes in last few years through mergers of companies to meet the increased statutory requirement of minimum paid up capital as per Insurance Ordinance 2000.

         Some of the major insurance companies are listed below.

• 1.      Jubilee Life Insurance
• 2.       EFU Life Insurance
• 3.       Adamjee Insurance Company
• 4.       Alfalah Insurance
• 5.       State Life Insurance Corporation of Pakistan    

Opportunities to insurance companies in Pakistan: It is important for every industry to avail the maximum of opportunities nearby them. But as other industries in Pakistan, insurance industry is not exposed to many opportunities but still there are some opportunities they can have in many conditions.

1.       Social Approach: It is opportunity for the insurance companies to utilise Social networking which had been dominated in the whole world and peoples are connected to each other and informed about the new things through this. Social approach can be used in many ways like Advertisement customer awareness, live sessions of awareness on internet, posting ads on different platforms and many other things.

2.       Awareness Programs: Insurance industry can establish awareness programs for illiterate people because they remain unaware about these things. This can get more people know what actually insurance is and what are the policies they are giving with what benefits so that they can be attracted towards insurance.

3.       Innovation in accordance with Customer’s Taste: Customer’s taste is mandatory today to be succeeded in market and very importantly in Emerging markets. Those who do not modify their policies or introduce new policies cannot compete with others. So insurance companies in Pakistan can know about what customers are desiring to have so that they can introduce new policies and rank high in the market.

4.       Use of E-Commerce: commerce has been modified today. Insurance industry can use E.commerce to get through customers electronically. So it can be easier for the customers to buy policies.

5.       Flexibility in Resources: Those insurance companies which use flexible resources becomes more efficient than the companies with rigid resources. So it is an opportunity for the companies to provide more flexible resources in order to have more policy holders.

6.       Manage a Team of Innovators and expansionists: A team of innovators and expansionists can make time to time innovations with the expansion of market because innovations are very important to grab the attention of customers.

7.       Children Saving Plans: Children are also part of our economy. Insurance companies of Pakistan should introduce Plans for minors.as it will be a new thing in the market so the companies can avail this opportunity to be renown.

8.       Investment in research and technology: Investment in these sectors can make Pakistani insurance industries more renown and the one with standards. Through this the peoples can more easily be connected to each other.

Problems for insurance companies in Pakistan: Insurance firms are summarily viewed as establishments meant to cancel or minimize the adverse consequences of unforeseen misfortunes. Indeed, insurance companies are risk outcomes underwriters. Because we leave in very unpredictable societies that have an extensive variety of risk trajectories, it is commonly expected that a person at a particular point in time will run into unfriendly situations that will endanger his or her life and property regardless of status, calibre, education level, and class. Industrialised and matured societies depend on insurance. This is an explanation why many companies and industries in developed nations do not liquidate or “go under” in such societies. But Pakistan is an under developing country so it tends to face many problems in its insurance industry. Some major problems faced by insurance companies of Pakistan are:

1. Awareness: Awareness is the most important issue in the sale of insurance. In most cases illiterate people did not get insurance policy even when they require it just because they are unaware about insurance. They do not show any kind of interest to buy a policy.
2. Economic instability: When the country`s economy is down, all insurance companies will be affected. At such situations, the rates can be affected such that the insurance companies might be forced to increase their rates, just like interest rates on credit facilities provided by financial institutions. Of course, no client will appreciate this, even if it is stated clearly in the contract that the insurance rates might change from time to time. Therefore, such situations might create a bad image for a company since costumers can spread the information about a service or product they were not happy with very fast.
3. Lack of trust: This is a reason why many individuals don`t bother with insurance. Many insurance firms fail to pay claims, and they don`t own up to offering some benefits. Therefore, most people just see insurance as one of the unnecessary expenses. Many insurance firms do shut down because of financial challenges and individuals who are the victims of the loss don`t even think twice about purchasing insurance policies. These peoples also influence others not to buy any policy. It is a very important issue.
4. Competition: Today, there are many insurance firms on the market of Pakistan and therefore there is an intensive challenge for insurers. Each company looks for the best way of selling their insurance products in the best possible way and targets a particular group of individuals. Most insurance businesses, especially the new ones are the most doubted companies. In fact, most people trust some of the existing insurance firms compared to the new businesses since the new enterprises are operated on a thin line between failure and success and no one will want to take such risks with the little among of money that they have.
5.  Halal and Haram conflicts: It is most generally discussed matter in Pakistani society. It is a challenge for insurance industry to clear the thinking of people about this serious issue. This issue diverts the mind of many peoples so they remain confused about buying a policy or not. In Pakistan peoples have made many thing religiously restricted to them. Due to that they do not invest in such businesses.
6. Customers Access: It is also a challenge for the insurance industry to keep close to its customers. In Pakistan many of the peoples do not have access to insurance companies because major part of Pakistan lives in rural areas. Insurance companies should make some arrangements to let the peoples of rural areas know about insurance as a result number of policy holders will be increased.
7. Inflation Effects: Inflation plays a vital role in economy of any country. With increased inflation in country, the value of money decreases while the income of peoples specially employed remains same. As a result peoples can only fulfil their basic necessities. There is no money is not left to invest in any other project. Many of the peoples do not buy policies due to this reason.
8. Skilled Human Resources: Human capital is like blood in the human body for firms. Every firm requires good educated and skilled human resources. It is a very big challenge to get skilled Human resources as well as keep them in company for the maximum possible time to make sure them to satisfy about their jobs.
9. Technological Development: In today’s world technology has been developed many times than previous. To succeed, technology is the most important thing and a challenge for industry to make some Innovative and customer Friendly technology. Pakistan is a bit behind in technology which is ultimately affecting the insurance industry.                                                                                     These are some main problems of Pakistani insurance companies. These problems are contributing to have less policy holders. Although there are many insurance companies in Pakistan but still these are not known enough to the peoples so that they can show their interest in.

Conclusion:

                    In every emerging market there are some opportunities and some problems present to be faced. Insurance industry of Pakistan is also such type or market with many problems and opportunities. But opportunities can be availed and problems can be solved. To get more benefit from insurance markets, companies need to pay a bit more attention on their progress. They need to adopt the changing demands of the customers and modify their policies according to them and even introduce new ones. They should use social media platforms to advertise about their company and policies and most importantly they have to maintain the trust of customers.