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ISLAMABAD: Pakistan’s insurance industry has significant room for expansion but remains constrained by preferential treatment for state-owned insurers, restrictive regulations, mis-selling through banks and weak enforcement of compulsory motor insurance, according to a Competition Commission of Pakistan (CCP) assessment.
The CCP report, currently under stakeholder review, says insurance density in Pakistan is only about $14 per person, compared with $82 in India and $134 in Turkiye. Among a population of more than 240 million, insurers had sold only about 7.8 million policies in 2022.
The assessment was discussed at a meeting of the Competition Consultative Group on ‘Strengthening Competition in Pakistan’s Insurance Sector: Challenges, Opportunities and the Way Forward’. Participants called for a more competitive market, wider digitalisation, improved claims handling and greater access to insurance products.
CCP Chairperson Farid Ahmad Tarar said Pakistan’s low insurance penetration offers significant room for growth, with greater competition needed to spur innovation, improve services and widen consumer choice.
The study says four state-owned entities retain significant influence over the market. State Life Insurance Corporation and Postal Life operate in life insurance, National Insurance Company Ltd (NICL) dominates public-property insurance, while Pakistan Reinsurance Company Ltd (PRCL) is the country’s sole incorporated reinsurer.
State Life alone accounts for about 55 per cent of the life insurance market and continues to benefit from a federal guarantee on its policies, giving it an advantage over private competitors. NICL has exclusive rights to insure public-sector property, while PRCL is entitled to at least 35 per cent of treaty reinsurance business with a first right of refusal.
The CCP recommends removing such preferential arrangements, opening public-property insurance to competition and allowing insurers greater choice in sourcing overseas facultative reinsurance.
Consumer confidence is another major concern. The report says bancassurance, the sale of insurance through banks, provides insurers access to a large customer base but has also generated complaints over policies allegedly being sold as bank deposits or investment products, with key charges, risks and conditions insufficiently disclosed.
The CCP calls for stricter disclosure and sales standards, better staff training and clearer responsibility for resolving complaints involving banks and insurers.Motor insurance offers another major opportunity. Although third-party motor insurance is legally mandatory and Pakistan has more than 30 million vehicles on the road, only about three per cent are insured, leaving most motorists and accident victims without adequate financial protection. The report recommends digital verification, a centralised database, stronger enforcement and public awareness.
The commission also proposes reviewing sales taxes on reinsurance and withdrawing the 1.0 per cent federal insurance fee on non-life policies, saying such charges increase costs.It identifies agriculture, health, Takaful, micro-insurance, small businesses and rural markets as major areas for growth, supported by digital onboarding, easier premium payments and faster claims settlement.
