KARACHI, Feb 5: Despite significant presence of insurance companies, insurance penetration in Pakistan is at the lowest level as compared to other countries across the world.

Insurance penetration, as measured by the ratio of premiums to GDP, reflected that both life and non-life insurance penetrations are at the lowest level here.

Insurance companies said insurance business has increased substantially during the last five years, but the huge increase in the size of the Gross Domestic Product (GDP) has underplayed the insurance penetration.

The data of Swiss Re Sigma showed that insurance penetration in Pakistan (life and non-life) is 0.7 per cent of the GDP on the basis of 2005 gross premium numbers.

However, the most important non-life insurance sector showed a penetration of 0.44 per cent which is much lower than even regional countries.

Non-life insurance penetration in Sri Lanka is 0.77 per cent while in India it is 0.65 per cent.

The penetration in the US is 5.14 per cent, UK 3.68 per cent, Europe 3.20 per cent and Africa 1.48 per cent.

The world’s average non-life insurance penetration is 3.43 per cent while Asia’s penetration is 1.79 per cent.

Pakistan is also at the lowest side in terms of insurance density.

Insurance density is measured as ratio (in per cent) of premium to total population.

Insurance density of non-life insurance in Pakistan is 2.2 times as compared to world average of 220 per cent.

The insurance density of India is four per cent and the number is high despite huge population of the country crossing one billion.

The insurance density in the United States is 2062 per cent, United Kingdom 1318 per cent, Europe 579.8 per cent, Africa 13.1 per cent and Asia 47.1 per cent.

Insurance companies said the auto sector growth has improved the non-life insurance penetration in Pakistan.

They were also of the view that industrial growth would further increase the number.

“We expect rising industrialisation, growing trade activities, double digit growth in car sales and increasing awareness about insurance products will bode well for insurance sector,” said analyst Mohammad Imran.

He expected that the gross premium of non-life insurance sector will increase four times to Rs105 billion by the end of 2011 as compared to Rs27 billion currently.

“Non-life insurance penetration is likely to touch 0.8 per cent of the GDP by 2011,” he said.

Insurance companies argued that low insurance penetration was related to the low literacy rate in Pakistan.

“The medium and small business sectors used to avoid getting insurance despite attractive offers being made by the insurance companies,” said S M Saeed, a sales manager of large insurance company.