Pakistan suffers from financial exclusions on all fronts and insurance is no exception. At present, gross premiums are a paltry 0.9 per cent of GDP, compared with the regional average of 2.2pc and the global average of 6.6pc. Similar to the banking industry, the prime reason for this low-level penetration is that the industry is yet to look at their service from the customer lens. The customer journey from the product, sales as well as the claim process has major bottlenecks, which have yet to be addressed.

The individual insurance industry can be divided into life and general. Life insurance consists mainly of life and health. While general includes: motor vehicle, home and content, travel and phone.

The main product of the life segment is life insurance coupled with a savings plan. This product is sold through agents as well as through banks. As a result of the savings component, the monthly annual premiums are unaffordable for the average Pakistani, the premiums are collected through cheques and the level of product awareness is alarmingly low. The claim process is not automated and is painful. In the first instance, the investment component must be decoupled from the insurance cover. This product is pushed by the agents principally for the commissions they earn as opposed to the customer need.

According to the Pakistan Telecom Authority, the country now has 162 million phone users but the current insurance coverage remains under 0.5pc at best

The purpose of life insurance is to replace the monthly earnings of the principal earner in the family; hence the coverage has to be high enough to create the required monthly income. A simple term insurance (death cover only) product would achieve this objective.

The second bottleneck is the means of the premium collection as they are currently collected through cheques. The last pain point is the claim payment process. Physical documents are required and the average time to receive a claim payment can take a month. The objective should be a Rs100,000 life cover only product, (provided in units of Rs100,000) made available through a daily premium that is collected either through mobile wallets or airtime. An ideal plan would be for Rs100,000 with a daily premium of Rs2 per day.

The insurance would be sold through a call centre (not physical sales) with the claim documents being simplified and provided electronically and upon the documents meeting the declared criteria, the claim funds being made available to the customer within 20 minutes. The digital journey would greatly increase the insurance penetration in our country.

The second biggest need is that of an in-patient (hospitalisation) insurance. The service must be made available digitally; all hospitals must be covered and not limited to network hospitals. The claim process must be automated. Insurance companies should integrate with as many hospitals as possible so that the hospitals stop demanding up-front cash.

In general insurance, the customer-based service is limited to auto insurance, and even here the customer uptake is limited and the customer journey is convoluted. Domestic travel insurance, mobile phone theft, mobile phone screen, home and content insurance are virtually non-existent. In neighbouring countries with similar regulations and level of awareness, these services are now very popular. We need to determine the root cause of our low penetration.

On the auto front, our current regulations require all auto owners to have a minimum of Third-Party insurance. This regulation can easily be implemented however, it is not. Secondly, other than a few companies the customer journey remains painful, especially the claim process. A digital claims management solution would greatly benefit customers.

According to the Pakistan Telecom Authority, the country now has 162 million phone users. However, the current coverage remains under 0.5pc at best. Unlike other forms of insurance, the pain point here lies with the customer as opposed to the insurance companies. Smartphone screen insurance requires a picture of the phone along with the unique IMIE (International Mobile Equipment Identity) number to mitigate against moral hazard. Same is the case with smartphone theft insurance, which requires an FIR to protect against fraud.

Pakistani customers as well as distribution intermediaries find these requirements too onerous. This bottleneck must be tackled from both sides. Customer awareness as well as alternative solutions are necessary. Domestic travel started to take-off prior to the advent of Covid-19, but travel insurance did not. A simple application which provides instant cover, based on travel documents and instant premium payment via mobile wallets needs to be explored.

The insurance industry must step back and look at the customer journey and make coverage, premium collection and claim payments transparent. The technology exists to provide the solution, what is required is the vision and the will to implement it.

The writer is a technology entrepreneur

Published in Dawn, The Business and Finance Weekly, October 12th, 2020

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