KARACHI, Sept 7: Two more banks are launching very soon the insurance companies in a market where at least four such sets of banks-insurance nexus are already in operation signalling the emergence of business cartels in a new form.

Market sources say that Bank Al Falah is in process of launching its insurance company while the Bank of Punjab has almost finalized the plans to enter life insurance business. In fact, the Bank of Punjab has already filed an application with the Securities and Exchange Commission of Pakistan.

In less than last one year, the Pak Saudi Commercial Bank and PICIC Commercial bank have launched their respective insurance companies. After acquiring the Muslim Commercial Bank in 1991 privatization deal, Mian Mansha also took over the biggest private general insurance company the Adamjee Insurance.

Adamjee Insurance is now said to be in process of acquiring five million shares of the MCB. A general meeting of the Adamjee Insurance shareholders has been convened on September 19 to decide on purchase of five million shares of the bank.

The Askari Insurace remains tied to the tail of Askari Bank operating under the shadow of high and mighty Army Welfare Trust.

All these developments in the insurance market are being watched with fear and doubts by most of the 40 odd small insurance operators. A loud rumour going around the insurance market suggests that the Securities and Exchange Commission of Pakistan is considering to raise the requirement of minimum capital base to Rs200 million. The rumours got strength on launching of Pak Saudi Insurance and PICIC Insurance each having a capital base of Rs200 million.

All the insurance companies now in operation completed Rs80 million capital base fixed by the SECP at the end of 2004. “A weak regulator with no agreed tariff on business has sparked off a cut-throat competition in the market hurting the small insurance companies,” executive of an insurance company said.

The SECP has engaged an advisor on insurance business on a fat salary whose experience and exposure to Pakistan’s insurance business is minimal. “Anyone who has even served a small branch office of a foreign company in Pakistan is considered to be a professional and is given a key position,” complains a leader of the Insurance Association of Pakistan. “All such professionals are hand-picked and have not been selected through normal proper channels, which should have established their merits,” he said.

The cut-throat competition among the insurance companies and a slump in insurance premium rates is not benefiting the common man. “The real beneficiaries are the big corporations and companies having close business links with the banks with which the insurance companies are associated,” he said. Insurance operators say that the big corporations and companies are paying small premium on their bulk business. They enjoy the quick payment of claims because under the new insurance law, the companies are not bound to engage surveyors to judge veracity of claims. The common man pays higher premium and his genuine claims are either not entertained at all or are processed for such a long time that the claimant gives up his claim.

Pakistan’s international trade now exceeds $32 billion a year and should have brought rich gains to the insurance companies. During the year the total premium business of 30 companies was estimated at Rs17.68 billion. But more than 58 per cent of this business was shared by only two companies while another company got about 8 per share. The 36 per cent insurance premium was shared by 27 other companies. The lowest share was only 0.05 per cent of Rs17.68 billion. In fact, 14 companies shared less than one per cent of the business. Five companies got less than 2 per cent share and five companies more than two per cent share of the business.

There is now a growing demand in the local insurance business to constitute Pakistan Insurance Regulatory Authority with a team of professionals that should go through a selection process rather than appointing someone who is close to the people in government set-up.