KARACHI, March 11: A few Pakistani private general insurance companies have entered into re-insurance business relationship with the giant state-owned General Insurance Corporation of India (GIC).
“It is on a modest scale, at present,” a top private insurance operator informed Dawn while elaborating on the reinsurance business relationship of the Pakistani companies with the Indian re-insurer, adding that a beginning has been made.
This relationship between the Indian re-insurer and the Pakistani companies has come about with out any bilateral treaty or a protocol on the government level because no “such bilateral insurance treaty” existed between the two countries on the government level, explained a senior insurance executive.
Insurance industry leaders of Pakistan and India met in September last year when an international conference on “Insurance and re-insurance scenario — Future outlook,” was held at Mumbai. The Insurance Association of Pakistan (IAP) leaders attended this conference and explored the possible areas of cooperation.
Leaders of the insurance industry of the two countries also met recently at Cairo on the occasion of an international insurance moot and explored ways of further expanding their relationship.
India boasts of a world-renowned insurance institute and an insurance education centre of excellence in Mumbai and Pune where the Pakistani insurance companies are now planning to send their junior and senior executives for training.
Insurance education is being introduced as a major subject in at least two reputed institutions of Lahore — Hailey Commerce College and the Lahore University of Management Sciences (Lums). Insurance business in Pakistan is gradually expanding and a fast track privatization programme has motivated the local insurance industry to prepare itself for grabbing the future opportunities.
Yet, the volume of Pakistan’s insurance business and its penetration, compared to that of India, remains pitifully small and insignificant.
Comparing Pakistan’s general insurance business with that of India, the Pakistan Insurance Year Book of 2004-05 reveals that the total gross premium in Pakistan was only $438 million as compared to $17.30 billion in India. India’s premium is 40 times higher than that of Pakistan and, even after making adjustments with the size of population and of economy, the insurance year book says that it should have been at least $2 billion.
Insurance density in terms of per capita premium in Pakistan remained dismally low at $2.9 as against $16.4 in India. It means that the insurance industry in India attracted $16.4 from per person as against only $2.9 in Pakistan.
In a population of 146 million in Pakistan hardly, two per cent give some importance to insurance. In Pakistan the total insurance premium constitutes 0.62 per cent of the national GDP as compared to 2.88 per cent in India, 1.16 per cent in Iran, 1.35 per cent in Turkey and 15.88 per cent in South Africa.
Taking stock of the situation in the insurance business, the IAP leaders have set a five point roadmap. The first point is to have in place a code of conduct and ensure strict adherence. The second objective stresses upon the IAP members to understand and adhere to the regulatory requirements.
The third point is to carry the message of insurance benefits across the masses and create more awareness, and the fourth point focuses on improving the standards of insurance education. The fifth and final point is to address the presence of bogus and fraudulent insurance companies involved in third party motor insurance business.
Making a start from 77 foreign insurance companies in the year 1947, there are now only 31 general insurance companies, of which 30 are private and one in public sector. Bulk of the insurance business is done by only eight insurance companies, while the remaining 22 are involved in insignificant amount of business.
The people still have doubts on claim payments by these companies particularly, the compensation on cotton fire claims remains scandalous as many textile tycoons are either directly on the board of the insurance companies or have people under their direct influence.