safeguarding insurance policyholders' interests
Up until the end of 2000, the Ministry of Commerce had regulatory authority over the insurance industry. During that time, the general public sector insurance businesses benefited from their privileged position and captive market while the private sector insurance industry suffered from operational inefficiencies, a lack of expertise, and low unacceptable ethical standards.
The insurance sector experienced several problems under the outdated Insurance Act of 1938's regulatory framework. General insurance businesses' capital requirements were woefully insufficient, insurer registration and monitoring costs were low, and as a result, the statutory solvency margins were based on out-of-date ideas.
Unfortunately, successive administrations in Pakistan have never given the insurance business the attention it deserves as a vital component of the financial system. The repeal of the Insurance Act of 1938 by the Insurance Ordinance of 2000 (referred to as "the Ordinance") in 2000 was the most major about-face that we have seen. The primary goals of the new insurance legislation are to guarantee the interests of insurance policyholders are protected and to promote the healthy growth of the insurance business.
The Securities and Exchange Commission of Pakistan (SECP) took over the regulatory and supervisory duties for the insurance industry in 2001 from the Department of Insurance, Ministry of Commerce.
Although Pakistan's insurance market is still highly undeveloped in comparison to its potential, recent years have seen a promising rise in premiums as seen below:
Any area of economic and industrial activity can expand sustainably depending on a number of variables. In light of the fact that the insurance industry is one that offers services, the author is of the opinion that without good human resources, adherence to best business practices, professional expertise in the insurance industry's core business, and a strong financial foundation, this sector wouldn't be prepared to fully exploit the enormous potential challenge for development, and its performance would remain muted.
There were 47 active insurance/Takaful companies, of which 40 (including 3 general Takaful, the Social Insurance Company Private Limited, and the Pakistan Reinsurance Company Limited) and 7 (including 2 family Takaful and the State Life Assurance Corporation of Pakistan) are in the non-life and life sectors, respectively.
Commitments on specific policy initiatives within the insurance sector were made to the Asian growth Bank and other foreign donor agencies in order to reinforce SECP's role as an effective facilitator for the healthy growth of the insurance and Takaful sectors. This is consistent with SECP's strategic objective of building and upholding an efficient regulatory framework that would allow the insurance and takaful industries to grow and prosper.
The following main areas have been in focus since late 2005 with a focus on the underlying goal of increasing insurance penetration level:
Protection of insurance policyholder interests;
changes to the legal framework to reinforce SECP's position as the top insurance regulator.
The insurance industry's capacity, the growth of private lines business, the accessibility of insurance cover to underprivileged groups in society, the regulatory framework for Takaful, the development of human resources, and the industry's reputation are all important factors.
The reader will be informed of the accomplishments, current projects, and short-term goals pertaining to the aforementioned topics moving forward.
The formation of the Small Dispute Resolution Committee, the Insurance Tribunals, and the Insurance Ombudsman's Secretariat had all been planned for in the Ordinance. However, the government only achieved these goals after six years.
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