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Pakistan Society of Actuaries 7 th

Global Conference of ActuariesLife Insurance in Pakistan ² Past, Present & Future New Delhi 2005

LIFE INSURANCE IN PAKISTAN

Past ,Present and Future

Presented byJamshaid Islam, FSA, FPSA





1956 1961 1972 1984 1987 1992 2000 2002 2005

India: LIC Act

Sri LankaLife InsuranceNationalized

BangladeshBINO

Pakistan: LINO

BangladeshPrivate SectorLife Insurance

CompaniesAllowed

Sri LankaPrivatization

of Insurance

PakistanPrivate SectorLife Insurers

Allowed

Sri LankaRegulation of

InsuranceIndustry Act

Pakistan

InsuranceOrdinance 2000

IndiaIRDA Act

PakistanInsurance Rulesand Insurance

AccountingRegulations

PakistanTakaful Rules,

VoluntaryPension Rules,

Valuation

Regulations

Life Insurance History in Indian Subcontinent





2003 - Type of Business

Individual Life

Pension

Accident &

Health

Group Life

Source: Published Accounts





2003 - Unit Linked vs. Non Unit Linked






2003 - Unit Linked vs. Non Unit Linked


Private Sector





2003 ² Group Life






2003 ² Group Life Private Sector






Product Development 1947 - 1972

Dominant type of plans:

Whole Life Assurance

Endowment Assurance�Limited payment

�Anticipated endowments

Annuities were also offered





Product Development 1972 - 1992

Product ´basketµ initially offered by State Life ² basedon plans offered by the pre-nationalisation companies

W hole Life

Endowment Assurance

Anticipated Endowment

Progressive Premium

Optional Maturity





Innovations in the PakistaniPakistani insurance market

UUnit llinked PProducts

IInflation PProtection

CComputer IIllustrations for BBenefits

EEducation PPlanning SService

CCritical IIllness PProduct

Product Development 1992 Onwards





Since creation of Pakistan insurance business wasregulated under the ´Insurance Act 1938µ

Insurance sector reforms in 1990s

Securities and Exchange Commission formed in 1999

Insurance sector reforms in collaboration with theAsian Development Bank

New Insurance Law ² Insurance Ordinance 2000Insurance Rules 2002Accounting Regulations 2002

Insurance Regulatory Environment





Insurance Ordinance 2000

Capital and Solvency Margin requirements

Separate Statutory Funds for different classes of business

Admissibility of Assets

Role of the Appointed Actuary

Financial Reporting

Market Conduct Rules





Competitive Forces





The Future

Takaful

�Government has taken keen interest in promotingIslamic modes of banking, investment and

insurance

�Recently the SECP created a Task Force to draftTakaful Rules ² current regulations do not cater toTakaful products.

�Individual life Takaful products will primarilyfollow the unit linked structure





Window operations for Family Takaful allowed -separate statutory fund required

Takaful operational model based on the principle ofWakalah. The Participants Takaful Fund may be

based on the principle of Waqf. The investment offunds in the Participants Investment Fund may bebased on the principle of Wakalah, Modarbah orcombination of both

Retakaful placement with conventional reinsurersallowed in case sufficient capacity not available

Shariah Board

Draft Takaful Rules





1996 2001 2002 2004

Depositor·sInsurance

Credit Life Mail Inserts BancassuranceAg reements

The Future

Bancassurance evolution





5 banks offering credit life on group basis - premiumseither explicitly charged from customer or paid by thebank from product margins.

2 banks have commenced telemarketing of insurance

products ² personal accident and critical illness products.

2 banks have entered into bancassurance agreements ²products offered: personal accident, unit-linked lifeassurance

Agency system of bancassurance model being followed

Expected to grow rapidly in 2005

Bancassurance





The Future

Voluntary Pensions System

SECP has drafted Voluntary Pension Rules

Life Insurers and Mutual Funds allowed to operateas Pension Fund Managers

Main competition in this market with Mutual Funds

Currently mutual fund industry has assets over Rs. 1trillion





Cap on front end fee (3%) and investment management

charge (1.5%)

Contribution limit and tax allowance to be set in income taxrules

Tax penalty on withdrawal before age 60. After age 60, canwithdraw 25% as lump sum and the remaining to be paidas an annuity purchased from a life insurance company

Two sub funds to be created ² Equity and Debt

Benchmark for investment performance ² weighted averageof all sub funds less 2.5%

Voluntary Pension System Rules





The Future

New Life Companies

Major banking groups intend launching lifeinsurance companies

Already have a viable distribution channel

Takaful companies





Role of Actuaries in a changing market

�Active involvement of the actuarial profession

�In an evolving market actuaries have to be broadbased business professionals and cannot confinethemselves in ´specializationµ silos

�Critical role for the actuarial profession to act as abridge between the industry and the regulator

�More communication and interaction betweenregional actuaries bodies



Pakistan Society of Actuaries 7

th


LIFE INSURANCE IN PAKISTAN

Past ,Present and Future

Presented byJamshaid Islam, FSA, FPSA

life insurance in pak,past prsent

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