FUTURE & PROSPECTS OF BANCASSURANCE IN PAKISTANPresented by Abdul Ahad Wahedna
What’s Going On????What’s Going to Happen!!! Rapid Changes… Volatile Economic Conditions Ever Creeping Costs of Business Environment not conducive for Business Focus towards break-even, higher ROA…..ROE Acquisitions & Mergers Fierce and Intense Competition
Spreads declining in core deposits and lending products Minimal Product Differentiation
Resulting in higher focus towards: Non-Traditional areas Liability Business….core focus Non-Funded Revenue Lines
What are Non-Funded Revenue Lines??? Typically defined as income streams which
do not require fund based investments In recent times banks are focusing towards:
Cash Management Solutions Home Remittances Trade Businesses Fee Based Income Lines linked with Deposits Wealth Management Products Bancassurance
Why Bancassurance – Insurance Company’s Perspective Increased market penetration
Penetration into Middle-Income Markets
Access to millions of customers
Higher premium turnover
Most viable option of mass selling
Why Bancassurance – Insurance Company’s Perspective Flexibility to develop low cost products
Reliable and low cost premium collection
model
Banks with almost 10,000 branches
provide the ideal distribution network
Overall lower expense to premium ratio
Why Bancassurance – Bank’s Perspective
Low start-up cost
Fast track implementation i.e. Quick to
Market
Significant source of non-funded fee income
Product Diversification
Leveraging core competencies
Why Bancassurance – Bank’s Perspective
Low cost of distribution
Geographical spread
Customer reach of all segments
Higher trust levels and greater brand
awareness
Increased ROA
Multiple communication channels
Market Penetration - Comparison
Insurance Density: Premium/capita in USD in 2009
Source: Swiss re, sigma No 2/2010
Rank
Country Total Business Life Business Non-life Business
Market Outlook
Total Bank Accounts: 26.5 Mn. Total Bank Deposits: PKR4,693
Bn.
Individuals & Others: Accounts 18.2 Mn. Amount PKR2,237 Bn.
Estimated Population 185 Mn. (Source
IMF)
Source: SBP Statistical bulletin, Data as of June 2010 & Economic indicators November 2010
Market Outlook
The market also includes investments like: Mutual Funds
▪ Net Assets PKR199 Bn.▪ Individuals PKR46 Bn. & 124,000
customers National Saving Schemes PKR1,653 Bn. Stock Markets: Karachi, Lahore and Islamabad Certificate of Deposits Workers Remittances USD900
Mn./month
Funds beyond the economic circle
Source: Mutual Fund Association of Pakistan, June 2010
Challenges
Social norms and acceptability of insurance products
Development of low cost products for mass market
Penetration into the rural segment No tax exemption benefits associated with
premiums and investments in insurance products
Negligible product differentiation…..specially for life insurance products
Opportunities
Investment based products for HNW clientele Huge opportunity in pension funds and
retirement plans…..market largely untapped Lowest per-capita insurance premiums as
compared to other regions Non-existent medical facilities / benefits Development of short-term investment / saving
products to inculcate culture of saving through insurance.
Recent Growth of Islamic Insurance in International market and its prospects in Pakistan.