The SECP’s Commissioner for Insurance and Information Technology, Aamir Khan stated that the SECP’s five-year strategy plan for the insurance sector targeted at utilizing technology to exploit Pakistan’s enormous untapped potential in insurance.
He was speaking at the Insurtech Conference 2023, organized by Pakistan Fintech Network to deliberate upon the critical theme of innovation through the use of technology in Pakistan’s Insurance sector. All the insurance CEOs, members of boards, and experts attended the conference.
Khan said that Pakistan‘s insurtech is still in its infancy. He pointed out that the share of Insurtech sector is less than 1 percent of the overall premium written. This is an undesirable statistic but a reality nonetheless. Globally, as of 2023, there are over 3,400 insurtech companies, up from 1,500 companies in 2018. There are at least 30 unicorns in the insurtech space, he added.
In view of the above, the primary goal of SECP’s insurtech policy is to enhance the customer experience via customization, increase operational efficiency, reduce risk, use data-driven decision-making, and, as a result, increase insurance penetration. SECP, in line with these key goals, has been facilitating the merging of technology and insurance, khan said.
According to Grand View Research, the global insurtech industry was valued at $5.4 billion in 2022. The revenue forecast for 2030 is $152 billion. Can Pakistan contribute $1 billion to this expected $152 billion in the next 7 years? The answer to this question is an emphatic “Yes” for me. Pakistan has a huge potential to be a new star of fintech in general and insurtech in particular. There are 190 million mobile users in the country. This coupled with the presence of 130 million internet users allows insurtech to explore endless possibilities, Aamir Khan explained.
In Pakistan today, only 3% of vehicles are insured against 30 million registered vehicles. Similarly, against a population of 220 million, there are only 8 million individual life policies. According to an estimate, the total number of farmers in the country stands above 8 million. However, less than 1 million farmers are covered under any sort of insurance policy.
Among the 32 million recorded properties, only 0.3 million are insured. This is the story of every sector, every sphere, and every insurance class. The 40 companies registered in Pakistan can double in number and there will still be market opportunity for new players. So, the market potential that exists in the Pakistani insurance market is clear and present.
He said that there are some challenges and the major one is limited financial literacy. As per State Banks’ recent research, 100 million adults in Pakistan are not aware of regulated services provided in the country and only 23% of the population has some basic financial literacy. A closely related subject is limited digital literacy as people do not fully understand the power of the smartphones they are carrying.
Khan recognized the fact that there are inadequate funding and investment opportunities; it is not easy in the current environment for insurtech and fintech start-ups to attract funding, investments, or talent. However, there is also inadequate interest by insurance companies in leveraging technology and exploring insurtech. The case has either not been sold effectively to, or not accepted openly by the C-suite and the boards of insurance companies.
The above gaps warrant a concerted and energized national-level thrust, by moving beyond basic insurance coverage and harnessing the role of technology in the development of an efficient insurance ecosystem.
Aamir Khan said that the SECP’s regulatory sandbox has allowed testing of innovative products and services and the regulations on digital insurers were a result of the same. He encouraged insurance industry to explore the sandbox and discuss their ideas with SECP’s insurance policy team. He insisted that the broader Insurance industry needs to invest in technology; the recent growth spurts in the digital lending space, can be replicated for the insurance sector too.
Insurtech products and solutions, related to pure protection, health insurance, parametric insurance, robo-advisory, etc., can similarly reach out to the financially excluded. He assured participants SECP support as a regulator and also as a facilitator for innovation and insurtech.
Source: Pro Pakistani