Pakistan’s insurance industry contributes PKR 59.9 billion to the national economy

Pakistan’s insurance industry contributed PKR 59.9 billion ($214 million) to the national economy.

This contribution includes PKR 28.8 billion in income tax, PKR 13.7 billion in sales tax, PKR 11.01 billion in Federal Excise Duty (FED), PKR 3.7 billion in stamp duty, and PKR 2.7 billion in other contributions, as per the insurance industry statistics for 2023 published by The Securities and Exchange Commission of Pakistan (SECP).

SECP mentioned the insurance sector holds 5.55% of government marketable securities and its investment in equity securities stands at 2.58% of market capitalization.

Despite these contributions, the statistics indicate stagnation in premiums, particularly in the life insurance sector where growth has been less than 10%.

The slow growth is attributed to several challenges, including ineffective enforcement of motor third-party insurance with only 3% of vehicles insured, low adoption of agriculture and livestock insurance, an unfavorable taxation regime, limited local reinsurance capacity with retention levels at 42%, and a shortage of skilled human resources.

The report shows that the life insurance sector accounts for 64% of the industry's gross premiums written, while the non-life sector comprises 36%. In 2023, the industry's total assets grew from PKR 2,421 billion to PKR 2,900 billion.

A gross premium of PKR 631 billion was written in 2023, reflecting a 14% year-on-year growth compared to PKR 553 billion in 2022. Claims paid during 2023 amounted to PKR 373 billion, with life insurance companies paying PKR 289 billion and non-life companies paying PKR 84 billion.

Aamir Khan, Commissioner Insurance at SECP, emphasized the need for the insurance industry to adopt the 5-year strategic plan, which includes the use of technology, support from the federal government for essential legislative changes, and strict enforcement of compulsory insurance schemes by provincial governments.

He also highlighted the importance of using insurance to manage risks to public assets, securing livelihoods in the agriculture and livestock sectors, and providing health and associated covers through pool structures.

Khan also suggested that SECP should simplify its regulatory approval processes and develop a digital ecosystem for capturing, storing, sharing, and using insurance sector data to support innovation and product development. He stressed that these measures are crucial for the continued growth and stability of the insurance industry in Pakistan.