Insurance Industry of Pakistan: A Paradigm Shift

Abstract

This research study has been conducted to highlight the potential in the insurance industry of Pakistan. The author has tried to highlight the issues that hampered the growth of insurance sector of Pakistan. Nationalization, back in 1972, unfair competition, presence of few players where big one getting bigger and smaller one were facing extinction & government’s negligence, are some of the major factors that hampered the growth of insurance sector. Furthermore, we have tried to find out potential in this very industry. We compared the local insurance industry with the industries of developed countries and highlighted the gaps between the product offerings and structure of the industry. We have come to know that Government is serious this time boosting this sector and reforming it in order to lure the international players to enter in to this sector. In addition to that we have tried to find out answer of our research question and tested three propositions. As it is a vast area to research on, there must be many important areas which remain untouched because it was beyond the scope of our research study. We have tried to justify our Propositions and Research question on the basis of data we gathered from different public and private sources. In the end we concluded that Government is serious in reforming this sector and wants the international big players to enter the market. Government knows that there is a huge untapped market still present for insurance business in Pakistan. Liberalization of insurance sector is the step towards luring the foreign players. The inception of Islamic Insurance (Takaful) in the country would promote the insurance business further. Furthermore, the government’s very recent rule that Banks with 70% or more equity could start their own insurance company under the name of same bank would attract the banking giants into this business and monopoly of few main players would be weakened. We have come to the point that future of insurance sector of Pakistan is very bright if current policies continue in future. The need of the hour is that Government and Insurance companies join hands to promote this sector and come up with Win-Win solution that benefit both the parties.