Entry of life insurance companies to Takaful segment will benefit customers: Managing Director, Jubilee Life Insurance

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BR Research: Give us a brief introduction to Jubilee Life Insurance. Also tell us why the name of the Company was changed recently!

Javed Ahmed: This Company was acquired by the Aga Khan Fund for Economic Development (AKFED) in 2003 and was named as New Jubilee Life Insurance Company Limited. Our parent company also owns insurance companies in other parts of the world. The recent change initiative was part of a global branding strategy for insurance businesses of our group. All insurance companies under the umbrella of AKFED now work with the same brand. As we expand our business across different countries, we would like to be recognised by the same identity wherever we operate. In Pakistan there are two companies operating under the umbrella of Jubilee Insurance: Jubilee Life Insurance and Jubilee General Insurance.

Along with this new identity, we have also stepped up our marketing efforts. The penetration of insurance is very low in Pakistan. We feel that the current spending of insurance companies on marketing and awareness creation is woefully inadequate. We, therefore, decided to break away from the tradition and invest in our brand with a view to raising awareness about insurance in the Country and also to familiarise the domestic market with our offerings.

In terms of distribution structure, our outreach is now in every corner of the Country. Apart from our own branch network, we currently offer insurance products through branches of eleven banks. By leveraging the reach of the branch networks of these banks, we are able to serve clients in geographically dispersed areas of the Country.

BRR: In many cases individuals may obtain life insurance policies but later on lapse on the payments. How does the Country's insurance sector fare in terms of persistency among policy holders?

JA: Life insurance companies measure persistency by monitoring the percentage of policy holders that continue to pay their premiums through successive years. Globally, persistency rate of 85 percent or more is considered a good level.

Apart from improving their customer service, life insurance companies take every step to ensure that their persistency remains at higher levels. The companies link remuneration packages and incentives of their sales staff with persistency ratio.

The life insurance sector of Pakistan has fared better than regional peers in terms of persistency. The industry-wide average rate in Pakistan is above 80 percent while in other South Asian markets, persistency is less than 70 percent. Jubilee Life Insurance currently enjoys a persistency rate of above 85 percent.

BRR: Tell us about the annual premium collection by the Company and how the same compares to the industry!

JA: During 2012, total premium written by Jubilee Life was Rs 12.1 billion, whereas the industry is estimated to have written total premium in excess of Rs 86 billion. Jubilee Life has increased its market share significantly during last few years and is now the largest private sector insurer in terms of gross written premium.

BRR: If and when life insurance companies are allowed to operate Takaful windows, do you expect insurance penetration to receive a major boost in the Country?

JA: At the time of introduction of Takaful Rules in 2005, Takaful operators were given exclusivity period of 5 years during which conventional insurance companies were not allowed to enter this market segment, so that the new firms would have adequate time to develop and establish themselves. Unfortunately, development of Takaful has been much slower than expected and even after completion of 5 years exclusivity period, Takaful companies are not willing to compete at a broader level and have taken the matter to Court.

The induction of conventional insurance companies into Takaful sector will enhance competition which will be beneficial not only for the consumers but also for the sector. The customers will have more options from among which to make a choice and the competition would force all companies to develop better value propositions for clients.

In my opinion, Takaful companies will also benefit if insurance companies are allowed Takaful windows because the larger companies will be able to spend more on marketing and awareness creation which will ultimately be beneficial to the industry at large.

BRR: Last week, a Memorandum of Understanding was signed between the Central Depository Company and life insurance sector participants. What is the scope of this MoU and how will it benefit the industry?

JA: This is essentially a data sharing arrangement that covers three different aspects. Under the arrangement, CDC will maintain a centralised database of information regarding declined/postponed insurances cases, history of claims and work history of agents working within the sector.

Consider a typical problem that life insurance companies face when scrutinising applicants for life insurance policies. Suppose one company receives an application and rejects it on medical grounds. The same person can then buy an insurance policy from another insurance company with lower sum assured to avoid medical examination. This not only hurts the insurance companies in the form of excessive claims but also results in reputation damage if the claim is declined. Similarly, an agent committing some forgery in one company can go unnoticed and cause damage to multiple companies.

At present, companies keep records of such rejected cases, claims and agents on an individual basis and, therefore, sharing information with other companies is difficult. By compiling a centralised database, information sharing will become easier and faster.

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