FUTURE PROSPECTS OF BANCASSURANCE IN PAKISTAN Presented by
FUTURE & PROSPECTS OF BANCASSURANCE IN PAKISTAN Presented 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 Rank Country Source: Swiss re, sigma No 2/2010 Total Business Life Business Non-life Business
Market Outlook Total Bank Accounts: Total Bank Deposits: Individuals & Others: Accounts Amount 26. 5 Mn. PKR 4, 693 Bn. 18. 2 Mn. PKR 2, 237 Bn. Estimated Population Source: SBP Statistical bulletin, Data as of June 2010 & Economic indicators November 2010 185 Mn. (Source IMF)
Market Outlook The market also includes investments like: Mutual Funds ▪ ▪ Net Assets Individuals customers PKR 199 Bn. PKR 46 Bn. & 124, 000 National Saving Schemes PKR 1, 653 Bn. Stock Markets: Karachi, Lahore and Islamabad Certificate of Deposits Workers Remittances USD 900 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.
- Slides: 12