FUTURE & PROSPECTS OF BANCASSURANCE IN PAKISTANPresented 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

Source: Swiss re, sigma No 2/2010

Rank

Country Total Business Life Business Non-life Business

Market Outlook

Total Bank Accounts: 26.5 Mn. Total Bank Deposits: PKR4,693

Bn.

Individuals & Others: Accounts 18.2 Mn. Amount PKR2,237 Bn.

Estimated Population 185 Mn. (Source

IMF)

Source: SBP Statistical bulletin, Data as of June 2010 & Economic indicators November 2010

Market Outlook

The market also includes investments like: Mutual Funds

▪ Net Assets PKR199 Bn.▪ Individuals PKR46 Bn. & 124,000

customers National Saving Schemes PKR1,653 Bn. Stock Markets: Karachi, Lahore and Islamabad Certificate of Deposits Workers Remittances USD900

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.