SECP unveils plan to digitize insurance sector

KARACHI: The insurance sector is struggling to keep pace with the global shift to digital operations, with less than 1.0 per cent of premiums generated online, according to a new report by the Securities and Exchange Commission of Pakistan (SECP) titled ‘Insured Pakistan through Digitalization: Gaps, Potential & Roadmap’.

In its report, the SECP outlines the roadmap to meet the objectives of the Insured Pakistan 5-year Strategic Plan. Key components include the establishment of digital repositories for various insurance types, digital platforms for reinsurance and coinsurance, and the creation of a centralized insurance information bureau.

The SECP is also proposing amendments to the Insurance Ordinance to create a more conducive environmentfor digital innovation. SECP Commissioner InsuranceAamir Khan emphasized the urgent need for industry-wide collaboration to achieve the vision of a fully digitalized insurance sector.

The SECP’s blueprint aims to accelerate the industry’s digital journey, enhancing customer experience, expanding insurance penetration, and contributing to the overall economic growth.

However, the survey findings underscore the challenges ahead. The report says that despite efforts to modernize, the industry remains largely analog, with limited online offerings and a dearth of innovative technologies. In 2023, the industry generated premiums worth Rs553 billion. Of this, premiums worth only Rs842 million or 1.0 per cent were generated online.

While drawing comparisons between Pakistan’s insurance industry and that of other jurisdictions, the survey identifies areas of progress and those that are neglected. It indicates that the insurance industry is still in its infancy stage of digitalization, evidenced by only a few companies starting their digital journey and digitalization efforts being primarily focused on the distribution side. As such, majority of companies have yet to take significant steps towards digitalization.

The report says that only a fraction of insurance companies offers policies online, and even fewer have developed robust mobile applications. Those that do exist primarily serve existing customers rather than attracting new ones.

The overly conventional insurance sector has initiated digital distribution through websites, mobile apps, insurtechs, affinity platforms, banking apps, and digital wallets but this collaboration is in the nascent stage and so far, their contribution towards enhancing insurance footprint remains minimal.

Out of 29 non-life insurers, only 10 offer some form of insurance coverage through their websites, while just seven of the 11 life insurers do the same. The range of products available online is also limited, and the overall digital customer journey is often disrupted.

Mobile applications are also scarce, with only 10 non-life and seven life insurers providing them. These apps typically serve existing customers rather than attracting new ones. The insurance industry has been slow to adopt innovative distribution channels like insurtechs, affinity platforms, and digital wallets, hindering its growth.

The use of advanced technologies like artificial intelligence and data analytics is also minimal. Only two companies offer data-driven products, relying primarily on tracker and satellite data. Similarly, just three out of 40 insurance companies utilize artificial intelligence and machine learning.

The report serves as a wake-up call for Pakistan’s insurance sector, which must adapt to the digital age or risk falling further behind.Industry experts say the insurance sector needs to accelerate its digital transformation to remain competitive and meet the evolving needs of consumers. This will require significant investments in technology infrastructure, as well as a cultural shift within the industry.