1. Future & Prospects of Bancassurance in Pakistan
Presented by
Abdul Ahad Wahedna

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. Market Penetration - Comparison
Insurance Density: Premium/capita in USD in 2009
Rank
Country
Total Business
Life Business
Non-life Business
Source: Swiss re, sigma No 2/2010

9. Market Outlook Total Bank Accounts: 26.5 Mn.
Total Bank Deposits: PKR4,693 Bn.
Individuals & Others:
Accounts Mn.
Amount PKR2,237 Bn.
Estimated Population 185 Mn. (Source IMF)
Source: SBP Statistical bulletin, Data as of June 2010 & Economic indicators November 2010

10. 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

11. 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

12. 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.