BR Research: Take us through the journey of Jubilee Life Insurance Company Limited. Also inform us of the reasons behind the recent change in the company name. Javed Ahmed: This Company was acquired by the Aga Khan Fund for Economic Development in 2003 and was named New Jubilee Life Insurance Company Limited. The parent company also operates insurance companies in other parts of the world.
To make it appear as one brand across international boundaries, the decision was taken to change the name of the Company. We have two companies operating in Pakistan under this brand umbrella; Jubilee Life and Jubilee General. But both these companies use the Jubilee Insurance brand. In addition to this new identity, we have also increased our marketing efforts.
Pakistan has a very low penetration of insurance sector, which needs rigorous efforts to educate the people. Moreover, we also believe that the total spending by existing market participants on marketing and creating awareness is significantly lower than desired.To make it appear as one brand across international boundaries, the decision was taken to change the name of the Company. We have two companies operating in Pakistan under this brand umbrella; Jubilee Life and Jubilee General. But both these companies use the Jubilee Insurance brand. In addition to this new identity, we have also increased our marketing efforts.
We made a conscious effort to deviate from this trend and invest meaningfully in our brand. The core idea remains to create awareness about the insurance and its benefits in the Country and also to familiarise the domestic market with our offerings. In terms of organisational structure, our Distribution Wing takes care of the outreach in the entire country. Our Agency Branch Network is operated within the Distribution Wing. At the moment we are working with established commercial banks in Pakistan. We ensure interaction at personal level with our potential clients either through our own representatives or the customer relations officers of those banks. Taking advantage of the reach of the branch networks, we ensure our presence in remote and geographically dispersed areas of Pakistan as well.
BRR: How does Pakistan's insurance sector fare in terms of persistency among policy holders? JA: Insurance companies all over the world measure persistency of clients by monitoring the number of people that continue to pay their premiums through successive years. Globally, a persistency rate of 80 percent or more is considered to be commercially viable.
The remuneration packages and performance evaluations at insurance companies including Jubilee Life are such as to ensure that our sales teams are motivated to pursue such clients that will continue to make contributions towards their life insurance policies.
The life insurance sector of Pakistan has generally fared better than regional peers in terms of persistency. The industry-wide average persistency rate in Pakistan stands above 80 percent while in Bangladesh, it is only about 60 percent. Jubilee Life currently enjoys a persistency rate of about 86 percent, above the industry average.
BRR: Tell us about the annual premium collection by the Company and how the same compares to the industry.
JA: The average premium on our individual life insurance policies is about Rs 45,000 per annum. We don't sell policies for less than ten years. In 2012, the total premium received by the Company was about Rs 12.1 billion, compared to the industry's cumulative premium generation of about Rs 86 billion. State Life Insurance Corporation is the biggest player in the industry; its premiums tallied Rs 52.3 billion in the outgoing year. EFU Life is also comparable to our company in terms of premiums, while the remaining industry participants are significantly smaller.
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: When Takaful rules were introduced in 2005, they were allowed five years during which no insurance sector companies would enter that market segment so that the new firms would have adequate time to develop. However, despite the completion of that term, the Takaful companies took the matter to court and effectively insurance companies have not been able to enter that market segment yet.
The influx of insurance companies into that sector would enhance competition which will be beneficial for consumers in multiple ways. Not only would they have more choices from among which to make a choice; the competition would also force all companies to develop better value propositions for their 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 a data sharing arrangement that covers three different aspects. Under the arrangement, the CDC will maintain a centralised database of information regarding declined insurance cases, history of lodged claims and work history of employees working within the sector.
Consider a typical problem that life insurance companies face when scrutinising applicants for life insurance policies. Suppose our Company receives an application which is eventually rejected on medical grounds. The same person can then use that information to apply for an insurance plan at another company while applying for an amount lower than the threshold at which that company mandates a medical examination. At present, companies keep records of such rejected cases, claims of their employees, on an individual basis. But sharing information with other companies is difficult under the current mode.
By compiling a centralised database, information sharing will become easier and faster. The nature of the information being shared is such that the individual companies will not be undermined and their sensitive information maintained by each of them will not be compromised.
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