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Future Prospects of Bancassurance in Pakistan

What's Going On???? What's Going to Happen!!!. Rapid Changes

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Future Prospects of Bancassurance in Pakistan

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    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

    9. 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)

    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

    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.

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