study on lack of awareness about insurance with reference to efu general insurance limited

8/6/2019 Study on Lack of awareness about Insurance with Reference to EFU General Insurance Limited

http://slidepdf.com/reader/full/study-on-lack-of-awareness-about-insurance-with-reference-to-efu-general-insurance 1/25



CONTENTS

CHAPTER 1 : INTRODUCTION

� Introduction

� Beginning of Insurance Industry

� Products Providing By EFU General Insurance Ltd

� Purpose of Study

� Research Objectives

� Research Methodology

CHAPTER 2 : LITERATURE REVIEW

� Literature Review



CONTENTS

CHAPTER 3 : GENERAL INSURANCE INDUSTRY

Introduction

Type of Insurance

Type of General Insurance

Insurance Market

Contribution of GDP



CONTENTS

CHAPTER 4 : PROBLEM AND PROSPECTS

Natural Disaster.

Basic Obstacles facing by EFU General Insurance Ltd

Political Unsuitability.

Competitors.

Availability of Reinsurance coverage

Reinsurance Cost

Volatile Market

CHAPTER 5 : CONCLUSION AND RECOMMENDATIONS

Conclusion.

Recommendations



INTRODUCTION

� INSURANCE

A promise of compensation for specific future losses in exchange for a periodicpayment annually most cases. Insurance is formulated to protect the financialloss of an individual or group, company or other entity in case of unexpectedloss. Some forms of insurance are required by law, while others are optional.

Agreeing to the terms of an insurance policy creates a contract between theinsured and the insurer. In exchange for payments from the insured (calledpremiums), the insurer agrees to pay the policy holder a sum of money uponthe occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest.



INTRODUCTION

BEGINNING OF EFU GENERAL INSURANCE LIMITED

In 1932, established Eastern Federal Union Insurance Company (EFU) with financialassistance from the Aga Khan and the Nawab of Bhopal. Mr. Abdur Rehman Siddiquebecame the founder chairman. The company was originally registered at Kolkata andoperated in India and Burma.



INTRODUCTION

BEGINNING

77 foreign insurance companies were dominating the Pakistan market post partitionwhen the strength of local insurers was only Seven. In 1952 Government establishedPakistan Insurance Corporation to promote the local insurance industry and number of local insurance companies increased to 60 while number of foreign companiesreduced to Seven.

In 1976 National Insurance Corporation (NIC) was formed, with the purpose of

undertaking General Insurance business relating to any public property.



INTRODUCTION

Key Market Players

The general insurance market comprises two segments Private Sector and PublicSector. Private Sector is composed of 37 Local companies and 2 foreign company.National Insurance Company Limited (NICL) is the only direct insurer for publicsector.

Allianz-EFU Health insurance company was set up as the first Specialized HealthInsurance Company in Pakistan.



INTRODUCTION

� Products Providing by EFU General Insurance Limited.

� Motor Insurance Travel Insurance

� Marine Insurance Health Insurance

� Property Insurance Personal Insurance

� Miscellaneous Insurance All Risk Insurance

� Aviation Insurance Guarantee Insurance

� Marine Hull Insurance Third Party Liability Insurance

� Cash in Transit Insurance Medical Expenses Insurance

� Cash In Safe Insurance Theft Insurance



INTRODUCTION

PURPOSE OF STUDY

The purpose of study is to find out the solutions of the obstacles which influenced toincrease and availability of insurance. And also try to describe insurance industry tomake people aware about insurance.

RESEARCH OBJECTIVES

This report is to highlight the obstacles of General Insurance to the development of Pakistan¶s Economy, the complete working environment of the insurance industry, themacro and micro factors affecting the big insurance operators and their functions.

Any person new to the Insurance business can also comprehend this report as it first

explains the basics of the Insurance then the actual topic of ³Obstacles facing by EFUGeneral Insurance Ltd´ to give the reader a background about the Insurance Industry.



INTRODUCTION

Research Methodology

Information Sources

The information has been sourced from various sources like EFU General InsuranceLtd, Adamjee Insurance Co Ltd, NJI Insurance Company Limited, Askari InsuranceCompany Limited, Reliance Insurance Company Limited, Books, Newspapers, Industryportals,Government Agencies, Trade associations. Monitoring Industry News anddevelopments and trough questioner.

Analysis Method

The following analysis methods have been used: Ratio Analysis, Historical Trend Analysis, Judgmental Forecasting and Cause and Effect Analysis.



GENERAL INSURANCE INDUSTRY

INDUSTRY

Both life and general insurance business has made reasonable progress sincePakistan came into being, particularly with respect to premium income generation.

The Insurance Association of Pakistan (IAP), which is the representative body of theinsurance companies writing non-life business, has compiled tariffs for all classes of insurance.

Although insurance premiums have increase by 11% in 2010 compared to 2009, itreflects only 0.31% of Pakistan's GDP. This shows very low penetration of

insurance Market as compared to India and Sri Lanka. It is anticipated that

insurance penetration in future will rise at 0.05% per year and it will touch more then1.0% in 2014.

The Market Share of top four companies (including NICL) is 72%, while remainingcompanies share the balance of 28%.




Particulars Number % of Total

KSE Listed Companies 2010 660 100

Listed Insurance Companies in(SECP)

39 5.909




Rank Insurance Company Premium Written(PKR Billion) Market Share

1 Adamjee Insurance Company Ltd 10.2 25.30%

2 EFU General Insurance Ltd. 9.7 24.06%

3 National Insurance Company Ltd 5.5 13.64%

4 New Jubilee Insurance Company Ltd 3.56 8.80%

Sub Total 28.96 71.8 %

Others 11.36 28.2%

Grand Total 40.32 100.00%

(Year 2010)




2010 2009 2008 2007 2006

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

Total Premium

2010 2009 2008 2007 2006 20050

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

Private and Goverment Insurance Company Premium

Government Sector

Private Sector

f i g u r e i n

' 0 0 0 '




Pakistan Economy & Insurance Contribution of GDP

Contribution of GDP

Developed countries are receiving the assistance of friendly system of insurance but we

are still living with the conventional approach. Pakistan Insurance Industry Contribution toGDP is 0.31%. Luxembourg has highest contribution to GDP, which is 54.42%. In 2010Total Premium of insurance industry of Pakistan was $ 949 Billion, while India holds $43,032 Billion. Premium of World Insurance Market has increased by 75% in the lastdecade, also growth of Pakistan insurance industry for the same period is increasedrapidly.



PROBLEM AND PROSPECTS

� Lack of awareness about Insurance knowledge and important aspects by thecustomers and also lack of good Communication between customers and insurers.

� Non appropriate Marketing Strategies of insurance companies about client'sinsurance needs and requirements

� Religion Bindings / Limitations.

� Poverty in the Country

� Instability of Political Environment in Pakistan.




� Unavailability of Reinsurance Coverages.

� High Cost of Reinsurance Coverages.

� Natural Disasters like Earthquake & Flood etc.

� Unawareness about the claims settlement procedure.

� Lack of funds and resources and support from the Government to train the salesforce.




Natural Disaster

Natural disasters are happening more often and having an ever more dramatic impact onthe world in terms of both their human and economic cost. While the number of lives lostdeclined in the past 20 years²800,000 people died from natural disasters in the 1990scompared with 2 million in the 1970s²the number of people affected has risen. In the

past decade.

Kashmir quake claims 88,000 lives

The earth only shook for 50 seconds on the morning of 8 October 2005. But that wasenough to make hundreds of schools Banks and Collages in Kashmir collapse,obliterating a whole generation in many places

Kashmir and parts of North Pakistan were devastated when the magnitude 7.6earthquake struck at 8.52 local time on 8 October 2005. The tremors lasted for 50

seconds, causing the collapse of some 200,000 houses and razing entire towns andvillages to the ground. With 88,000 fatalities, approx. 200,000 injured, and more thanthree million homeless, the Kashmir quake ranks second only to the December 2004tsunami as the worst natural catastrophe of the past decade. A generation of youngpeople was almost completely wiped out when hundreds of schools collapsed.




Political Instability

F actors affecting operations of insurance companies

In my view, the problem faced by any business or industry is lack of investmentconfidence. To build this, there is need for stable political climate and smooth law and

order situation. Unfortunately for Pakistan, after the horrifying event of the assassinationof Mohatarma Benazir Bhutto, and Insurance Companies got more then 10 billion lossesand also the investment climate has deteriorated, loosing investors' confidence. Theevent of 27 December, 2007 and the political instability post March 2008, changed thebusiness climate in Pakistan, and gave a major hit to Pakistan economy. Yet, theinsurance market grew at a rate of 10%, mainly

Competitors

There is a few competition within the non-life insurance sector in Pakistan as there arearound 39 non-life & life insurance companies. The promulgation of insurance ordinancein 2000 and subsequent regulatory changes strengthened the regulatory and supervisoryinfrastructure for NLI companies. For instance, enhancement in paid-up capitalrequirement improved the equity structure and reduced the number of non-profitablecompanies.




Availability of Reinsurance coverage :

The number of general insurance companies have been on a continuous declineover the last three years ² from around 55 to 42 last year and 39 presently,including 37 local and 2 foreign companies. While these 39 companies managed to

improve the collective gross premium by almost 15 per cent from around Rs 10.9billion in 2009 to Rs 12 billion in 2010.

The underwriting results of most of the companies from Pakistan for 2009 & 2010 andfor three quarters ended, at 30 September, 2010, were not quite satisfactory. Manycompanies suffered from either large losses or a multiple risk losses, resulting in anunsatisfactory bottom line to the reinsurers.

The commissions were either reduced or were put on sliding scales. The ProfitCommissions were deleted. Loss participation clauses were tightened and in many

cases the Reinsurers refused to give required proportional capacity.




Reinsurance Cost

Continuous losses has increased reinsurance cost for Pakistan Insurance Industry.Pakistan Insurance Industry has appropriate coverage from reinsurers but keepeffecting losses to reinsurers. If we have coverage of reinsurance so its very

expensive its completely favor of reinsurers.



CONCLUSION ANDRECOMMENDATIONS

� In order to get better Reinsurance Support from abroad the political environmentshould always be certain in the country so it effects the positive image on the other countries and as result every Reinsurers will definitely agree to provideReinsurance Support with maximum required coverages and low cost/price.

� Eventually, the government should eliminate the reinsurance duties, and thereinsurance remittance should be free of cost i.e. without any cost so the insurancecompanies can be able to purchase the reinsurance supports with requiredcoverages and with low cost/price.



CONCLUSION ANDRECOMMENDATIONS

� By adopting the appropriate marketing strategies insurance industry can bedeveloped and can solve the most problems. First companies should know whatexactly customers want to purchase insurance and what kind of coverages arerequired or needed.

� Nevertheless, this can be proposed or suggested to the government to reduce theinsurance taxes as much as possible (should be maximum 5% to 10% only) so thepeople can be able to purchase the insurance products with low cost/price withdesired coverages.



Study on Lack of Awareness about Insurance

with Reference to EFU General Insurance Limited

THANKS

study on lack of awareness about insurance with reference to efu general insurance limited

Documents