In terms of insurance penetration, Pakistan ranks 83rd in the world. Our GDP stands at 26th in the world which indicates that we are lagging far behind in this sector. Saad Nissar, CEO TPL Direct Insurance gives his insight about insurance and the related auto insurance sector of Pakistan.
By Ismail Dilawar
Please tell us about your professional background?
I completed my MBA (Honors) as a marketing major from the Institute of Business Administration in Dec 1999. I joined TPL Trakker on January 5, 2000 when it was launched as Trakker Pakistan (Pvt.) Ltd. or simply “TPL”. Introducing a completely new technology to the market was quite a colossal challenge. However, this became the driving force that inspired everyone at TPL to become a part of this “Hi-Tech Crusade” against the menace of vehicle crime in the Pakistani society. I started my career as Product Manager. Subsequently, I was promoted to National Sales Manager in 2004 and by 2006, to the post of Executive Director. I moved out of TPL to join the now famous “TDI” or “TPL Direct Insurance” as its CEO in 2009. TDIL, a subsidiary of TPL, had come into existence in 2005, as the first and only Direct Insurance Company, another first for Pakistan and adding to our list of “Tech Supported Efficient Servicing” ventures. Both companies, TPL & TDI are now public listed companies.
Tell us about the history of TPL Insurance and its operations.
Founded in 2005, TPL Direct Insurance started its operations on July 31 when it acquired 76% stake in Jupiter Insurance. We did extensive risk profiling by developing an exclusive software to ascertain insurance rates based on customer’s profile, driving habits, vehicle’s usage and whereabouts etc. To ensure smooth and transparent operations, competent insurance professionals with an open mind were hired. We also established a 24-hour Help Line by outsourcing it to TRG to ensure speedy claim process. Back then, we had an office each in Karachi and Lahore and now, we have physical presence in all major cities of Pakistan serving approximately 25,000 retail customers.
Tell us briefly about your products/services. How much workforce do you have?
Well, auto insurance (motor insurance) predominantly constitutes our entire range of products and services as 98 % of our business stems from it and the rest on travel and home insurance. We are launching Health insurance in April, 2013, Insha Allah and are very confident with its market potential. Our workforce includes 116 people with a forced attrition of 10% annually.
Do you have any new products in the pipeline?
We are working to launch a Takaful Widow this year. Health insurance on the retail side is another venture which will be materialized in the next 2-3 months. We are constantly thinking about new ways to facilitate our customers. We feel that the ambit of insurance services should be enhanced to include more creative classes of insurance. Take for example the victims of suicide and other bombings that have to run after the government for their compensation. If every Pakistani can be insured against this eventuality then not only will the claim process be streamlined and made efficient but on a larger scale, every citizen of this country can benefit from it. This is the sole reason why in developed economies, insurance is as big as banking. Both are considered irreplaceable pillars of any economy or developed nation. For this plan to work, the government will have to create a Victim Fund which will be insured by a pool of the best life insurance companies in Pakistan. This will make timely compensation payments to legal heirs of the deceased. The government will have no role in this. The families of the victim will contact us instead of the government for the compensation announced for them. This, will increase insurance density by manifolds from the current meager 0.8 %.
What are the major issues being faced by TPL Direct Insurance?
The challenges we face mostly are related to our products of travel and home insurance, where we feel that people by large have zero awareness of their benefits.
We also face many operational challenges in our quest for being the best in customer services and in order to maintain our speedy processes. To deal with this, we continuously invest in better IT systems, training / adequate compensation of human capital backed by relentless pursuit for innovation in both products and processes.
Who are your direct and indirect competitors and what is your market share?
Our competitor is anyone who makes a person think whether or not to invest in insurance. Out of the Rs. 10 billion auto insurance industry, our market share stands at Rs 700 million or 7% making us the 4th largest (on earned basis) auto insurer in Pakistan (as of September 2012).
Can you describe the concept of direct company in the insurance sector?
The concept of a direct insurance company signifies the direct link of the customer with the insurance company by removing the intermediaries and channel agents. This holds true for both customer acquisition (sales) and customer retention (claims). Conventionally speaking, insurance customers are primarily in contact with insurance agents /company’s local or regional branches and these agents are their regular means for assistance in acquisition, renewal and more importantly the claims processing and settlement. As it is, there is a perception in the market that insurance settlement is a tedious task full of hassle. Through our Direct Insurance we, as in the company itself, are there to assist the customer round the clock, transparently and efficiently. We take pride in lodging the claims in 60 seconds, processing them in 45 minutes and providing settlements of claims in Maximum 7 days. Today we live in a fast paced world where everything is required instantly; instant coffee, instant transactions, instant services & ATMs, online banking, etc. so how can you expect such a market to wait for a few days for a survey or settlement of claim. “Life Uninterrupted” is what TDI is all about.
Where does the insurance business stand in Pakistan, especially in the automobile sector?
The insurance density in Pakistan stands lowest in the region at 0.8 % of the country’s Gross Domestic Product (GDP), much below India’s 4.6 % and Malaysia’s 4.3 % and is even lower than Bangladesh. We are ranked 83rd in the world in terms of insurance penetration, while our GDP stands at 26th in the world, indicating immense potential that is yet to be tapped by this sector. The life insurance, companies have shown great potential and are growing at a consistent and enviable CAGR of 25 to 30% bringing more and more households under the banner of insurance. However, the non-life insurance, which is growing nominally at 3 % a year, should be scrutinized and then revitalized. Last year, the total insurance premium stood at Rs 124 billion, of which, life insurance firms contributed Rs 70 billion and non-life Rs 54 billion.
The auto insurance industry has not flourished in the way it should. What do you think are the reasons behind this?
It is not only the auto insurance in particular, but the non-life insurance in general, that has not flourished the way it should have. Firstly, relying mostly on captive and bulk business, historically the retail customer has been serviced at an arm’s length and thus no one ever developed this segment in its true spirit. Lack of awareness of claim procedures / laws, make people skeptical about insurance. Moral Hazards / white collar crimes kept the insurance companies on an edge whereas due to stricter claim procedures, genuine customers also got crushed under the burden of bad underwriting or simply bad customers. The Islamic angle further complicated this industry’s faith as most of the market believes it to be “Un-Islamic”, which signaled a growing potential for Takaful Products. Sadly, the existing Takaful Operators can hardly tap any potential in this country due to their limited size whereas we are not allowed Takaful Window. More focus on investment profits than underwriting bottom line also lead to “Motor Insurance” being treated as the ugly duckling of the general insurance market. There was more glory and money in chasing factory, marine and fire insurance as compared with Motor, Health or Home, since they provide for huge amounts of premiums from single accounts and thus to their business, motor insurance contributes a very small part with a really small ticket size. How will one make auto insurance profitable if the companies slash their premium rates?
Since the market treats you the way you treat your own product, our target audience never developed that undying faith in insurance, just like the top management or board of many of local insurance companies could not have faith in promoting motor. Price haggling with agents and arguments over claim settlement rocked both the insured as well as the insurer. I staunchly believe and advocate that an industry wide, cumulative effort is required. All insurance providers should bring their forces together and use various platforms and campaigns to spread awareness about insurance benefits. Even today, there is a dearth of insurance related commercials on media. Companies are more interested in B2B business and are hardly interested in B2C. This is true not just for sales but even on claims end; a centralized data bank like “ECIB” can be developed where the claim information of all customers is dumped. This information can later be pulled out by any insurance provider, before insuring the risk of any person. Like credit history, we can have insurance history of individuals / corporates / Banks and then SECP should penalize the companies that go below the allowed target criteria for insuring someone. This will not only allow people to get rates based on their own history but will also help insurance companies to incentivize or penalize a customer.
What difference has your firm made in the auto insurance sector?
Well, we took some grass-root level measures to make auto insurance profitable. First, we eliminated the agent so that we could directly be in touch with the customer. As a direct contact can only help you educate the customer on the difference between your prices and services compared to other market players and that his/her genuine claims will be solved genuinely and instantaneously. We believe in the saying “no agent no hassle” so “Go Direct”.
Secondly, we improved the claims’ processing services through establishing Claims Service Centers at the Authorized 3S workshops level. Simultaneously, we have established a 24-hour contact center which processes your claim within 45 minutes and a remarkable workshop network, primarily with authorized 3S workshop of Toyota & Honda. To avoid unnecessary documentation, which delays the clearance of claims, we take photocopies of our clients driving license and CNIC at the time of sale so that the client is not asked for minute things all the time. Moreover, the work done on 3S is definitely more reliable. These “Trakker Business Partners” as we call our 3S Dealers / workshops, have recently been given a pre-authorized limit of 20,000 to authorize and undergo any repair that falls in this ambit of 20,000 without asking us for approval. This not only increases efficiency in getting the job done, but increases loyalty of workshops and decreases cost of appointing independent surveyors for us.
Unlike, the market trend of minimum 30 days, we have fixed 7 days as a deadline for clearing the bigger insurance claims of theft and total loss. Any claim not attended beyond a certain criterion, pops up on screen automatically and stays there till attended / resolved. We have also introduced emergency roadside assistance service ‘EVAC’, under which our tow trawlers and mobile workshops are operating 24/7 to pick up vehicles having stuck up in an emergency. We are going to be imparting claim and sales services through SMS and website so that even the “calling” part is taken out of the equation as we feel it is becoming increasingly inefficient in these modern times. SMS, email and online insurance is the name of the game and we are working hard to bring the processing of 45 minutes down to 10.
In terms of business, how do you prioritize different regions of Pakistan?
Service-wise, we are present in Karachi, Lahore, Islamabad, Faisalabad, Multan and Hyderabad, while our sales team is present in almost every 3S Dealership across the country. Most of our customers are based in Karachi, then Lahore, then Islamabad and then the rest of the cities.
How do you deal with new theft techniques? What is the best way to secure a car?
The best way to secure a car is to get it insured but never do that without installing a tracking device in it. If you only have insurance, then you will lose the insurance premium, registration and any other accessory not covered by your policy. All of our vehicles (almost 92%) are covered by Ctrack device, from our parent company TPL. To deal with theft techniques is thus, the task of TPL Trakker and their South African Partners, DigiCore. Our car recovery ratio has grown to 92 % since January 2011, with the advent of anti-jammers in our tracking devices.
How do you rank different cities in terms of safety for car owners?
Vehicle theft is a countrywide phenomenon; however, Karachi & Lahore top the list of most vulnerable cities. Islamabad and Faisalabad are other places to follow.
Which other companies are you associated with?
We have formed strategic alliances with leading banks, whereby we are present on their panels for auto insurance. We are also in the process of launching bancassurance products with these banks. Our core sale comes from 3S dealerships who are our strategic partners and they endorse our auto insurance product to their walk-in customers.
What potential do you see in the market for new players? Which area of insurance sector needs more investment?
The 0.8 % insurance density in Pakistan is the lowest. In my opinion, the growth potential is the remaining 99 % which is still untapped, especially for new comers. Life Insurance, I think, is a better option for new investors because of higher return rates and acceptability of the target market.
What is your opinion on government’s regulations for this sector? Do you have any suggestions for the government?
Despite raising billions for last several years under the head of Federal Insurance Fee (FIF), the federal government is far from establishing insurance academies, the absence of which makes it difficult for us to find or nurture good insurance professionals. Secondly, Takaful Window should be granted immediately. This would increase government’s revenues on account of 16 % GST. The government should ensure free market economy especially for the service-based industry and this concept of not allowing conventional the much needed Takaful Window, is beyond my humble comprehension.
What opportunity do small investors have in the insurance business?? What advice would you like to give to new entrants?
The size of investment does not matter. For investors, micro insurance is the biggest opportunity which could be developed on the pattern of micro-financing. Non-Resident Pakistanis (NRPs), who are remitting billions of dollars every year can be targeted. The insurance firms, using the National Identity Cards of Overseas Pakistanis (NICOP), can facilitate families of Pakistanis working abroad at their doorstep and other products can also be sold through NICORPs like bank financing, vehicle purchase etc.
What remedial measures do you suggest to improve services in the insurance industry?
The insurance industry has to change its traditional procedures to make its services time-efficient and transparent. If the industry believes that we can do better in future then this must reflect in their marketing budgets and the advertisement campaigns. Most importantly, their claim services should be revamped by fronting it through a Contact Center that just don’t pick up calls, but actually goes another mile for its customers and alleviates their predicament with speed and honesty.
Where do you see this industry standing in the next five years?
I see it changing with companies joining hands to create better insurance awareness and services. We all should allocate some budget and submit it to Insurance Association of Pakistan, which will release insurance awareness campaigns directed towards insurance. Gradually, the image of insurance especially claims’ processing is improving. Charities and more community work should be done, like donating ambulances by health companies, road side assistance, fire brigades etc. by Motor Insurance Divisions and so. The agency-based culture will probably end in the next 5 to10 years or will be restricted to other classes of business whereas the direct insurance concept will be followed in letter and spirit as it is followed in the developed countries.
