An exclusive interview of Mr. Saifuddin Zoomkawala, Managing Director EFU General Insurance Ltd.

Tell us something about your professional background?
After graduation in Business Administration, from IBA Karachi, I joined EFU in 1964 and worked in various capacities of non-life insurance.  In 1975, EFU Group decided to establish a joint venture insurance company in United Arab Emirates, and I was posted as General Manager of Credit & Commerce Insurance Limited,Dubai. EFU General as a parent company, promoted EFU Life Assurance Limited in 1992, when the Government of Pakistan allowed the private sector to establish life insurance companies. After the sad demise of our Chairman Mr. Roshen Ali Bhimjee in 1998, I was invited back toPakistanin 1989, to take over the post of Managing Director and Chief Executive of EFU General Insurance Limited. Since then I have been holding this position.

In 2000, EFU group signed a joint venture agreement with Allianz Group of Germany to establish a health insurance company in Pakistan. This company is the only specialist company in the country, which underwrites health insurance business for individuals and families. I was elected Chairman of this company on its establishment.

Give a brief account of EFU and how does it work?

EFU General Insurance Limited was founded in 1932. EFU Life enjoys a market share of more than 50% of the private sector life premium income.  The company is in the business of providing a full range of General Insurance products and services customized to meet the varied insurance coverage needs of a wide spectrum of business and industrial clients and individuals. Besides providing traditional covers like Fire, Marine and Motor, EFU also provides specialized covers like Machinery Breakdown, Consequential Loss of Profit, Home Protection, and Specialized Burglary covers etc.

The most important aspect of our operation is that we have created a separate Risk Management Team and an Engineering Group who work closely with clients to identify various risk exposures and then provide specific insurance. The shares of the company are quoted onKarachiand Lahore Stock Exchanges of Pakistan with over 60 branches throughout the country.

Our vision is to be the preferred company for our customers, shareholders and employees. We do business of the highest integrity with great clients and do not compromise our principles.

What are your insurance policies?

EFU General has a market share of more than 30% in non life insurance market business. The company provides a full range of General Insurance products as per need of the commercial / Industrial clients and individuals. EFU also provides custom made covers as per clients need and requirement.

Basically we have two forms of insurances, insurance of a product (object/ material) and life insurance of human beings. Product Insurance is if a person or company owns some product (e.g. car or house or goods) and wants to insure it against any possible harm (e.g. theft, fire, accident etc.). There will be some fixed payment in the form of insurance fee that the person or company will pay to the insurance company and in-turn the product will be insured. Now if any harm is inflicted upon the product, the insurance company bears the cost according to its insurance. The life insurance of a human is a relatively newer concept as compared to product insurance. In life insurance, a person keeps on making a certain amount of payment for a certain number of years (we have 20 years normally) and it covers three areas.

1.    If the person dies within those 20 years, his family (beneficiaries) receives a handsome sum of money, already decided at the time of signing the insurance contract.

2.    If the person does not die within those 20 years, a handsome sum of money is given to him as profit incurred on the yearly installments of payments he had been making to the insurance company.

3.    In some cases, in addition to one of the above, if the person falls ill, his medical expenses are covered by the insurance company during those 20 years.

What are your strengths?

The company has a motivated team of insurance professionals who work with devotion and commitment. They support the clients, by providing after sale services and work with genuine zeal and enthusiasm.

EFU is continuously investing in human resources by inducting young talent and grooming them by providing training and exposure at various levels. EFU believes in family values and each and every employee is treated as a family member.

EFU General has been adjudged amongst top 25 companies nine times by the Karachi Stock Exchange.  It has also received the Corporate Excellence Award of Management Association Of Pakistan ( MAP ) in the Insurance Sector 2006 and Corporate Excellence Certificate 2007 and 2008, Insurance Sector. It is also a recipient of Brands of Year award -2006, 2007, 2008 & 2009 which is the best Brand performance in the category of General Insurance. This is awarded by The Most Authentic and Acclaimed Brands Award in Pakistan.

Euro money adjudged EFU as the Best Insurance Company inPakistanin pricing, claims resolution and product range, in the year 2009. The company has been rated as AA (outlook, as stable), by the JCR-VIS Credit Rating Company Limited.

Are you intending to start any insurance services in any other (new) area?

You may be aware that EFU is a brand name for insurance in Pakistan and it is the only group in the country, dealing solely in insurance. As our prime focus is on insurance, we have plans to explore new opportunities in other areas at the right time with the due spade work.

When do you think that insurance sector will achieve its saturation point?

In my opinion, the insurance sector has just kicked off and has a huge market to tap inPakistan. The relevant fields are: Personal lines insurances life and non- life, Takaful, Health, Agriculture, Livestock, and Credit etc.

What are the major threats in insurance sector?

One of the major threats that we face are the misconceptions regarding insurance. People claim that it is not allowed according to a baseless argument which states that by purchasing insurance we cease to be good Muslims because according to some unknown authority Allah does not like insurance.

Insurance does not mean selling of intangible goods; it is in fact safeguarding your tangible goods.

The other issue is capital constraints and the slow down in the economy which affected the insurance industry in Pakistan. Turning back the pages of history, we find nationalization in 1972 that has created a great hindrance. Only a state-owned insurance company was operating on a monopoly basis which could not exploit the strength of the insurance market in Pakistan.

Another problem is the government taking over the insurance business. The duty of the government is to maintain law and order, provide basic infrastructure and opportunity of jobs and livelihood to the citizen. It should provide electricity, gas, roads, basic education and health. The government should abstain from taking part in this business.

The development of effective enterprise risk management program can help to protect insurers from losses, reputation damage and provide a platform for strengthening governance and decision-making.

What is the main reason people are reluctant in opting insurance policies in Pakistan?

The level of literacy ratio as compared to our neighboring countries India, Bangladesh and Sri Lanka has hampered the growth of insurance penetration in Pakistan. Low level of education has put the impression on the mind of the common man that insurance is against the principles of Islam, which is not true, as insurance is not a wagering contract.

Further, disparity in the level of income and absence of middle class, as compared to neighboring countries are also main reasons for low penetration.

In 2005, the government promulgated a law which allowed dedicated Takaful companies to start writing business to address the perception that conventional insurance is not allowed in Islam.

Recognizing that new companies would take some time to build up their distribution channels, on account of limited resources, the government had decided in principle to allow existing conventional insurer to write Takaful business through window operations. Unfortunately, we are still waiting for the Government for the permission of window operations.

How do you compare different insurance companies in Pakistan and their performances?

ADAMJEE, EFUand NJI are the major players in Pakistan with market share of 70%. Other 25 companies which are active share the remaining 30%.

In view thereof, there is a need to develop and strengthen the existing medium and small companies to promote healthy competition in the market and in turn project the image of the industry. This presents a wake up call for expansion and development of insurance sector inPakistan. There is an extreme need for diversification of development of insurance business inPakistan. All concerned may start thinking to step forward for the development of the insurance sector in the overall economic development ofPakistan.

How does insurance sector play role in the economic development of the country?

A well-developed and efficiently working insurance sector can play an important role in the economic and social development of a country. The insurance industry also contributes in the development of other financial institutions and markets. Like many developing countries, the insurance sector in Pakistan has shown low incursion. The size of the insurance industry is relatively smaller in Pakistan as compared to other regional countries such as India andSri Lanka, as discussed earlier.

However, the Pakistan Insurance Industry has stood up to the modern challenges of underwriting huge projects and have efficiently handled the major disaster of 27 December 2007, having paid claims of billions of rupees, to the satisfaction of all concerned.

What measures should be taken to improve the insurance sector in Pakistan?

There is a tremendous potential for development of insurance sector in Pakistan, the following should be addressed:

• Awareness      in insurance products, specially, demands for Shariah Compliant Takaful      Insurance.
•  Personal lines of business:  Home, Car, Travel, mobile Phone, Credit      Cards etc. in co-operation with banks.
•  Agriculture Insurance, (crop, livestock,      dairies and poultries) to provide covers to farmers, for calamities like natural      disasters, diseases etc.
•  Insurance education needs to be given top      priority by all Universities.
•  Public Private Partnership should be      introduced with facilitation support by the Ministry of Commerce,      Government of Pakistan for strengthening insurance sector in the country.

What advice would you like to give to entrepreneurs who want to start business in insurance sector? 

Insurance is a service industry and offers intangible products in the shape of promise for compensation on the occurrence of a contingency. To provide effective service an entrepreneur venturing into the insurance business will need the financial support but most importantly the human capital. In Pakistan, unfortunately there is great dearth of good insurance technicians. Currently, most of the business done in insurance sector is through the personal contacts and many times the important basics are ignored in acquiring the business.

Keeping in view of above facts, there is a need to tape human resources before venturing into insurance sector, as on strength of this the other requirements could be fulfilled without any hassle.

Insurance has a huge potential, as the economy is now showing signs of recovery. Further, the penetration of insurance ratio on GDP is lowest in Pakistan as compared to our neighbors India, Sri Lanka and Bangladesh.

Today, the population of Pakistanis of 170 million plus. With the investment in education sector, the young generation is being educated and employed. This will in turn increase rapidly the growth of urban middle class. I feel that personal lines insurance will be a key for growth in near future.

In addition to above, penetration by insurance sector in rural areas is negligible while more than 70 percent of our population is confined to villages. Currently, agriculture loan insurance is provided to selected banks by insurance companies, which is small in percentage to the huge potential provided by agriculture.