The Competition Commission of Pakistan (CCP) has called for significant amendments to the Insurance Ordinance, 2000, advocating for private companies to compete with the National Insurance Company Limited (NICL) in the public property insurance market. This move aims to create a more equitable market environment and potentially reduce costs for the public sector.
In a comprehensive set of recommendations to the government, the CCP proposed transitioning the Pakistani insurance market towards an Insurance Guarantee Scheme (IGS), similar to those in operation in several other countries. This transition is expected to alleviate the government’s fiscal burden while enhancing efficiency and innovation within the insurance industry.
A major concern highlighted by the CCP is the preferential treatment afforded to state-owned enterprises (SOEs), which distorts the competitive landscape. NICL currently holds a monopoly on insuring public sector assets, while the Pakistan Reinsurance Company Limited (PRCL) benefits from protection under SRO 771 (1)/2007, granting it the ‘exclusive first right of refusal’ to acquire at least 35 percent of all reinsurance business in Pakistan.
Similarly, the State Life Insurance Corporation (SLIC) enjoys a federal government guarantee under the Life Insurance (Nationalization) Order 1972, giving it a significant edge over private competitors.
These regulatory barriers restrict market access for private insurers and limit the industry’s growth potential. The Insurance Ordinance, 2000, grants NICL exclusive rights to insure public property, effectively barring private competition from this lucrative market. Additionally, restrictions on procuring reinsurance from foreign companies further constrain the industry’s ability to manage risk efficiently and increase operational costs.
The CCP also urged the State Bank of Pakistan to issue guidelines to prevent restrictive and misleading practices in bancassurance, ensuring banks provide accurate information and fair access to insurance products.
To enhance insurance penetration, the CCP emphasized enforcing Section 94 of the Motor Vehicles Act, 1939, which mandates Motor Third Party (MTP) insurance for all vehicles.
To address these challenges, the CCP has put forth several key recommendations to foster a competitive insurance market. Among the most pressing is the amendment of SRO 771 (1)/2007 to fully open the reinsurance market to the private sector. Other critical recommendations include revising Rule 18 of the Insurance Rules, 2017, to allow insurers the freedom to choose between domestic and foreign reinsurers, and removing the federal government guarantee on policies sold by SLIC to create a level playing field for all competitors.
Additionally, the CCP suggested that the Federal Insurance Ombudsman (FIO), created to resolve disputes between insurance companies and policyholders, should cover all insurance companies, both public and private, operating in Pakistan. A single ombudsman could streamline the complaint resolution process and ensure a consistent approach to handling issues nationwide. The CCP also recommended rationalizing tax policies, particularly addressing double taxation on insurance and reinsurance premiums due to provincial sales tax.
