CCP Strongly Recommends Changes to Insurance Ordinance 2000

The Competition Commission of Pakistan (CCP) has strongly recommended changes to the Insurance Ordinance, 2000 to allow private companies to compete with NICL in the public property insurance market. This would ensure a more equitable market environment and potentially lower costs for the public sector. According to a set of recommendations to the government, the CCP recommended that the Pakistani insurance market transition towards an Insurance Guarantee Scheme (IGS), as operational in several other countries. This will reduce the government’s fiscal burden and bring efficiency and innovation in the insurance industry. A key area of concern raised by the CCP involves the preferential treatment given to SOEs, creating a distorted competitive landscape. The National Insurance Company Ltd. (NICL) holds a monopoly on insuring public sector assets, while the Pakistan Reinsurance Company Ltd. (PRCL) enjoys protection under SRO 771 (1)/2007. This SRO grants PRCL the ‘exclusive first right of refusal’ to acquire at least 35 percent of all reinsurance businesses in Pakistan. Similarly, the State Life Insurance Corporation (SLIC) benefits from the federal government guarantee under the Life Insurance (Nationalization) Order 1972, giving it a significant advantage over private competitors. These regulatory barriers limit market access for private insurers and constrain the entire industry’s growth potential. For instance, the Insurance Ordinance, 2000 grants NICL exclusive rights to insure public property, effectively closing off this lucrative market to private competition. This preferential treatment extends to restrictions on procuring reinsurance from foreign companies, further limiting the industry’s ability to manage risk efficiently and driving up operational costs. Additionally, the CCP calls for the State Bank of Pakistan to issue guidelines to prevent restrictive and misleading practices in bancassurance, ensuring that banks provide accurate information and fair access to insurance products. To improve insurance penetration, the study emphasizes enforcing Section 94 of the Motor Vehicles Act, of 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. One of the most pressing suggestions is the amendment of SRO 771 (1)/2007 to fully open the reinsurance market to the private sector. Other critical recommendations included:- Revising Rule 18 of the Insurance Rules, 2017, which would allow insurers the freedom to choose between domestic and foreign reinsurers, and removing the federal government guarantee on the policies sold by SLIC to create a level playing field for all players, where they may compete based on their services. Finally, the CCP recommended that, since FIO was created with the specialized mandate to resolve disputes between insurance companies and policyholders, it may 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 across the country. Additionally, rationalizing tax policies, particularly addressing double taxation on insurance and reinsurance premiums due to provincial sales tax, may also require reassessment, CCP added.