ISLAMABAD: National Database and Registration Authority (NADRA), on the recommendation of Technical Committee on Insurance, formed under the National Financial Inclusion Strategy (NFIS), has agreed to reduce the cost of its verification for microinsurance policies.
This will apply to the microinsurance policies sold through mobile, internet, digital and non-digital modes. The cut in the NADRA verification cost will reduce the premium for microinsurance policies, making them affordable for the low-income segments. It is expected that this will pave the way for the development of the microinsurance segment thereby achieving the objectives of the NFIS.
The government of Pakistan had launched the National Financial Inclusion Strategy (NFIS) to enhance financial inclusion across all parts of the financial sector. Accordingly, the NFIS governance structure was established in the form of NFIS Council, chaired by the finance minister, and the NFIS Steering Committee, chaired by the State Bank of Pakistan (SBP) governor.
In its first meeting, the NFIS Steering Committee resolved to form seven technical committees to focus on dedicated areas, one of which is the Technical Committee on Insurance (NFIS-TCI), which is co-chaired by the Insurance Association of Pakistan (IAP) and Securities and Exchange Commission of Pakistan (SECP).
The committee decided to promote the microinsurance segment by providing a conducive operating environment.
Microinsurance is small size insurance aimed at those segments that remain uncovered since the insurers are reluctant to serve them due to the limited commercial viability of microinsurance products.
The cost of NADRA verification was a special concern since it is significant in proportion to the value of microinsurance policy and the premium although it is eventually recovered from the end consumer.
Therefore, in April 2017, the NFIS Technical Committee on Insurance had taken up the matter with NADRA to rationalise the verification cost for microinsurance policies. After extensive deliberations, NADRA has agreed to offer services at a reduced rate of Rs 10 per verification. Earlier the rate was Rs 45 per verification.
Apart from the above initiatives, the NFIS Technical Committee on Insurance (TCI) has already completed the development of standardised insurance glossary for the insurance sector in Urdu. The SECP, on the recommendation of the NFIS-TCI has also rationalised the Enhanced Due Diligence (EDD) requirements for digitally distributed insurance through the issuance of directives for corporate insurance agents and technology-based distribution channels.
The insurance policies will now be subject to simplified Customer Due Diligence (CDD) requirements only and not the EDD.