Importance of opting for insurance

Financial security in Pakistan is no longer determined by how much you earn, but by how well you can absorb shocks.

Pakistan’s weekly Sensitive Price Index (CPI) inflation was recorded at 9.12pc in the most recent reported week. For an ordinary consumer, this is a significant number. To put it into perspective, with a monthly salary of Rs100,000, an average household spends about 60 per cent of its income on essentials like food, utilities and transport. So, items that originally cost Rs60,000 will now cost an individual more than Rs65,000. Most of all, this drains their disposable income, including savings and contributions made to any emergency funds.

This is where the conversation shifts, from managing expenses to managing risk.

Inflation is just one of the macroeconomic indicators affected. Overall, the true impact of the current crises means that items often perceived as optional or long-term planning tools are now becoming essential. Chief amongst these is life insurance.

Building a solid financial buffer is essential, particularly when local and global economies experience considerable volatility from time to time

For years, life insurance has been overshadowed by more immediate financial priorities. Where the global average insurance penetration stands at 3.5pc of GDP, Pakistan has long stood at less than 1pc. Insurance is not absent because it is unnecessary; it is absent where it is needed the most. With the persistent global crises emerging year after year since the Covid-19 pandemic, ignoring life insurance has become a miscalculation that households can no longer afford.

And it’s not just about global conflicts like the 2022 Russia-Ukraine war or the current war in the Middle East. Economic volatility linked to internal factors or climate disasters like the 2022 floods that caused almost $30 billion in damages, are amongst the numerous events around us that highlight the importance of being safe rather than sorry.

In this environment, the real risk is not limited to illness or death. It is the sudden disruption or complete loss of income.

Building a solid financial buffer is essential, particularly when local and global economies experience considerable volatility from time to time. And a vital part of any resilience equation is life insurance.

While it has often been viewed only as something that holds value in the event of illness or death, life insurance has been widely misunderstood. Unfortunately, not many efforts have been made to collectively correct this perspective either.

In today’s world, having a buffer against unforeseen circumstances has become imperative. Life insurance serves as a tool that can absorb financial shocks when disposable income is most negatively impacted by savings programs. In most Pakistani families, where many families have a sole breadwinner, this pays dividends if the income stream is ever disrupted.

Pakistan’s significant insurance penetration gap means that millions of families across the country are, unfortunately, one crisis away from financial distress.

The World Health Organisation reports that 26pc of people worldwide are currently struggling financially due to the cost of their own medical care. In developing countries like Pakistan, with low insurance penetration, this percentage is even higher. A single hospitalisation has the ability to push even a middle-income family into debt, which can be compounded further in the event that the sole breadwinner passes away.

Life insurance products, coupled with health and savings components, are specifically designed to prevent such situations.

With recurring global challenges, one thing is absolutely clear. Economic shocks are no longer isolated; they are increasingly interconnected. Fuel price increases can be caused by an international conflict countless miles away, which can lead to inflation, depreciated currencies, and lower household disposable income.

Climate events disrupt agriculture, affecting food security and rural incomes. Health emergencies strain both public systems and private finances. In this context, insurance is no longer about just protecting an individual or their family; it is about systemic stability.

Despite its obvious importance, insurance adoption in Pakistan has been marred by two significant barriers: firstly, a lack of awareness and secondly, and more importantly, a lack of trust.

Simultaneously, there is a need to drive consistent and transparent public education campaigns. Insurance can no longer be positioned simply as an expense that is at the bottom of the “importance” tier. It has become a basic component of financial planning, equally as important as savings and investments.

Another important aspect to address is that in emerging economies, income streams have become irregular, and most people are unable to build financial buffers. In such cases, traditional insurance products remain ineffective and impractical. Therefore, innovative solutions are required to tackle the problem.

Micro-insurance is a prime example. Offering low-cost coverage tailored to underserved segments with low household incomes, this product has demonstrated its ability, globally, to extend protection to millions who would otherwise remain uninsured. In Pakistan, where a significant portion of the population remains part of the informal system, such models can make a significant difference.

Building a financially resilient society is not the responsibility of the insurance industry alone. Regulators, technology suppliers, policymakers and financial institutions must work together to achieve this.

The private sector should invest in innovation and trust-building, while governments must view insurance as a vital component of economic stability. The objective should be to offer significant protection that aligns with customers’ changing demands, rather than just selling policies.

The writer is the managing director & CEO of Jubilee Life Insurance Company Limited.

Published in Dawn, The Business and Finance Weekly, April 27th, 2026