Islamabad: The Competition Commission of Pakistan (CCP) has asked the government to end the monopoly of the National Insurance Company Limited (NICL) with respect to insurance of public property.
The CCP on Tuesday issued a policy note to the federal government recommending it to amend Section 166 of the Insurance Ordinance, 2000, which currently prevents competition in the non-life insurance market.
The commission has pointed out that the Section 166 (3) of the Insurance Ordinance provides that all insurance business relating to any public property or to any risk or liability appertaining to any public property, shall be placed with NICL only and shall not be placed with any other insurer.
The National Insurance Company Limited is the only state-owned company, under the administrative control of the Ministry of Commerce, which is involved in non-life insurance business in the country.
The CCP observed that this statutory monopoly of NICL harms competition in the insurance market. In this case the government is the direct consumer and is denying itself the benefits of competition such as improved quality of service and competitive premiums.
The CCP’s policy note further states that the monopoly position of NICL has emerged not because of business acumen but through the creation of statutory barriers that reduce competition.
The NICL, the commission said, has a share in total industry assets of 22 per cent but its share in Gross Written Premium was only 12pc.
“Such preferential treatment for NICL creates de facto subsidies and leaves no incentive for NICL to maximise its efficiency,” the CCP has said.
Statutory monopoly of the National Insurance Company Limited limits opportunities for potential competitors because legislative exclusive rights create barriers to entry for the new entrants.
