In a strategic push to reform Pakistan’s healthcare and insurance ecosystem, the Securities and Exchange Commission of Pakistan (SECP) has formally urged the Federal Board of Revenue (FBR) to remove sales tax on health insurance. The recommendation aims to expand access to affordable healthcare by eliminating tax burdens that inflate the cost of insurance products, particularly for individuals.
The SECP made this call in its newly released report titled “Healthcare Ecosystem in Pakistan,” which offers a detailed analysis of the country’s healthcare landscape, the role of health insurance, and the systemic inefficiencies that hinder its accessibility and growth. The report forms part of the SECP’s broader five-year vision, “Journey to an Insured Pakistan,” launched in December 2023, which outlines key operational reforms to grow the insurance sector and reduce the country’s out-of-pocket healthcare expenditure.
Drawing attention to the minimal reach of individual health coverage, the report reveals a startling gap: as of December 31, 2023, only 1 percent of the gross written premium in the health insurance sector comes from the individual or retail market. This translates to just 31,000 individuals being covered, compared to 6.5 million under corporate or group insurance plans. This disparity, according to the SECP, is worsened by the sales tax applied to health insurance, which disincentivizes individuals from purchasing policies due to increased cost.
The Insurance Reforms Committee of the Ministry of Commerce has echoed this stance, highlighting that taxes on health insurance not only raise prices but also reduce affordability for the population at large. The report identifies that without corrective measures, the high cost of insurance will continue to burden citizens and stall the sector’s growth.
In evaluating the challenges, the SECP cites multiple issues plaguing the industry: escalating healthcare costs driven by inflation and currency depreciation, inflated billing from private hospitals, delays in claims processing, lack of product innovation, weak monitoring of underwriting practices, fraudulent claims, inconsistent third-party administrator practices, and underinvestment in digitization and automation. These factors have collectively contributed to the persistent financial losses suffered by health insurers in Pakistan.
Despite healthcare being constitutionally recognized under Article 38 and globally prioritized under the UN Sustainable Development Goals, Pakistan continues to lag behind in financial protection. According to the World Health Organization’s Global Health Expenditure Database, the country’s out-of-pocket health spending stands at 47 percent—significantly higher than neighboring economies such as Sri Lanka (40 percent), Malaysia (38 percent), and China and Indonesia (both 33 percent).
The SECP’s report provides a forward-looking roadmap inspired by global best practices, focusing on five core areas: product innovation and inclusivity, administrative conduct, pricing and underwriting reform, regulatory oversight, and private-sector engagement. It emphasizes the need for a value-based insurance ecosystem aligned with universal health coverage ambitions.
In his statement accompanying the report, SECP Chairperson Akif Saeed emphasized the importance of integrating primary healthcare systems with universal coverage mechanisms, calling for collaboration between public and private stakeholders. Commissioner Insurance Mujtaba A. Lodhi also advocated for a holistic, nationally coordinated strategy to drive sustainable change and increase health protection across all segments of society.