Pakistan’s insurance penetration rate, the ratio of total premiums to Gross Domestic Product (GDP), remains among the lowest globally. As of 2024, insurance penetration stood at around 0.7% of GDP, highlighting the marginal role of insurance in the national economy. This rate is starkly below global averages and far behind peer economies such as India and China, whose penetration levels are significantly higher. In absolute terms, the insurance market recorded gross premiums of approximately Rs 677 billion in 2024, up modestly from Rs 631 billion in 2023, reflecting a 7% year-on-year growth. However, this nominal increase has not translated into meaningful financial inclusion or resilience for the majority of the population. Total industry assets expanded from about Rs 2.9 trillion to Rs 3.6 trillion within the same period, driven partly by rapid growth in the takaful (Islamic insurance) segment. Despite these asset and premium gains, coverage breadth remains constricted. Less than 4% of Pakistan’s population holds life insurance, with just 7.9 million policyholders out of a population exceeding 240 million. Vehicle insurance, a legally mandated coverage for all registered vehicles, is particularly under-enforced. Of 31 million registered vehicles, only about 900,000 carry third-party or comprehensive insurance, leaving over 97% of vehicles uninsured, exposing drivers, pedestrians, and public resources to significant financial risk. Agricultural insurance coverage is even more negligible, affecting only a small fraction of the farming community. This pervasive underinsurance raises an important strategic question: Can financially challenged groups be expected to purchase insurance as a conventional retail product like their wealthier counterparts? The answer, grounded in socio-economic realities, is no. For low-income and bottom-of-the-pyramid segments, insurance must be treated as critical infrastructure and not a discretionary financial product. Insurance, in its purest economic function, transfers risk from individuals, businesses, and governments to specialized institutions. When risks are retained rather than transferred, losses must be absorbed out of savings, income, or public funds, often with devastating consequences. The unprecedented 2022 floods, for instance, inflicted economic damages estimated at more than $30 billion, yet less than 1% of the affected assets were covered by insurance. This protection gap meant that the vast majority of recovery costs were borne by the state, donors, and affected households, exacerbating fiscal stress and slowing economic normalization. For low-income and bottom-of-the-pyramid segments, insurance must be treated as critical infrastructure and not a discretionary financial product. Beyond natural disasters, low insurance uptake exposes households, businesses, and vehicle owners to everyday risks, traffic accidents, health emergencies, property damage that can easily erode financial stability. In advanced markets, vehicle insurance functions as a critical mechanism for financial protection and risk management, complementing other forms of coverage. In Pakistan, however, structural deficiencies and weak enforcement of mandatory motor insurance leave both vehicle owners and third parties exposed to significant losses. Structural limitations are not merely low awareness or distrust but are central to the insurance sector’s stagnation. In Pakistan, the industry largely serves an urban elite with expensive, conventional products, while donor-funded micro-schemes operate temporarily and disappear with subsidy withdrawal. Neither model builds systemic resilience nor integrates insurance into the broader economic fabric. Without structural embedding, insurance remains peripheral, a product for those who can already self-insure, rather than a shield for those who need it most. The economic rationale for repositioning insurance as infrastructure is compelling. Risk is universal: every farmer, worker, business, vehicle owner, and government entity faces uncertainty from health, environmental, or economic shocks. The costs of inaction are immense, recurrent climate events, road accidents, and income disruptions impose multi-billion-dollar losses that are seldom covered by risk transfer mechanisms, leaving governments to shoulder unplanned fiscal burdens. Insurance accelerates recovery by providing timely liquidity, preventing asset erosion, and enabling faster economic rebound after shocks. Moreover, insurance promotes financial equity, enabling vulnerable populations to protect what little they have and convert exclusion into economic participation. The protection gap is particularly glaring in disaster-exposed sectors and vehicle coverage. Although Pakistan ranks among the most climate vulnerable countries globally, it still lacks a public disaster risk insurance program or widespread enforcement of vehicle insurance compliance, apart from other insurance segments which are necessity of daily lives. Consequently, losses from floods, accidents, and earthquakes are absorbed directly by households, the government, or donors rather than managed through structured insurance mechanisms. Embedding insurance as critical infrastructure requires integrating it into social protection, agriculture, health, and climate adaptation policies. Governments should prioritize risk financing strategies that incorporate both public and private instruments, including reinsurance, catastrophe bonds, and indexed disaster risk coverage. Subsidies for vulnerable groups should be framed not as welfare but as preventive fiscal management, ensuring that small shocks do not escalate into systemic economic crises. Integrating insurance into national planning entails insuring public assets, establishing ambitious coverage benchmarks, and forging public-private partnerships to extend protection across sectors. Vehicle insurance enforcement, digital distribution, and financial literacy campaigns are critical to expanding coverage among both urban and rural populations. Modern regulatory frameworks, including risk-based capital standards and international reporting compliance, will further strengthen market resilience and transparency. Discussions on inclusive economic growth often emphasize credit and savings, enabling investment. Yet the ability to recover from shocks, including traffic accidents, natural disasters, and income disruptions is equally crucial. Without insurance, even well-conceived development gains remain fragile. Every rupee invested in risk transfer infrastructure can save multiple rupees in post-disaster relief and reconstruction, making insurance not optional but indispensable for economic stability and resilience. Until Pakistan elevates insurance, including vehicle, life, health, and agricultural coverage from the margins of financial inclusion to the heart of national planning, recovery from disasters and daily financial shocks will remain slow, ad hoc, and costly. Embedding insurance as infrastructure ensures that the nation does not just rebuild, but bounces back stronger, faster, and more equitably. The article does not necessarily reflect the opinion of Business Recorder or its owners.