2022 is considered the year of Takaful growth development and the strategic framework of digital Takaful transformation. Digital Takaful transformation is the process of changing how Takaful business leverages technology, people and processes to improve business performance and embrace new business models. This transformation is cultural in nature and affects all elements of the business including sales, marketing, Shariah compliance, operations and customer service and is typically accompanied by a move to modern cloud technologies.
Review of 2022
In the beginning of 2022, there were awareness events and workshops on the Takaful business because COVID-19 had a strong impact on the Takaful industry in Africa, leaving many unanswered questions about the sector’s full-year performance. Despite the difficult economic situation, the pandemic also revealed some positive effects such as a growth in awareness about the benefits of Takaful and the acceleration in digital Takaful transformation.
In March, the Moroccan Supervisory Authority of Insurance and Social Welfare granted a license to Wafa Takaful Insurance, a subsidiary entirely owned by Wafa Assurance, to carry out family, investment and general Takaful activities. The new entity has started Takaful insurance operations with three Takaful products in both General and Family Takaful.
In July, the 9th African Islamic Banking & Takaful Summit was held in Johari Rotana, Dar-es-Salam, Tanzania. The purpose of this event was to explore the untapped Takaful insurance market for socioeconomic benefits of the African region. The banking and Takaful industry of Tanzania and the surrounding areas had actively participated in the conference to gain ample knowledge of the Islamic insurance sector and solutions to the escalating problems of society. Among the issues discussed in this conference was the issue of digital transformation of Takaful operations.
Gambia, Tunisia, Algeria, Kenya and Egypt stand among African countries where Takaful insurance is witnessing substantial growth. The establishment by some insurers of Takaful windows, providing at the same time conventional products that are consistent with Shariah rules and principles, has boosted this activity.
In the third quarter of the year, Noor Takaful Insurance, the pioneer of Takaful insurance companies in Nigeria, distributed a total of NGN109.85 million (US$249,360) as surplus to Takaful participants who did not make claims on their insurance contracts during the 2020/2021 financial year — Noor Takaful Insurance announced this during the surplus distribution event held at Radisson Blu Hotel in Ikeja, Lagos.
At the event, the vice-chairman of Noor Takaful Insurance, Aminu Tukur, stated that the surplus distribution came as a redemption of its pledge to Takaful participants, noting that Takaful insurance has become highly receptive among Nigerians over the last few years.
Preview of 2023
In previewing 2023, the Takaful operators in Africa need to have a strategy in deploying innovative technology for digital Takaful transformation which can be the focus of the Takaful industry leadership in 2023 as follows:
1. Develop digital skills: To succeed in the ‘new products’, Takaful operators will have to adopt technology by developing digital skills and offering new Takaful products based on P2P platforms, adapting to change rapidly. Business continuity strategies such as work-from-home arrangements, shorter product development cycles and restructured distribution channels will play a key role.
2. Digital transformation: Takaful operators will need to ramp up their digitalization efforts to create a seamless and efficient customer experience to cater to an increasingly digital consumer market. This will also enable better access to new customer segments such as young consumers and the lower income class.
3. Shariah compliance-based Takaful value: COVID-19 has reinforced the need to look more thoroughly at topics such as the enhancement of social resilience, community empowerment, sustainability and environmental protection in accordance with Shariah rules and Takaful value. Having a value-driven agenda embracing these issues can further elevate the potential growth of Takaful.
4. Higher awareness and demand: As consumer awareness of the benefits of Takaful insurance grows in Africa, most of the conventional insurance operators are applying for a license to do Takaful business from the regulator, with government budgets stretched to support recovery.
5. Incentives for learning digital skills: It is significant for Takaful operators to provide incentives for learning digital skills in order to help in building capacity in the strategic transformation for digital Takaful insurance.
The strategy can be summarized in Figure 1.
Conclusion
In conclusion, COVID-19 has accelerated the transformation of the Takaful insurance industry in multiple respects. It is the obligation of the Takaful industry leadership to drive transformational change in ESG to continue to build across geographies including the African region. It is hope that Takaful operators can achieve digital Takaful transformation in 2023.
Professor Dr Abdussalam Ismail Onagun is the co-founder and CEO at Qitmeer Smart Consultancy. He can be contacted at [email protected].