Takaful’s ability to attract a previously untapped demographic is being constrained as an increasing number of Takaful entrants begin to compete with a shrinking pool of potential customers. The low lying fruit remains bountiful for operators as uptake remains strong, but these are customers that are still being attracted at a basic level through an agency-driven sales force.
The issue remains: can the Takaful industry maintain its existing momentum and growth trajectory? What impact will the increasing number of Takaful players entering the market have on the industry at large? Will these new entrants add to the value of the Takaful industry or will they further saturate what is becoming an increasingly competitive landscape? All these questions are coming to the fore as the Takaful industry begins to take an introspective look at itself.
Takaful need not be a static or limited avenue of products marketed solely at the Muslim consumer. By engineering and marketing products to the mass market, promoting the inherent benefits of Takaful above and beyond those offered by conventional insurance and offering a personalized service above and beyond the industry norms, Takaful can move beyond its current religion-focused constraints. The ethical basis and inherent pooling of Takaful is still not yet fully understood by the market at large and needs to be rectified. The interest in Takaful is there; however, this interest is still not being fully capitalized upon, particularly in the General Takaful space.
An over-concentration on profitable business lines, particularly Family Takaful, has meant that Takaful operators are losing ground to the conventional insurance business as they are achieving significantly lower returns on their equity. A proportion of the poor profitability can be put down to a refocusing of Takaful operators’ business activities in light of the challenging operating environment. However, Takaful operators have yet to be significantly challenged in their operations, having up till now been able to easily and effectively tap what has proved to be a lucrative segment of the market. This has allowed Takaful businesses to operate in relative isolation from the larger insurance industry and to limit direct competition.
Ultimately the Takaful industry needs to create a more significant business case for itself, focusing on increasing its underwriting profitability and maintaining operational performance. Many of these operations have yet to achieve a critical mass and are thus struggling to maintain a scale of operations, meaning efficiency is compromised.
With such a large untapped demographic out there, we are still yet to see a Takaful operator emerge as a regional player in both the Gulf and Southeast Asia. This can be attributed to an increasingly competitive global landscape but the fact remains that the opportunities available at a regional level are significant and remain largely untapped.
The Takaful industry is well placed to capitalize on the niche that it has carved out for itself. Inherent issues still remain within the industry: such as size and scale of individual operators, and competition from established conventional players entering the market.
Takaful contributions are on the rise across many products and in certain markets. However, the Takaful industry is still lacking the levels of professionalism required to compete on the global playing field, with a significant disadvantage in the number of qualified personnel and an over-reliance on the agency model to drives sales and uptake. Levels of competency and service quality should be on par with those in the developed world and the industry needs significant focus to successfully increase its capacity-building initiatives.
The industry’s rapid rise and expansion is good for its perception as a valid alternative to the conventional insurance coverage. However, this rapid expansion should not be allowed to occur at the expense of its operational abilities and service quality. — SW