Significant growth has been forecast for the Takaful industry in 2012. However, the industry has yet to prove that it can successfully achieve enough critical mass to be entirely self-sustaining, especially after some significant retrenching post-financial crisis. So how do operators go about achieving significant advancements in the Takaful industry, and move beyond their initial base to the next level?
Opportunities abound within the industry, as current Takaful uptake accounts for little over 1% of the total global insurance market. However, Takaful operators need to ensure that they have strong foundations in place to sustain financial performance. Ghassan Marrouche, the general manager of Takaful Emarat commented: “The Takaful industry, like any other growing industry, is facing challenges like increasing competition, the need for skilled professionals, a regulatory and prudential framework and Shariah compliant investment opportunities which need to be addressed. Takaful operators must focus on improving the quality of their product offerings.”
Raising awareness of Takaful and encouraging investment discipline will help to sustain the rapid growth expected in 2012. One of the central challenges for Takaful is to raise product awareness beyond simply adherence to religious principles and towards the inherent benefits that cooperative insurance can offer its participants. Understanding at the corporate level also remains problematic as far too few companies realize that there are products on offer to meet their requirements and as a result fail to request a quotation.
In addition, overall insurance penetration is also significantly lower than in many emerging Takaful markets, an indication that insurance is not a priority for individuals unless it is made mandatory through government regulations.
Another central issue is a shortage of experts with significant competency in Takaful to create alternative and viable products; hindering future innovation in an industry desperately requiring fine tuning to the needs of those that it is hoping to serve. Creating quality products that identify with the customer base as a whole will allow Takaful to permeate the market, spreading beyond its current theology-focused boundaries.
Islamic banks and Takaful operators have experienced rapid growth in recent years and we see this trend continuing as there is significant potential for product development and service enhancement in the industry. According to Marcel Omar Papp, the head of re-Takaful at Swiss Re: “Takaful operators must focus on underwriting quality, cost management and investment discipline as the current volatile investment environment presents a challenge to overall financial performance.”
Takaful has a number of attributes that need to be identified and capitalized on, particularly in light of the continuing global financial crisis. So far the articulation of the attributes and value proposition of Takaful has not taken place and needs to be introduced to a wider audience and to markets beyond Malaysia and the GCC.
Takaful has garnered a better image perception primarily due to its perceived ethical dimension and transparent nature gifted to it through its adherence to the principles of Shariah. By increasing consumer education and product knowledge, the industry can capitalize fully on these inherent features to move beyond Muslim targeted approaches to sales and uptake.
Takaful is still looking for its own paradigm shift, allowing it to operate on its own plane without subsidy or slanted market and regulatory support.
Essential to achieving this momentum and to take the industry to the next level will be the creation of simple, easy to understand products that avoid unnecessary technical jargon and heavy reliance on Arabic terminology. A customer should be drawn to the inherent qualities offered by Takaful. By raising the expectations of what a Takaful provider can offer, the industry can begin to compete on a higher service level. In creating distinguishing features between service providers you gain customers, as it is this principle of choice and quality of service on which people base their selection of provider. — SW