Wealth management channels are proving to be the next target for Takaful companies as their customer bases grow and the industry matures, offering an increasingly sophisticated range of products and services for individual clients.
The Takaful industry has done exceptionally well in 2011, seeing a lot of growth based on industry numbers. Performance of the sector as a whole widely supports the view of an expected growth figure of around 20% per annum, believing it to be a fair measure of what the industry can achieve over the coming years.
The Islamic wealth management industry is one of the leading torchbearers of the financial services industry, continuing to expand rapidly despite the recent financial situation. Today, Islamic wealth management has evolved significantly and offers considerable opportunities for innovation and global growth. Several providers have now diversified their offerings beyond equities and real estate towards a focus on structured products, multimanager funds and Takaful.
The market for Muslim consumers is increasing and the need to cater to this growing population is being tackled by all industries. The spectrum of services has grown for the Islamic finance industry and this implies that the requirement of value-added services for customers has also increased.
Islamic financial products offer new opportunities for institutions to address previously unexplored consumer and business segments. Institutions offering Islamic financial services have increased in number and availability thanks to a growing demand by certain segments of the world’s 1.3 billion Muslims for Shariah compliant products broadly covering wealth creation, preservation and, last and most importantly, the distribution of said wealth in accordance with the provisions of Shariah law.
The Islamic finance industry is at a crossroads and is expected to continue to show resilience in the face of a challenging economic outlook. The industry offers a high growth market potential but lacks sophisticated wealth management products. Financial planning is another area that has grown in importance, creating a new window of opportunity for the Family Takaful business. As family wealth has increased so has the desire to allocate some of that wealth to future generations.
Wealth management divisions in banks are now starting to include a suite of Family Takaful-linked investment products for both lump sum and regular savers. Hence Islamic savings, education, marriage and retirement plans that combine investments with protection benefits have started to become attractive. More banks and Takaful operators, particularly in the GCC, are now embracing a segmented approach offering tailor-made solutions based on the customer’s lifecycle needs, and in accordance with the individual’s risk profile.
According to Winston E Jeyaprakash, the deputy chief executive of Malaysia-based Bank Simpanan Nasional (BSN): “The Takaful market is proving to be highly lucrative, and in areas of low penetration it is allowing for a greater level of penetration and financial product uptake.” Jeyaprakash goes on to add that: “BSN’s customer profile is such that we give precedence to Takaful products as out of our customer base of more than seven million customers, 70% are Muslim.”
The Takaful industry already provides a wide range of products that are protection-cum-savings, with suites of investment products, non-linked and General Takaful. However it is widely agreed that there needs to be further enhancement of the saving and protection needs of customers and based on their financial requirements. Such products also provide additional income streams.
While offering a fairly comprehensive range of products, Azim Mithani, CEO of PruBSN Takaful, believes that with Takaful there remain a number of avenues and clear opportunities that the industry has yet to explore that will enhance the current range of benefits on offer. Mithani refers to this as lifecycle support; in order to cater for the “growing demand for financial planning for retirement, education and healthcare”. — SW