C Consumer confidence in what we offer is the key. Takaful operators need to be credible both technically and on a Shariah basis. Innovation is needed but often this word is hollow, used merely as a slogan in advertisements than actually demonstrated. There needs to be more investment in technology and a better use made of it to distribute through all forms of channels ensuring a high quality service. The use of e-Commerce is a must to attract a bulk of the customer segment. Bancassurance is another cliché but if a bancassurance customer remains just as confused after the sale then this rapid outreach heightens the reputational risk both for the institutions involved and the industry at large.
Some of the areas that can give Takaful operators an increased market share and greater visibility are: – Think of the basics, why there is low penetration of insurance, especially in life insurance amongst Muslims? The answer used to be that ‘insurance is haram’. That should not be the case anymore. And if it is, then the Takaful industry is not doing enough to get the message across.
Remember, ‘Takaful’ is insurance that people can relate to.
The essence of this central message should be delivered correctly and understood properly.
T he Takaful industry is in a rapid phase of expansion. Several new providers have been established during the last 3 years. In addition to the US and European markets, other important markets include Saudi Arabia, Iran, Pakistan, Malaysia and Indonesia.
The Takaful industry has been successful in distributing products through its agency sales force, direct channel, e-commerce and to a limited extent via certain retail banks. However, more investment is needed in terms of R&D, product innovation, the alignment of product packaging with customer convenience, more effective customer segmentation, the development of a suitable individual customer fact finding toolkit, enhancing overall customer service standards, and making the consumer experience a more rewarding one. Product customization for the different bank channels (Retail, Wealth Management, Private Banking), customer referrals and gaining brand loyalty are important critical success factors.
For Family Takaful linked investment plans, an open architecture investment platform is important for the retail banking channel. Clearly the ability to tailor suitably diversified risk reward investment portfolios, select top quartile performing funds from major international brands and control defined portfolio risk levels are powerful drivers for the retail value proposition. A dynamic fund select model is needed to generate alpha for a given risk budget.
Product packaging, customer convenience, customer care and transparency are also important catalysts to increase the share of the Takaful business across multiple distribution channels.
There is some convergence between Socially Responsible Investing (SRI) and Takaful products. Furthermore, the Shariah certification and ongoing compliance monitoring with high ethical standards has favourably impacted transparency, disclosure of different terms and conditions, charges and frequency of reporting.
The Takaful industry is well poised to expand cross border i.e. across national markets. Going forward, the right products mix, high service standards and pragmatic use of technology can make the Takaful operators an international competitive alternative to the conventional insurance business.
Partner FWU Group
A wareness of the Takaful concept is now widespread but operators are maybe not differentiating themselves sufficiently from the conventional market for policyholders to see the philosophy of Takaful evident in the products they buy and service they receive. Many mutuals and co-operatives undertake a number of community and social projects, and have active policyholder participation in their decision making, this sense of ownership can lead to a greater affinity with the customers, assist product development and provide a competitive advantage.
Takaful operators can learn important lessons from the practices of the established conventional insurance market, the internet, bancassurance, affinity marketing etc are all distribution channels which should be explored actively by Takaful providers. In addition Takaful has a unique selling point which is the religious obligations of the muslim policyholder, this can be utilized especially if the Takaful operator is providing competitive products and an efficient customer service. In Sweden, ICMIF member Folksam is selling its products through a co-operation with the Swedish Muslim Council (SMC). The SMC inform the Muslim community of Folksam`s products and their alignment to Islamic doctrine through the local mosques and Imams, this agreement benefits the objectives of both organizations and demonstrates how a partnership with a local or national Muslim institution could provide an effective distribution and marketing channel.
As a federation of co-operative and mutual insurers we recognize the value of sharing experiences and practices between our member organizations, while operating in completely different environments, they still face similar challenges and are able to find common solutions through open communication. The Takaful operator needs to work closer together and exchange ideas and dialogue for overcoming difficulties in their local markets, there needs to be greater focus on the similarities between the various operators rather than the differences.
Senior Vice President ICMIF
T akaful, being new, has the opportunity to “do it right the first time” and not “repeat the same mistakes”. Given the typical incentive structure inherent in the insurance industry (and the financial services industry, in general), it would be fair to characterize it as an industry driven by a sales culture.
The secret to increasing sales lies in establishing quality and effective distribution capabilities with emphasis on a quality, well-trained agency, disciplined market research and expert capability for other distribution methods – all co-ordinated into a holistic market positioning for the company.
But this does not diminish the other critical functions like product design, pricing, customer service, administration and investments, etc. All of these are equally important. But compared to other “material” or “commodity” product-based businesses, distribution plays a uniquely critical role in the insurance business.
Having effective distribution capabilities means that typical sales incentives pays strict, consistent attention to proper hiring, training, sales practices, illustrations, disclosure, transparency, compensation structuring, etc. However this particular functionality is fraught with potential problems and abuses. This has been demonstrated over and over again in the US and UK, and other mature markets. The typical response has been to impose regulatory restrictions and requirements, further reducing quality and effectiveness.
Understandably for a developing industry, it appears that there has been great emphasis and effort invested in the development of products, Shariah compliance, regulatory compliance and their administrative capabilities. This focus has resulted in the key executive positions at the Takaful companies to be filled with individuals with such relevant background. In some cases, the appointments may be from the ranks of the bureaucracy of the parent organization.
With few exceptions, individuals strong in product, administration, compliance and service, do not make strong marketing, sales, distribution leaders. In addition, different distribution channels require their own unique experience and skills. Underestimating this is a mistake we have seen made repeatedly.
It is critical to include the right, seasoned leadership in the senior management ranks, establish a quality distribution system and to ensure that the sales compensation structures encourage the desired behaviours. In addition, life insurance products are generally complex and it takes a well-trained advisor to provide proper assessment, advice and explanation to customers. If this is absent, there is room for incompetence, misrepresentation or abuse in the sales process.
Given these demands there is a tendency to favour an agency type system. The economics of this system can be demanding and, in the Western countries, we have seen the eventual abandonment of the lower and middle-income markets by such distribution systems for this reason.
Accordingly, “alternate”, “supplemental” distribution systems have come up. These include direct mass marketing, telemarketing, bancassurance, affinity marketing, internet, etc. It is worth remembering that each of these distribution channels has its own distinct expertise and a good agency leader is not necessarily, and invariably is not, the right leader for the other distribution channels. And it is critical to have co-ordinated, comprehensive market positioning using all these distribution mechanisms.
Executive Director Princeton Advisory Group