Across the developing world, insurance penetration has been slow to take off in a measurable way. This is particularly true in the Middle East and Asia where despite favorable population demographics, insurance penetration and uptake rates continue to remain lower than projected despite the resilience of many of the Middle Eastern and Asian nations to the economic slowdown.
Takaful has gone a long way towards bringing greater financial inclusion to many of these countries, by bringing a previously untapped market into the fray.
However, low insurance penetration remains an indication that insurance coverage may not yet be a priority for many individuals and that they have not yet been made fully aware of the benefits of such coverage despite its numerous advantages, in particular those offered by Takaful.
The Middle East, particularly the UAE, is a good example of low overall insurance penetration, despite the higher than average number of insurance and Takaful providers.
Much of the growth in such markets has been dominated by government-led mandatory coverage policies. For example, the Takaful industry has continued to be bolstered in the GCC by the implementation of such mandatory third party motor and health insurance requirements.
This solid Family Takaful income continues to underpin the growth demand and underlying financial basis for most of the GCC’s Takaful operators.
According to Dubai Islamic Insurance and Reinsurance Company (AMAN Insurance), the UAE’s travel insurance market is poised to grow by 40% in 2012. “The country’s travel insurance market has demonstrated key vibrancy despite the effects left behind by the global economic crisis,” said Hussein Al Meezan, CEO and managing director of AMAN Insurance.
According to Hussein, one of the main reasons for this continued growth is the recent development in making travel insurance a compulsory aspect of securing a travel visa to many countries, particularly in Europe, thus increasing the appeal of the UAE to many visitors.
The first sign of this introduction of mandatory travel insurance in Malaysia comes from the members of the Malaysian Association of Tour and Travel Agents (MATTA). From the 1st March 2012, all outbound tickets booked through a MATTA associated travel agent must purchase mandatory travel insurance whether they are travelling by air, land or sea.
Mohd Khalid also pointed out that mandatory travel insurance is nothing new and has been compulsory for those performing the Umrah and Hajj pilgrimages for some time.
Specifically designed Hajj and Umrah travel packages have generally been bundled with some form of Takaful coverage and have gone some way towards boosting Takaful’s perceived image as more than just thinly veiled insurance policies with Arabic phrasing, thus boosting its Shariah compliant credentials, with most policies specifically tailored to Muslim pilgrims travelling to and from Mecca.
However, such policies are not universal and will not attract a non-Muslim demographic to a specific Takaful vendor. Mandatory travel insurance policies offered by a Takaful operator on a universal scale would do a great deal to highlight the accessibility of Takaful products to a wider demographic. — SW