Held again in Kuala Lumpur, The Takaful Rendezvous served as self-check for the takaful industry both locally in Malaysia as well as around the world. While the industry is certainly now a mainstay in the insurance world, there is room for improvement as many takaful companies mature from childhood to adolescence.
At present, takaful’s most notable successes have largely been in family takaful segment, and this year’s conference had a large focus on getting to know the rapidly changing needs and preferences of customers today.
Ms Na Jia, Managing Director of ReMark Asia, pointed out that while customers are more comfortable in accessing insurance on a direct basis, most would still appreciate having a degree of guidance when making purchasing decisions. Hence, agents and advisers still play a crucial although somewhat varied role today.
ReMark’s research findings also show consumers generally placing greater emphasis on the credibility of advice, and hence agents need to be well-qualified when offering advice.
While advisers or agents still play an important role in selling, takaful providers should not allow the sales process to be wholly adviser-led. Ms Jia noted that for companies who wish to grow consistently over the long term, the focus should be on providing what customers want, and takaful operators who get this aspect right will ultimately see their products getting better traction from consumers.
Social media and smart phones
There was also emphasis on creating a positive customer engagement via smart phones. While there are lots of data and content out there, takaful companies should move away from high quantity data to smart and relevant data and thus provide a more meaningful customer experience, she added.
In sharing about the findings from EY’s Global Consumer Survey, Mr Shaun Warren, Executive Director at EY noted that digital channels are fast reaching parity with traditional face-to-face channels – with the majority of Malaysian consumers willing to use a digital channel for their transaction.
In this regard, Malaysian consumers may be more committed to automatic renewals if they were able to transact on a smartphone or tablet, he said. Hence, he noted that digital channels should be provided to supplement traditional channels, and that takaful providers must develop stronger digital and self-service channels regardless of their distribution strategy.
Approaching consumers from multiple channels
Takaful operators looking to transform their operations should ultimately look at adopting an omni-channel approach in order to fully engage and deliver more value to customers, said Mr Warren.
Compared to banks, insurers have less interaction with customers and thus have to maximise every opportunity they get to interact – Mr Warren deems each interaction as a “moment of truth”.
In the case of Malaysia, customers have a higher frequency of interaction with their insurers compared to the global average, he said, adding these interactions presented a significant opportunity for cross-selling and upselling.
However, he pointed out that the quality of communication is important in influencing a customer’s opinion. At present, only 6% of Malaysian customers surveyed said they were very satisfied with the current quality of communication – compared to the global average of 11%.
He also noted that was a significant proportion of customers in Malaysia who were open to sharing more personal information with insurers and takaful providers in return for better premium or contribution rates.
Growing the takaful pie
Mr Ahmad Rizlan Azman, Chairman of Malaysian Takaful Association (MTA) and CEO of Etiqa Takaful, delivered an update of the Malaysian takaful market, and presented a slew of initiatives which MTA will undertake to increase awareness and understanding about takaful in the country.
On the general takaful front, he pointed out a five-year target to increase non-motor contributions from 40% to 55%. On the family takaful side, MTA has set a target of increasing penetration from 14.5% at present to 25% by 2020. During that process, it aims to double the certificates in force to eight million.
Mr Firas El Azem, Chairman of the Global Takaful Group and CEO of Takaful Re, noted that takaful volume is heavily reliant on Saudi Arabia and Malaysia. He said takaful companies in the MENA region are generally suffering from high cost ratios and need to improve their top lines. There is also a need for M&As in the sector due to excessive levels of competition.
In boosting the acceptance of takaful, he said takaful companies should continually strive to improve their quality of customer service as well as pricing. He also urged Shariah scholars to play a bigger role in explaining to Muslim masses why takaful was permissible from a religious perspective.
Growing on a sustainable path
Mr Mahomed Akoob, CEO of Hannover ReTakaful said that while top-line performance of the sector remains positive, there is still much room for growth given that about 25% of the world’s population are Muslims. Further, much of these regions consist of a young population and takaful will invariably provide access to new markets.
Mr Akoob added that takaful growth needs to be diversified as it is too reliant on Saudi Arabia, the UAE and Malaysia. Having a more diversified growth base will enable higher independence of national economic, political and social developments, and also help stabilise results by diversification of risks – both geographically and also in type.
He called for more harmonisation on a supranational basis in terms of financial regulation and standards, thus providing for higher transparency of products for the customer as well as a more sustainable basis for growth.
Exploring the commercial space
Unlike their Middle Eastern counterparts, takaful operators in Malaysia are generally more adept in writing family rather than general business. Mr Marcel Omar Papp, Head of Retakaful, Swiss Re Retakaful tried to offer a way forward that would make it feasible for both takaful and retakaful operators to begin writing commercial non-life business.
He first cited some of the challenges facing takaful players who wish to operate in this segment, including the need for dedicated capabilities in underwriting and risk selection, risk engineering, portfolio management, claims management and rating.
Mr Papp noted that retakaful operators could provide some assistance in these areas, but the commercial takaful market may not be large enough in Malaysia today for the necessary diversification in the portfolio of retakaful operators. Thus, he proposed the setting up of a Malaysian retakaful market pool to manage commercial risks in the country – supported by a technical board and a Shariah committee.
The Takaful Rendezvous 2015 was organised by Asia Insurance Review and sponsored by ReMark and EY.
Regulator urges operators to work together to boost efficiency and innovation
In his keynote address, Mr Wan Mohd Nazri Wan Osman, Director, Islamic Banking and Takaful Department, Bank Negara Malaysia, proposed ways in which takaful and retakaful players can better partner each other to achieve strategic objectives.
The proposals include pooling resources to create a centralised technology platform which helps organise and streamline operational processes.
“There are many areas that can be explored, such as the standardisation and integration of claims management processes at the industry level, that can create a more efficient mechanism to not only improve operational efficiency within companies, but also increase customers’ convenience,” said Mr Wan Mohd Nazri.
“This approach may also be cost effective as the integrated business operations industry-wide would enable the industry to conduct cost-sharing which reduces the expenses of silo-system management within individual companies,” he added.
Forming a viable digital intermediary
Mr Wan Mohd Nazri said forming a viable digital intermediary could potentially create a hassle-free customer experience, while delivering speed and accuracy for takaful providers.
“The joint development of payment system infrastructure by the banking industry is an example of how such joint efforts can yield a win-win solution for all,” he said.
New value-adding offerings
Mr Wan Mohd Nazri also urged retakaful operators to continue contributing to product innovation and enhancement, given that they are equipped with extensive data analytics and risk management approaches.
“For example, the health cover options for diabetic patients pioneered by a health insurance company in India presents a unique critical illness policy that packages family takaful coverage with wellness programmes to suit the rising needs of their customers.
“In this regard, retakaful companies may step in and actively embed such innovation in our market and embark on new value-adding offerings,” he said.
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