Takaful - Malaysia: Rural market key to takaful growth
Source: Middle East Insurance Review | Jun 2016
Malaysia’s Islamic insurance industry is set to double its growth rate this year as takaful operators focus on selling cheaper policies in rural areas, according to the nation’s takaful body.
The number of policies will rise by 10% to 5.05 million in 2016, compared with 4.3% growth in 2015 and a 1% estimated expansion of non-Islamic business, Mr Ahmad Rizlan Azman, Chairman of the Malaysian Takaful Association, said in an interview with Bloomberg in Kuala Lumpur. Insurers entering the microtakaful market and the liberalisation of commission structures are the biggest drivers, he said.
Around a quarter of Malaysia’s 31 million people live outside of cities and government efforts to boost the country’s insurance penetration rate to 75% by 2020 from 55% are supporting demand.
“Growth prospects still remain positive just by the virtue of the fact that the takaful base is smaller relative to the overall insurance industry,” said Mr Ahmad Rizlan, who is also CEO of Etiqa Takaful.
There were 12.56 million non-Islamic insurance policies in Malaysia at the end of 2015, according to data from the association. Growth in takaful has pulled back from as fast as 8.3% in 2013.
This is due to the “slow expansion and development of agency distribution and the lack of awareness and understanding about takaful among consumers and their unwillingness to make the switch from conventional”, said Mr Mohamed Hassan Kamil, Group Managing Director of Syarikat Takaful Malaysia.
The industry needs to improve distribution channels if it is to meet its goal of increasing the number of takaful policies to 8.5 million by 2020, said Mr Ahmad Rizlan. A new set of rules on commissions and allowing sales without advisory requirements will make achieving the target easier, he said.