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Expert Views From The Asian Takaful Conference
Co-existence with Conventional Insurers
Mr Ng Nam Sin, Executive Director of the Financial Development Department of the Monetary Authority of Singapore (MAS):
Takaful can readily co-exist with and complement the conventional financial system. Takaful operators must be nimble and more efficient to respond to constantly-changing market profiles. State-of-the-art technologies should be applied to support operations on a real-time basis.
Singapore, because of her small domestic market, is taking steps to promote wholesale activities in Islamic finance, such as wealth management, capital markets and retakaful.
Level Playing Field
Dr Bassel Hindawi, Director-General of the Insurance Commission of Jordan:
A regulatory framework to ensure a level playing field is imperative, to tackle industry challenges. These challenges lie in mobilising long-term funds, improving risk management capability based on mutuality and exploring untapped Islamic markets. The framework will help establish standards to resolve differences between takaful and conventional insurance.
There should be continual assessment of existing IAIS Insurance Core Principles and their applicability to takaful.
Major Challenges
Mr Mustapha Hamat, CEO of Islamic Banking and Finance Institute of Malaysia (IBFIM):
The takaful industry can do more in areas like capital, expertise, credibility, investment avenues, marketing, product innovation, research and development. It can also push for more supportive legal frameworks to promote orderly growth. Because of globalisation, takaful operators should expect more joint-venture activities, standardisation, and mutual leveraging of specialised expertise with conventional market players.
Need to Develop Strategic Alliances
Dr Saleh Malaikah, Chairman of Tunisia-based Best Re:
There is a real need to develop strategic alliances and identify synergies between Islamic operators at the international level. A comprehensive legal framework and regulatory environment that bring out innate competencies of Shariah compliance is essential to the development of takaful.
Management and Shariah Training Equally Needed
Mr Feda Salameh, Head of Training at Bahrain-based Solidarity:
Takaful operators have to ensure that their products are offered on a competitive basis with conventional products, and that the industry is regulated locally for best practices that conform to international standards.
Training in Islamic finance should not be limited to the managerial, financial and technical field but also extended to appreciation of Shariah principles.
Banking Partners
Mr Sohail Jaffer, Partner and CIO of the financial services group, FWU:
Islamic savings, education and retirement products can be effectively retailed via banks for low-cost entry into a new consumer market segment. Banks offer takaful operators an avenue to expand and retain customer relationships over a long period while capitalising on a rapid sales process through an Internet-based point-of-sale (POS) and administration system. Leveraging on a bank’s reputation also maximises synergy.
Education Is Key
Mufti Barkatulla, Shariah scholar and judge at the UK Islamic Shariah Council:
It is important to address the community’s perceptions of Islamic financial products. Public and private entities should organise roadshows and direct mailing to educate the public, imams, community leaders and secondary decision makers.
Companies operating in a yet-to-mature market should explain features that make theirproducts Shariah-compliant. Since takaful in general is a niche product, it requires niche distribution channels.
Transparency
Mr Hassan Odierno, a consultant with Mercer Zainal Consulting:
The critical success of takaful insurance lies primarily in the takaful operator’s choice of model. Furthermore, takaful agents must be trained both in insurance concepts as well as in Shariah principles. In the case of solvency, rovercapitalisation deters market participation and encourages risky practices.
There should be transparency in Shariah council decisions and determining the level of regulatory oversight.
Takaful Features
Mr Syed Moheeb Syed Kamarulzaman, Managing Director & Chief Executive Officer, Takaful Ikhlas:
Incorporating a donation feature (tabarru) can modify an insurance contract to make it Shariah-compatible. A conceptual framework for takaful takes into account contributions that are commensurate with risk, contributions from participants, collection of invested funds, claims processing that compensate for participants’ loss, a start-up fund and interest-free loan (qard hasan) if funds are insufficient to cover losses.
Leveraging on IT
Mr Abhijit Banerjee, SVP and Head of Insurance Business Solutions Group at 3i Infotech Asia Pacific:
Takaful operators can compete with conventional insurers by addressing new internet-based consumer behaviour patterns. Mass marketing via emails would be efficient as would e-campaigns and mobile phone-based advertising.
Players have to innovate, reduce time-to-market, aggressively use virtual channels to keep costs low and reach out to a larger audience. The IT system adopted, fully using web and mobile technologies, must be a business driver for the insurer, not just a transaction processor.
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