Takaful is often seen as way to help increase insurance penetration among the masses but affordability has proven to be a big obstacle in the industry's growth.
Several speakers alluded to this at the Takaful Rendezvous 2019 in Kuala Lumpur yesterday, suggesting that both insurers and takaful providers have to find a way to make protection more affordable especially in emerging economies.
According to a comment made during a Q&A session, in the context of Malaysia, current takaful contribution rates would need to fall by as much as 50% if the industry really wished to bridge the massive protection gap.
In response, Takaful Malaysia’s CEO Sri Mohamed Hassan Kamil while chairing a panel discussion among C-suite leaders, said, “Something has to change to increase affordability for consumers.”
The panel had earlier discussed multi-channel distribution and digital transformation as enablers for growth in the segment. Another dimension that was raised was aligning takaful to sustainability, seeing how takaful is a natural fit for the ESG agenda.
Islamic Financial Services Board’s (IFSB) secretary general Dr Bello-Lawal Danbatta believes that takaful operators should play a leading role in looking at ESG issues and deliver a value-added proposition to society beyond just profits.
“Climate change and disaster recovery are important issues of the day and the takaful sector can play an important role in delivery social-based protection,” he said.
Takaful holding its own in Malaysia
In his keynote address earlier in the day, Bank Negara Malaysia’s assistant governor, Adnan Zaylani Mohamad Zahid, pointed to the need to integrate social finance into takaful in order to make protection more viable for consumers.
“The takaful proposition of risk sharing is unique based on the underlying premise of mutuality, and this could be seen as an alternative to disrupt the risk transfer model,” he said.
In order to do that, he urged takaful companies to optimise digital technology to relieve some of the pain points among consumers, and to be fully plugged into the digital eco-system.
Since, 2017, takaful operators in Malaysia have been offering a suite of pure protection, medical and other products through the direct digital channel. While majority of takaful sales still comes from the top two traditional channels – agency and bancassurance – digital distribution has contributed to greater accessibility to takaful products in the market.
It has in part contributed to the double digit growth in Malaysia’s takaful segment in the first six months of this year, as revealed by Malaysian Takaful Association chairman Muhammad Fikri Mohamad Rawi.
He said that general takaful business grew by 16.4% in the first half of this year to MYR1.6bn ($380m), while family takaful registered 29.6% growth to MYR3.3bn.
The two-day Takaful Rendezvous 2019 is organised by Asia Insurance Review and sponsored by ReMark.
*A more detailed report of the event will be published in the November 2019 edition of Asia Insurance Review.