Takaful has to be made more affordable, say experts

Within the context of Malaysia, 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 much more affordable for people especially in emerging economies.

“Something has to change to increase the affordability for consumers,” said Takaful Malaysia’s CEO Dato’ Sri Mohamed Hassan Kamil while chairing a panel discussion among C-suite leaders. This was in response to a comment during the Q&A session that premium rates today would need to fall by as much as 50% if the industry really wants to bridge the massive protection gap.

The panel had earlier touched on the regular discussion around multi-channel distribution and digital transformation as enablers for growth within 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 the delivery of 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, also made the point of integrating 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 of 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.

Knowing your consumer

Putting consumers at the forefront of the business is something non-negotiable in today’s context. In that regard, SCOR Asia’s managing director Vincent Shi revealed interesting insights from the company’s annual consumer survey – which is due to be released later this month.

The survey, which spans a host of markets including Asia, revealed that 57.7% of those polled believed that their life insurance product offered ‘good value for money’. In that regard, price still appears to be the main factor when buying insurance.

Respondents also said that quick policy approval was a critical factor – with 75% expecting a turnaround within 24 hours. The survey also revealed that wellness programmes and health tips were highly valued by consumers in terms of their interaction with their insurers.

Source: Asia Insurance Review