Malaysia:Takaful looks to lead the way in sustainability

The pandemic has accelerated a shift towards a more 'values-based' approach to takaful backed by a greater commitment towards the ESG and sustainability agenda, said Malaysian Takaful Association chairman Elmie Najas at the virtual Takaful Rendezvous meet yesterday.

Mr Elmie added that members of MTA have successfully developed a framework that seeks to further ingrain sustainable business practices and values within the takaful businesses.

The Values-based Intermediation for Takaful (VBIT) initiative, which is set to be launched at the end of this month, will thus put Malaysia’s takaful sector at the forefront of sustainability and set a benchmark for the wider insurance sector. “It is expected that this framework will amplify the takaful value proposition to realise the intended outcomes of Shariah in its conduct and offerings, going beyond the minimum Shariah requirements,” he said.

The VBIT framework would also serve to guide the Malaysian takaful industry in drafting the sector’s roadmap over the next few years, thus allowing the industry to build up the necessary capacity to ensure consistent and effective implementation of the VBIT initiative, said Mr Elmie.

Scaling up through digitalisation

The digital transformation journey which the takaful sector undertook prior to the pandemic has put the industry in a good position to adapt to changes that have been brought on by the COVID-19 crisis.

“We have seen an explosion in remote sales capability and the use of customer apps to service customers. The COVID-19 situation has significantly accelerated opportunities for digital engagement and digitised delivery for the industry,” said Mr Elmie.

The takaful sector has found it hard to achieve scale for more than a decade and to overcome the advantage that conventional insurers have in terms of distribution. But technology may well help the industry overcome such barriers. “It has given the takaful industry a new capability to now reach and service customers across physical locations or boundaries. With more and more customers being more comfortable with online transactions and face to face interactions via video calls, the industry is entering an exciting period of change and technology will be the key driver of growth,” he said.

Despite the challenging conditions, Malaysia’s family takaful segment last year registered a 7% increase in new business contributions to MYR6.59bn ($1.6bn). Meanwhile, the general takaful business recorded a 4.4% increase in gross contributions to MYR3.31bn with motor takaful accounting for two-thirds of premium volume. Interestingly, the online channel grew by 22% last year to MYR213mn in gross contributions with motor takaful sales responsible for 96% of online sales.

Source: Asia insurance review