Islamic insurance is ‘cannibalising’ the standard market rather than reaching new customers
Takaful – insurance that complies with Islamic Sharia Law – is failing to reach previously uninsured policyholders, according to Arig chief executive Yassir Albaharna.
Speaking at the sixth annual MultaQa Qatar conference in Doha today, Albaharna said that rather than expanding the insurance market in the Gulf Cooperation Council (GCC) region, takaful is eating into the market share of conventional insurance products, Albaharna contends.
“Takaful in the region should be attracting the previously uninsured population. This unfortunately has not happened,” he said. “What has happened, on the contrary, is a cannibalisation of conventional insurance into takaful.”
He added that penetrating the uninsured segment of the region’s population would help ensure takaful’s success. “It is important for takaful to get its act together and really try to segment, sub-segment and target this previously uninsured population,” he said.
Albaharna also noted that insurance penetration across the Middle East and North Africa region continued to be low, at around 1.1%. But he contends that the region has everything going for it, including strong GDP growth, a growing middle class, and a favourable geographic location between east and west.
“There is no reason why the insurance penetration should not be within the 8% to 8.5% area, which is the average in the large industrialised nations,” Albaharna said. He blamed a lack of awareness in part for the continued lack of insurance penetration in the region, but he expects growth eventually.
“It just needs more stimulus, more patience and more development from the insurance companies,” he said.
Albaharna contended that, with some exceptions, there is a general lack of product innovation in the GCC region’s insurance industry, with companies typically selling standard policies.
“What is required more and more in this region is trying to look at specifics through segmentation, and trying to package policies, which has happened in the West and happened in many countries, to try and reach and infiltrate a better percentage of the market,” he said. “I have not seen this to a great level.”