The first panel session of Day Two of the Dubai World Insurance Congress 2020 tackled the question: why don’t more customers choose Takaful?
Takaful products are a vital product for the Muslim world, but take up remains low in many markets.
Frederik Bisbjerg, chief digital acceleration officer at Noor Takaful, says that one of the reasons behind this low demand for Takaful is down to the fact that, at its heart, Takaful is still an insurance product.
“There is no doubt that Takaful is a strong proposition, but the reality is that it is a type of insurance, and people don’t want to buy insurance, because you are buying something you hope you never have to use,” he says. “So we need to find a new way of discussing Takaful products with our customers.”
And Aman Insurance chief executive Jihad Faitrouni says this perception of Takaful as just another insurance product is a fundamental issue facing the market.
“Takaful is not just insurance, it is about sharing, caring and contributing between the policyholders and the shareholders,” he says. “But unfortunately we don’t have enough alertness and knowledge about Takaful, so how can we convince someone to buy a Takaful policy when it might cost more.
“But you cannot ask a Takaful product to reduce its premium just so it is less than conventional insurance, just as you can call a Takaful bank and ask for interest. Takaful is something else, and we have to believe it is a different concept and service to conventional insurance [before we can start selling more].”
Meanwhile, Ajmal Bhatty, managing partner at Masses Global, says one of the main issues holding back Takaful products is the structure of the Takaful companies themselves, which means there is never any surplus left to share with policyholders.
To change this, Bhatty says a new approach is needed.
“We need to make people feel that there is a mutuality,” he says. “We talk about it, but they don’t feel it. But you can create a membership where they don’t pay big premiums, just become members, and then Takaful becomes all about raising the Takaful pool, segregating it, streamlining the process for shareholders, and then when claims come you spread it over all of the memberships.
“That is how you can reduce ratios, spread claims over premiums, which are much lower, and create a surplus.”
Bisbjerg agrees, but says this is not possible within the current framework of a Takaful company.
“You can’t do that with the existing company construct,” he says. “You need to create a new digital Takaful company based on those values, and that will be the method to succeed in selling more Takaful.”
And GAIF secretary general Chakib Abouziad says more needs to be done to take Takaful products back to its original value proposition in order to increase demand for Takaful services.
“The concept of Takaful in the MENA region has deviated from its original value proposition to become almost a standard offer with limited compliance,” he says. “Few companies are meeting their promise to distribute the surplus, while shareholders are proceeding to dividends distribution.
“The concept is not properly explained and promoted, and professionals should be educated to make sure they have the Takaful Mindset and act in compliance with its principles and rules.”
Faitrouni agrees: “The demand for Takaful needs to be enhanced by educating and promoting Takaful basic concepts and differentiating from the conventional market in comparison with conventional insurance companies.”