I always being asked by marketers with regard to pricing of takaful products whether family or general. In other words, should we be part of price war competition with others? I disagree to use pricing as sole marketing strategy. Takaful is a service industry thus price is only one of the factor for consideration. Marketers should evaluate all relevant factors prudently prior to any conclusion:
1. Pricing, of course;
2. Coverage;
3. Exclusion;
4. Underwriting flexibility; and
5. Claims TAT.
For instance, those 'cheaper' policy may contain more exclusions. More exclusions means lesser coverage and vice versa.
Underwriting can be tedious for some companies where numerous requirements need to be adhered. This may lead to lesser standard policies and more loadings imposed.
As for claims, policyholders must ensure that the company adhere to prompt and justice in claims processing. As marketer, you should conduct simple investigation on the claims TAT of competitors.
Conclusion: Cheaper should not necessary be the choice for customers.
Monday, January 19, 2009
Sunday, January 18, 2009
Agents recruitment
I just returned from regional visits to Padang and Semarang. One of interesting question posted to me was how to intensify agency recruitment. My responses to the leaders were:
1. University graduates - look for final year students and ensure that you participate in the career week program in those higher learning institutions.
2. PHK - many companies are retrenching their employees due to global economic crisis. These prospects may have sustaining power for 1-2 years attributable to their retrenchment benefits. Convince them that agency may be a good career for them as proven by many successful agents.
3. Dissatisfied agents from other companies. You may have to be extra careful to 'pinch' these agents due to regulations and sensitivity within industry.
4. Mega agency recruitment. Work together with other leaders and invite as many prospects as possible. Ideally, the program should at least attended by 1,000 prospects. If 20% sign up to become agents then there is 200 agents to be shared among the leaders.
1. University graduates - look for final year students and ensure that you participate in the career week program in those higher learning institutions.
2. PHK - many companies are retrenching their employees due to global economic crisis. These prospects may have sustaining power for 1-2 years attributable to their retrenchment benefits. Convince them that agency may be a good career for them as proven by many successful agents.
3. Dissatisfied agents from other companies. You may have to be extra careful to 'pinch' these agents due to regulations and sensitivity within industry.
4. Mega agency recruitment. Work together with other leaders and invite as many prospects as possible. Ideally, the program should at least attended by 1,000 prospects. If 20% sign up to become agents then there is 200 agents to be shared among the leaders.
How to make agents productive
Many insurers/takafuls participate in many exhibitions or expo to promote their products and companies. In doing so, they like to invite their agents to assist in managing the booth and promote sales, etc. I did not agree to allow the agents to participate without any fees or charges. Instead the company should charge them with reasonable fees where the fees will be refunded should they meet certain criteria such as achieve sales target, collected minimum number of prospects or recruit minimum no. of agents.
Similarly, for all trainings conducted by the company, the agents must pay certain minimum charges mainly to cater for the actual cost incurred such as f&b, accomodations, etc. The charges will again refunded upon them successfully making sales subsequently.
This method should be an incentive for the agents to intensify their efforts in getting sales, recruitment or prospectings. We should eliminate those who are not serious in agency business. No more free lunch for agents and we mean business in every facilities provided. Teach them to fish instead of feeding them with fish.
Similarly, for all trainings conducted by the company, the agents must pay certain minimum charges mainly to cater for the actual cost incurred such as f&b, accomodations, etc. The charges will again refunded upon them successfully making sales subsequently.
This method should be an incentive for the agents to intensify their efforts in getting sales, recruitment or prospectings. We should eliminate those who are not serious in agency business. No more free lunch for agents and we mean business in every facilities provided. Teach them to fish instead of feeding them with fish.
Family takaful agency
After 14 years in takaful industry, PT Asuransi Takaful Keluarga had decided to review their agency structure and compensation comprehensively. I had voiced my concern on the effectiveness of the agency about 1 1/2 year ago and alhamdulillah the concern had been translated into reality.
Life or family agency may comprise of 2 - 6 tiers depending on the strategy. However, my personal opinion is that the ideal is 3 tiers as proven successfully in many countries including Malaysia. Whatever it is, the management should understand the philosophy behind the tiers.
3 tiers meaning 2 leaders; 4 tiers meaning 3 leaders; etc. As long as the management understand the philosophy perfectly, there is no issue with regard to the number of tiers. To appoint someone as agency leader, he/she should be prepared to exhibit certain minimum criteria as a leader or supervising roles. He/she must be able to conduct relevant trainings for subordinate including products, selling skill, etc. Skill of basic management is also required to ensure that the team under him is effectively manage for optimum result.
As a result, the leaders are then entitle for the allocated overriding commissions upon sales made by his agents. The agents will not feel any dissatisfaction should the leader play his role accordingly.
The management should then focus on developing the leaders who will then develop their downlines. This concept is adopted in MLM or multi-level marketing organisations throughout the world.
Life or family agency may comprise of 2 - 6 tiers depending on the strategy. However, my personal opinion is that the ideal is 3 tiers as proven successfully in many countries including Malaysia. Whatever it is, the management should understand the philosophy behind the tiers.
3 tiers meaning 2 leaders; 4 tiers meaning 3 leaders; etc. As long as the management understand the philosophy perfectly, there is no issue with regard to the number of tiers. To appoint someone as agency leader, he/she should be prepared to exhibit certain minimum criteria as a leader or supervising roles. He/she must be able to conduct relevant trainings for subordinate including products, selling skill, etc. Skill of basic management is also required to ensure that the team under him is effectively manage for optimum result.
As a result, the leaders are then entitle for the allocated overriding commissions upon sales made by his agents. The agents will not feel any dissatisfaction should the leader play his role accordingly.
The management should then focus on developing the leaders who will then develop their downlines. This concept is adopted in MLM or multi-level marketing organisations throughout the world.
Indonesia: The Future Takaful Hub
Come 24th August 2009, PT Syarikat Takaful Takaful Indonesia (Takaful Indonesia), Indonesia’s pioneer shariah insurance group, will celebrate its 15th anniversary. When it was first established, the still largely conventional economic system has only one shariah insurance provider since Indonesia introduced its first financial institution, Bank Muamalat in 1991. Understandably, Takaful Indonesia establishment has created quite a stir, making a considerable impact in the insurance industry and marking the beginning of a robust and evolving market for shariah-compliance insurance provider. Today, Takaful Indonesia owns two shariah insurances, namely PT Asuransi Takaful Keluarga (ATK) which provides family Takaful and PT Asuransi Takaful Umum (ATU) which provides general Takaful. With 39 branches all over Indonesia, Takaful Indonesia has approximately 1.5 million policyholders comprising of retail and corporates. Although a respectful number, this only comprises lower than 1 percent of the population, leaving the pie still big enough for further expansion and healthy competition. Investors looking for new places to spread their wings have only to look at all the obvious cues to realise how big an untapped market Indonesia is, especially for the shariah insurance, or more aptly known as Takaful.
Reputed as the world’s fourth most populous country, Indonesia is certainly an attractive market for business ventures as business opportunities are aplenty. With 17,508 islands, it is indisputably the world’s largest archipelago, and home to approximately 230 million population, spread out from as far as Sabang in North Sumatra to Merauke in Irian Jaya. The land is rich with natural resources, with much of it remain unexploited, but more importantly, it supplies not only abundance of human capital but also provides ready market for business growth. In the present day inclination towards shariah insurance, investors cannot miss one interesting fact: almost 85% of the total population is Moslem, and that traslates to about 200 million potential customers. Based on unsubstantiated sources, it is interesting to note the fact that Indonesia has more than 3,500 high networth citizens holding over USD100 million each. While almost 70 percent of this priviledged group lives in Jakarta, the market is still very attractive in term of customers’ spending potentials. The Indonesian Gross Domestic Product was approximately USD432.9 billion based on official exchange rates in 2007. The year 2008 also promises further boost to the economy, although the 6.5 percent current economic rate may fall further due to reduced exports attributable to the global financial crisis. The Government is confident to sustain the economic growth beyond 6% in 2008 and 2009 where steps are being taken to stimulate the economic expansion using the national budget, which already reached USD100 billion in 2008.
By end of 2007, the insurance industry in Indonesia has been faring well where the industry boasts total assets worth USD20.8 billion and penetration rate of 7.2%, with an average annual growth rate in assets and net contributions of 27% and 19%, respectively. In 2007, the gross premium income of insurance industry increased by 46% from USD4.3 billion the previous year to reach USD6.3 billion. The same year also saw an improvement in the economy as the Gross Domestic Product (GDP) increased significantly. In sum, the ratio of gross premium to GDP increased from 1.57% to 1.88%.
Amidst the still largely conventional economic system, the shariah economic practices has started to evolve and gain popularity significantly within the last 5 years. However, as compared to the growth of shariah entities in Indonesia, the development of shariah insurances has been rather slow, with only five shariah insurance companies by the year 2002, including ATK and ATU. The data from Bapepam LK shows that the asset of shariah insurance in 2007 was only approximately USD202 million, or about 1.6% of the total insurance asset in Indonesia. Meanwhile, the total premium collection that year was recorded at about USD115 million, a far cry from the total national insurance collection at USD7.4 billion (inclusive social security schemes). As development of shariah insurances has been lagging far behind the conventional insurances, a gap in the market place presents itself, creating opportunities waiting to be explored.
Although new players started to flood the market, demand for shariah-compliance product is still uprising, and the market is still large enough to accommodate new players. By July 2008, there were 149 insurance companies operating in Indonesia with 46 in life, 103 in general and the balance in reinsurance. Takaful Indonesia, being the pioneer, still lead the market for family takaful as ATK is among the two full-fledged and 13 windows whilst ATU is the sole full-fledged general takaful among 19 other operators. However, compared to other countries with substantial Moslem population, the growth of shariah insurance in Indonesia is rather slower. Malaysia for instance, has only 10 % of Indonesian population, yet the total asset of its Shariah insurance has reached approximately USD2.0 billion or about 6.0 percent of total assets of the insurances and takaful industry. In terms of premium collections, Malaysia’s takaful industry has reached about USD500 million or 6.0% of total premium collection recorded for the insurance and takaful industry for year 2006. In a nutshell, there are more to be developed to further stimulate the takaful market in Indonesia and ample rewards await those who make the right moves and efforts.
As acceptance of the Indonesian society towards insurance is still low in general, efforts should be taken to educate them about the necessity of having an insurance coverage and to familiarize them with the shariah concept of insurance. In most countries, the progress of shariah insurance and the growing demand for shariah-based products are driven by the society’s awareness towards the importance of insurance and the availability of choiced products. Familiarisation through product awareness will help create needs as people realize what they are lacking and learn how to fulfill the gap. Most of the victims of tsunami and earthquake in Aceh, Nias, Yogjakarta, Bengkulu and even those affected by major flood in Jakarta past few years, had neither family nor general insurance coverage, according to a study conducted by local insurance industry. Therefore, the shariah insurance companies, together with the government and Moslem scholars, should shoulder the responsibility to create awareness campaign among the population and to spread the information about the benefits of Shariah insurance through selected mass media nationwide.
To compete with the already dominant conventional insurance player, investors should be more inovative and creative. Shariah insurance needs to offer shariah products with dualistic role, 1) as an investment instrument and 2) as a protection instrument. For instance, with the approval and issuance of sukuk by the Government of Indonesia, the shariah insurance market can further boost sales by offering better investment related cum protection products or structured products, as it will provide better investment instrument in accordance with shariah principles. Thus, more takaful products can be competitively developed and offered to customers.
To be more creative and innovative in product developments, shariah insurance players must be able to create a strong business foundation, started with the ‘team’. The ‘team’ comprises of each and everyone working in the company, for even a small contribution srengthen the overall strength of the company. Shariah insurers need to develop and nurture the professional competency amongst its personnel, and equip them with the right knowledge and skills in both the conventional and shariah system. This is crucial as in the competetive market place, one must be ready to compete globally in the free trade era to ensure growth and profits. More importantly, a company with solid foundation can foster long term relationship with customers and customers’ loyalty means properity for business growth.
To foster growth, it is important that a company widen its market reach for as far as possible. In this respect, offering shariah-compliance products does not mean only zooming to the Moslem market as the sole target market. The universality of Islam and the Shariah concepts make non-Moslem a promising and potential market as well. Realistically, Shariah insurance accommodates risk management and sharing of risk among participants, regardless of their race or religion. For as long as the other party is engaged in non-haram activities, there is no restriction for Shariah insurers to extent their services. This is supported by the fact that in general, the demand for insurance products are higher among the non-Moslem society compared to Moslem mainly due to their higher standard of living.
Last but not least, the shariah insurance needs full support from the government to provide policies that are more flexible on investment and taxation that can accomodate and meet the needs of the industry. Hopefully, all aspects of shariah business can be developed simultaneously in the near future. Being under one roof, all shariah financial institutions are inter-dependent of one another. The shariah insurance can not develop significantly without the support of the shariah banking for instance, and vice-versa. As the real practices in Takaful Indonesia, the efforts to develop shariah-compliance products do not only focus on repackaging of common insurance products in the market but also on innovating specified shariah products. The Company draws strength from its product differentiation, as it is committed in offering value added products in accordance to shariah principles, a feature that distinguishes Takaful Indonesia from the conventional insurance. Presently, we have attractive products such as bancassurance and micro insurance which meet with the strong demand in the market. Our unit-linked products had also experienced tremendous business growth in 2008 compared to previous year. During 2007, Takaful Indonesia has been awarded the best performance Shariah insurance by some independent institutions in Indonesia. This is a recognition that the whole team of Takaful Indonesia is proud of, for it reflects our commitment and team effort in offering only the best shariah-compliance products for the people of Indonesia. As a pioneer and market leader, it welcomes healthy competition as it believes it is still a big market out there and that it is crucial to educate people about the shariah insurance as a preferred insurance.
Reputed as the world’s fourth most populous country, Indonesia is certainly an attractive market for business ventures as business opportunities are aplenty. With 17,508 islands, it is indisputably the world’s largest archipelago, and home to approximately 230 million population, spread out from as far as Sabang in North Sumatra to Merauke in Irian Jaya. The land is rich with natural resources, with much of it remain unexploited, but more importantly, it supplies not only abundance of human capital but also provides ready market for business growth. In the present day inclination towards shariah insurance, investors cannot miss one interesting fact: almost 85% of the total population is Moslem, and that traslates to about 200 million potential customers. Based on unsubstantiated sources, it is interesting to note the fact that Indonesia has more than 3,500 high networth citizens holding over USD100 million each. While almost 70 percent of this priviledged group lives in Jakarta, the market is still very attractive in term of customers’ spending potentials. The Indonesian Gross Domestic Product was approximately USD432.9 billion based on official exchange rates in 2007. The year 2008 also promises further boost to the economy, although the 6.5 percent current economic rate may fall further due to reduced exports attributable to the global financial crisis. The Government is confident to sustain the economic growth beyond 6% in 2008 and 2009 where steps are being taken to stimulate the economic expansion using the national budget, which already reached USD100 billion in 2008.
By end of 2007, the insurance industry in Indonesia has been faring well where the industry boasts total assets worth USD20.8 billion and penetration rate of 7.2%, with an average annual growth rate in assets and net contributions of 27% and 19%, respectively. In 2007, the gross premium income of insurance industry increased by 46% from USD4.3 billion the previous year to reach USD6.3 billion. The same year also saw an improvement in the economy as the Gross Domestic Product (GDP) increased significantly. In sum, the ratio of gross premium to GDP increased from 1.57% to 1.88%.
Amidst the still largely conventional economic system, the shariah economic practices has started to evolve and gain popularity significantly within the last 5 years. However, as compared to the growth of shariah entities in Indonesia, the development of shariah insurances has been rather slow, with only five shariah insurance companies by the year 2002, including ATK and ATU. The data from Bapepam LK shows that the asset of shariah insurance in 2007 was only approximately USD202 million, or about 1.6% of the total insurance asset in Indonesia. Meanwhile, the total premium collection that year was recorded at about USD115 million, a far cry from the total national insurance collection at USD7.4 billion (inclusive social security schemes). As development of shariah insurances has been lagging far behind the conventional insurances, a gap in the market place presents itself, creating opportunities waiting to be explored.
Although new players started to flood the market, demand for shariah-compliance product is still uprising, and the market is still large enough to accommodate new players. By July 2008, there were 149 insurance companies operating in Indonesia with 46 in life, 103 in general and the balance in reinsurance. Takaful Indonesia, being the pioneer, still lead the market for family takaful as ATK is among the two full-fledged and 13 windows whilst ATU is the sole full-fledged general takaful among 19 other operators. However, compared to other countries with substantial Moslem population, the growth of shariah insurance in Indonesia is rather slower. Malaysia for instance, has only 10 % of Indonesian population, yet the total asset of its Shariah insurance has reached approximately USD2.0 billion or about 6.0 percent of total assets of the insurances and takaful industry. In terms of premium collections, Malaysia’s takaful industry has reached about USD500 million or 6.0% of total premium collection recorded for the insurance and takaful industry for year 2006. In a nutshell, there are more to be developed to further stimulate the takaful market in Indonesia and ample rewards await those who make the right moves and efforts.
As acceptance of the Indonesian society towards insurance is still low in general, efforts should be taken to educate them about the necessity of having an insurance coverage and to familiarize them with the shariah concept of insurance. In most countries, the progress of shariah insurance and the growing demand for shariah-based products are driven by the society’s awareness towards the importance of insurance and the availability of choiced products. Familiarisation through product awareness will help create needs as people realize what they are lacking and learn how to fulfill the gap. Most of the victims of tsunami and earthquake in Aceh, Nias, Yogjakarta, Bengkulu and even those affected by major flood in Jakarta past few years, had neither family nor general insurance coverage, according to a study conducted by local insurance industry. Therefore, the shariah insurance companies, together with the government and Moslem scholars, should shoulder the responsibility to create awareness campaign among the population and to spread the information about the benefits of Shariah insurance through selected mass media nationwide.
To compete with the already dominant conventional insurance player, investors should be more inovative and creative. Shariah insurance needs to offer shariah products with dualistic role, 1) as an investment instrument and 2) as a protection instrument. For instance, with the approval and issuance of sukuk by the Government of Indonesia, the shariah insurance market can further boost sales by offering better investment related cum protection products or structured products, as it will provide better investment instrument in accordance with shariah principles. Thus, more takaful products can be competitively developed and offered to customers.
To be more creative and innovative in product developments, shariah insurance players must be able to create a strong business foundation, started with the ‘team’. The ‘team’ comprises of each and everyone working in the company, for even a small contribution srengthen the overall strength of the company. Shariah insurers need to develop and nurture the professional competency amongst its personnel, and equip them with the right knowledge and skills in both the conventional and shariah system. This is crucial as in the competetive market place, one must be ready to compete globally in the free trade era to ensure growth and profits. More importantly, a company with solid foundation can foster long term relationship with customers and customers’ loyalty means properity for business growth.
To foster growth, it is important that a company widen its market reach for as far as possible. In this respect, offering shariah-compliance products does not mean only zooming to the Moslem market as the sole target market. The universality of Islam and the Shariah concepts make non-Moslem a promising and potential market as well. Realistically, Shariah insurance accommodates risk management and sharing of risk among participants, regardless of their race or religion. For as long as the other party is engaged in non-haram activities, there is no restriction for Shariah insurers to extent their services. This is supported by the fact that in general, the demand for insurance products are higher among the non-Moslem society compared to Moslem mainly due to their higher standard of living.
Last but not least, the shariah insurance needs full support from the government to provide policies that are more flexible on investment and taxation that can accomodate and meet the needs of the industry. Hopefully, all aspects of shariah business can be developed simultaneously in the near future. Being under one roof, all shariah financial institutions are inter-dependent of one another. The shariah insurance can not develop significantly without the support of the shariah banking for instance, and vice-versa. As the real practices in Takaful Indonesia, the efforts to develop shariah-compliance products do not only focus on repackaging of common insurance products in the market but also on innovating specified shariah products. The Company draws strength from its product differentiation, as it is committed in offering value added products in accordance to shariah principles, a feature that distinguishes Takaful Indonesia from the conventional insurance. Presently, we have attractive products such as bancassurance and micro insurance which meet with the strong demand in the market. Our unit-linked products had also experienced tremendous business growth in 2008 compared to previous year. During 2007, Takaful Indonesia has been awarded the best performance Shariah insurance by some independent institutions in Indonesia. This is a recognition that the whole team of Takaful Indonesia is proud of, for it reflects our commitment and team effort in offering only the best shariah-compliance products for the people of Indonesia. As a pioneer and market leader, it welcomes healthy competition as it believes it is still a big market out there and that it is crucial to educate people about the shariah insurance as a preferred insurance.
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