September 2010 marked a new episode in takaful industry in Malaysia as Bank Negara Malaysia (BNM) had approved 4 new takaful licenses. Even though the licenses are strictly for family takaful business, it came as a surprise to the industry players as BNM had, earlier, announced that they will approve only two new takaful licenses. Anyway, 2 out of 4 new players had launched their companies and already doing takaful business. ING Public Takaful rumored to be the next to join the bandwagon whilst AmTakaful (perhaps) will be the last to do so. Anyway, yesterday, 7/3/11, IBFIM had organized a postmortem session with the Islamic institutions to assess the effectiveness of the 10-yrs FSMP introduced 10 yrs ago. During the session, BNM had highlighted several critical success factors which according to them had failed to embark. Innovation of products is one of the issue where the industry was alleged to just replicate the conventional products and services with some cosmetic features and claims as Islamic products. Commitment from shareholders had also contributed to the shortfall in achieving the target. MIFC had also failed to materialized as expected. Whatever it is, the industry needs to review their strategies accordingly to prepare for the future masterplan which will be introduced sometime this year, according to BNM.
Now, if you are one of the CEO for the takaful company (maybe new or existing), what do you think you will set as top priority to ensure that your company will take the lead in the industry soonest possible. Be it IT, Operations, Finance, Sales, Human Capital, etc, CEO must prioritize the list and execute accordingly. Now, most of new players started their business using the shared services model and claim cost efficiency as the objective. Nevertheless, there are few players which are using the approach since day one had yet to convert into full-fledge takaful companies despite of being in operation for more than 4-5 years. The question is that which is more effective and efficient? Shared services come with a price. However, the sacrifice is the control i.e. takaful operator may have lack of control on the resources executing the processes. BNM had also highlighted the same where they claim that too long dependency on shared services lead to lack of technical know how transfer to takaful operator. Maybe yes.
Is top line a top priority or bottom line? As a new company, good top line will increase a confidence level to potential clients to participate in the takaful business. This is important in order to reap more business in future. However, shareholders are more keen to see the bottomline results. In other words, huge business with no profit is not a darling to most shareholders. Therefore, managing expenses is more crucial than struggling to record higher production. I know at least one takaful operator which recorded the profit margin lower than 2%. As an investor, this is a bad investment as he can easily find an alternative investment vehicle which can easily generate 4-5% annually with lower risk. Think about it if you are the CEO. Competent and talented human capital is crucial, for my opinion. You cannot lead an army which mostly do not know on how to pull the trigger. Nevertheless, with 4 new players coming into play more or less at the same interval, human capital is the main issue as talent is still shortage in the industry. Everybody agrees that we cannot build a house without a contractor who had experience in doing so previously. Therefore, all new players had no choice but to lure or entice from the same pool of talent. Best men win.......
Ok, let me stop here to allow readers to stir your brains and formulate the best strategy for your company should you be the leader in the company. Will continue with more interesting topics....
