In May 2010, I was offered by IBFIM to consider being their Vetting Expert/Editor for their forthcoming book on takaful. Well, in order to ensure that my knowledge and experiences can be shared with the public, I decided to accept the offer. After about 3 weeks of intense and thorough reading the manuscript written by two authors, alhamdulillah I managed to summarize a total of about 300 comments and suggestions to improve the book. More or less, the draft was delivered in a good manner where a beginner and perhaps an intermediate practitioners in insurance and takaful can benefit from it. Generally, it covers the concept of takaful in depth where the syariah perspectives on the conventional insurance was well presented. Nevertheless, non-Moslem may encounter some difficulties as there are many arabic terminologies introduced as there are no equivalent translation in English. Perhaps, future takaful book should introduce a complete glossary at the end for ease of reading.
Next, the book presents the different takaful products being marketed today for general and family takaful. The content is quite comprehensive for the most common takaful products in Malaysia. We would appreciate for those outside Malaysia to share their feedbacks with respect to the relevant products in their respective countries. In addition, it also presents the legal issues and operational procedures such as underwriting and claims.
After completed vetting the book, I realize that most takaful books published todate have more or less common issues such as syariah perspectives, legal, operational and products. Thus, I am planning to write my own book on takaful but it will cover slightly different perspective and content. Already started but still far from completion. Hopefully, I should be able to complete before middle of next year, insyaAllah.
Sunday, September 19, 2010
Thursday, September 2, 2010
The Waiting is Over - 4 New Takaful Operators join the Industry
After more than a year with numerous rumors and speculations pertaining the new takaful licenses, Bank Negara Malaysia had finally released (1/9/10) the news that the following entities are awarded with new Takaful licenses but only to transact family businesses:
American International Assurance Berhad (70%) and Alliance Bank Malaysia Berhad (30%); AMMB Holdings Berhad (70%) and Friends Provident Group plc, UK (30%) ING Management Holdings (Malaysia) Sdn Bhd (60%), Public Bank Berhad (20%) and Public Islamic Bank Berhad (20%); and The Great Eastern Life Assurance Company Limited (70%) and Koperasi Angkatan Tentera Malaysia Berhad (30%);
Well, most of them are considered major players in the conventional insurance industry in Malaysia thus I would expect that they may kick off faster than those in the past. AIA had been issued an ITO (International Takaful Operator) license previously thus this new takaful license would compliment well with ITO license for their aggressive market penetration. ING may have an advantage due to to its partner which is a very strong FI in local market. Furthermore, ING had also partnered with a local takaful operator in promoting their employees benefit schemes to the Islamic prospects giving them some exposures to the takaful management. GE had a strong agency team in conventional which definitely be their competitive edge like PruBSN Takaful. AM Group with its subsidiary, AMAssurance, may have advantage from the partnership with oversea partner in terms of expertise and perhaps capital. We hope to see new innovation in products and services for the benefits of Malaysians in general.
Few advise perhaps from me is that the new takaful operator shall be named with an appropriate name in accordance with the Islamic phrases and if possible try to disassociate from the conventional name. This is critical in order to be effective in marketing strategies. Furthermore, key personnel especially CEO must be a Moslem where this will send a positive message to the community or society that the operator is serious about doing takaful or Islamic insurance and not merely for profit. As the license is only to transact family takaful, the core team must be those with strong family/life technical background with solid marketing experience. There are few (one or two) leaders in the takaful operators who are general practitioners thus making their life or family business moving a bit slow than expected.
Be careful when employing those from the conventional industry as there are several aspects differ significantly in takaful operations. Core team must comprise mainly those with solid background in takaful so that they can lead the rest towards the right direction in takaful philosophies.
I wish all those new takaful players "Good Luck and Welcome on Board" and please ensure that the main focus is strictly adhered i.e. to promote Islamic insurance with honesty, fairness and integrity.
American International Assurance Berhad (70%) and Alliance Bank Malaysia Berhad (30%); AMMB Holdings Berhad (70%) and Friends Provident Group plc, UK (30%) ING Management Holdings (Malaysia) Sdn Bhd (60%), Public Bank Berhad (20%) and Public Islamic Bank Berhad (20%); and The Great Eastern Life Assurance Company Limited (70%) and Koperasi Angkatan Tentera Malaysia Berhad (30%);
Well, most of them are considered major players in the conventional insurance industry in Malaysia thus I would expect that they may kick off faster than those in the past. AIA had been issued an ITO (International Takaful Operator) license previously thus this new takaful license would compliment well with ITO license for their aggressive market penetration. ING may have an advantage due to to its partner which is a very strong FI in local market. Furthermore, ING had also partnered with a local takaful operator in promoting their employees benefit schemes to the Islamic prospects giving them some exposures to the takaful management. GE had a strong agency team in conventional which definitely be their competitive edge like PruBSN Takaful. AM Group with its subsidiary, AMAssurance, may have advantage from the partnership with oversea partner in terms of expertise and perhaps capital. We hope to see new innovation in products and services for the benefits of Malaysians in general.
Few advise perhaps from me is that the new takaful operator shall be named with an appropriate name in accordance with the Islamic phrases and if possible try to disassociate from the conventional name. This is critical in order to be effective in marketing strategies. Furthermore, key personnel especially CEO must be a Moslem where this will send a positive message to the community or society that the operator is serious about doing takaful or Islamic insurance and not merely for profit. As the license is only to transact family takaful, the core team must be those with strong family/life technical background with solid marketing experience. There are few (one or two) leaders in the takaful operators who are general practitioners thus making their life or family business moving a bit slow than expected.
Be careful when employing those from the conventional industry as there are several aspects differ significantly in takaful operations. Core team must comprise mainly those with solid background in takaful so that they can lead the rest towards the right direction in takaful philosophies.
I wish all those new takaful players "Good Luck and Welcome on Board" and please ensure that the main focus is strictly adhered i.e. to promote Islamic insurance with honesty, fairness and integrity.
Friday, August 27, 2010
National Education Insurance/Takaful Plan?
We are seeing an escalating university/college fees year by year and I can't imagine the cost to be like in the next say 18-20 yrs from now. Thus, we need to explore the best solution to manage the situation at least to our next generation to come. It is not uncommon for us to see an established statutory retirement scheme such as Employees Provident Fund (EPF) in Malaysia. There are private and public retirement/pension fund setup by relevant parties mainly to ensure that the retirees/pensioners are well protected during their post-retirement period. By having such funds, the management costs are kept as low as possible and return may also be 'optimized' due to the huge available funds for investment activities.
Now, if we apply the same concept to the education plan which is also in dire need it would definitely benefits all relevant parties whether public or government. The entity to manage the fund can be a joint venture company with govt say holding 50%, private sectors mainly insurance/takaful companies say 30%, and the balance may be offered to key personnel in the company as a way of loyalty incentives. I foresee that this scheme will definitely be much cheaper than the available education insurance/takaful plan available in the market as we can scrap the 171% commissions structure from the pricing and keep the loadings as low as possible in view of law of large number. The modus operandi can be more or less similar to EPF and the Parliment may issue a law to impose a statutory requirement for all newborn babies to be enrolled in the scheme. Premiums/contributions may be a combination of parent (working), employer, and perhaps a token from the government as a way to reduce the burden of the parent. In the event of withdrawal due certain reasons such as the child fail to continue the study, the portions of employer and government will be returned. Thus, the parent will only receive his own contribution plus any investment profit, if any.
By this program, the government may reduce it's subsidy to the educational institutions in phases and ultimately this National Education Plan (NEP) will be able to sustain by itself. Perhaps, we may offer a 10% equity to the higher institutions (IPTA/IPTS) to ensure that the program is efficiently manage end to end. By being a shareholder in the entity, IPTA/IPTS should ensure that the cost of their fees are kept as low as possible in order to avoid 'deficit' in the funding.
A question may arise with respect to those unemployed parent. This is similar situation under the current retirement/pension schemes. Well, at least we solve bulk of the problem and the minority will be explored accordingly.
Now, if we apply the same concept to the education plan which is also in dire need it would definitely benefits all relevant parties whether public or government. The entity to manage the fund can be a joint venture company with govt say holding 50%, private sectors mainly insurance/takaful companies say 30%, and the balance may be offered to key personnel in the company as a way of loyalty incentives. I foresee that this scheme will definitely be much cheaper than the available education insurance/takaful plan available in the market as we can scrap the 171% commissions structure from the pricing and keep the loadings as low as possible in view of law of large number. The modus operandi can be more or less similar to EPF and the Parliment may issue a law to impose a statutory requirement for all newborn babies to be enrolled in the scheme. Premiums/contributions may be a combination of parent (working), employer, and perhaps a token from the government as a way to reduce the burden of the parent. In the event of withdrawal due certain reasons such as the child fail to continue the study, the portions of employer and government will be returned. Thus, the parent will only receive his own contribution plus any investment profit, if any.
By this program, the government may reduce it's subsidy to the educational institutions in phases and ultimately this National Education Plan (NEP) will be able to sustain by itself. Perhaps, we may offer a 10% equity to the higher institutions (IPTA/IPTS) to ensure that the program is efficiently manage end to end. By being a shareholder in the entity, IPTA/IPTS should ensure that the cost of their fees are kept as low as possible in order to avoid 'deficit' in the funding.
A question may arise with respect to those unemployed parent. This is similar situation under the current retirement/pension schemes. Well, at least we solve bulk of the problem and the minority will be explored accordingly.
Tuesday, August 17, 2010
Microinsurance/microtakaful
Recently, I've been approached by a PhD student seeking for my advise with respect to her thesis topic on microinsurance. She has strong interest to research on the topic however she kind of stuck to proceed further on the topic. During the discussion, I posed her several questions as follows to gauge her actual understanding on the subject matter:
1. What is the meaning of microinsurance or microtakaful?
2. Who is the target market for such program?
3. Is Malaysia a country seriously needed such program? compared to say Indonesia, Afrika, etc.
4. Why none of the insurance/takaful company is trying to lead this program?
5. Etc, etc.
Based on the questions and feedback, I concluded to her that microinsurance in just a concept and not actually an insurance products. You can choose any of the suitable products to market under such concept or program. It may be life or general insurance products however common products are life products.
Target market is obviously lower income group of population. However, another question arise from here i.e. whether the group is self employed or those employed on full time basis. Here is the trick and gray area pertaining microinsurance. Full time workers in Malaysia are required to participate in SOCSO (social insurance scheme) and EPF (employees provident fund) which I personally feel that the protections are rather sufficient for those category of population. Thus, the target shall be those self-employed with low income category. A question arise then whether those unemployed shall be considered under microinsurance. Well, if we add these people then it is the responsibility of the government to provide such insurance or social insurance. So the conclusion is that the self-employed is the target market for microinsurance. Another problem may arise here is that we may have difficulties to collect complete information pertaining this self-employed group to study further as no single entity which is maintaining the statistics pertaining the group.
Based on the above, I personally feel that Malaysia may not desperately need such program as SOCSO and EPF already well established and 'maybe' well managed. Those self employed may also participate voluntarily.
Insurance/takaful companies are not very keen to venture into this program in view of small premiums and profits however potential high claims. The companies already participate in such programs like al-khairat, special packaged for asnaf zakat (tithe), etc. Nevertheless, the volume may not be feasible for reasonable profits or return.
Countries like Indonesia may be a good place to promote such microinsurance since we can easily find millions of underprivileged citizens all over the country especially major cities like Jakarta, Bandung, etc. More or less about 40-50 million citizens are categorized as hardcore or very poor in Indonesia. Malaysia can be considered a much better country in terms of prosperity or wealth distribution among the citizens.
Thus, I recommendation is to switch to other practical and interesting topics to be researched.
1. What is the meaning of microinsurance or microtakaful?
2. Who is the target market for such program?
3. Is Malaysia a country seriously needed such program? compared to say Indonesia, Afrika, etc.
4. Why none of the insurance/takaful company is trying to lead this program?
5. Etc, etc.
Based on the questions and feedback, I concluded to her that microinsurance in just a concept and not actually an insurance products. You can choose any of the suitable products to market under such concept or program. It may be life or general insurance products however common products are life products.
Target market is obviously lower income group of population. However, another question arise from here i.e. whether the group is self employed or those employed on full time basis. Here is the trick and gray area pertaining microinsurance. Full time workers in Malaysia are required to participate in SOCSO (social insurance scheme) and EPF (employees provident fund) which I personally feel that the protections are rather sufficient for those category of population. Thus, the target shall be those self-employed with low income category. A question arise then whether those unemployed shall be considered under microinsurance. Well, if we add these people then it is the responsibility of the government to provide such insurance or social insurance. So the conclusion is that the self-employed is the target market for microinsurance. Another problem may arise here is that we may have difficulties to collect complete information pertaining this self-employed group to study further as no single entity which is maintaining the statistics pertaining the group.
Based on the above, I personally feel that Malaysia may not desperately need such program as SOCSO and EPF already well established and 'maybe' well managed. Those self employed may also participate voluntarily.
Insurance/takaful companies are not very keen to venture into this program in view of small premiums and profits however potential high claims. The companies already participate in such programs like al-khairat, special packaged for asnaf zakat (tithe), etc. Nevertheless, the volume may not be feasible for reasonable profits or return.
Countries like Indonesia may be a good place to promote such microinsurance since we can easily find millions of underprivileged citizens all over the country especially major cities like Jakarta, Bandung, etc. More or less about 40-50 million citizens are categorized as hardcore or very poor in Indonesia. Malaysia can be considered a much better country in terms of prosperity or wealth distribution among the citizens.
Thus, I recommendation is to switch to other practical and interesting topics to be researched.
Thursday, July 15, 2010
Seminar: Family Takaful Products & Processes
Overall, the seminar was very successful where I had shared with the participants on several actual case studies for their analysis. They were good case studies to learn on decision making processes and can't be found in any textbooks anywhere. Last but not least, thank you to IBFIM for the confidence on me to conduct the seminar. Thank you also to all the participants for your active participation and interest.
Tuesday, April 13, 2010
Basic Takaful for Agent
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