Window vs Full-fledged Takaful

In Malaysia, all takaful operators are operating based on full-fledged takaful business model. Comparatively, most of takaful operators in Indonesia are based on window concept business model.  Window takaful concept are more towards product manufacturer and distributor relationship where takaful operator will launch takaful products to meet with the need of conventional insurer which act as distributor.  Moreover, takaful operator is established with minimal infrastructure where most of the core back-end and supports are outsourced to the conventional insurer which has comprehensive infrastructure and establishment.  Nevertheless, regulator in Indonesia is trying to move towards full-fledged model.

Coming back to Malaysia takaful landscape, there are several takaful operators particular new ones are more towards window concept business model where their main shareholders, established insurers, are responsible to distribute the takaful products via their existing conventional distribution channels.  In addition, several core functions including actuarial, IT, underwriting, etc are heavily outsourced to the conventional expertise.  This should be allowed by regulator only for newly setup companies with limited duration say 3 years after which the takaful operator shall manage internally with few exception like IT which may require longer period say 5 years.  By imposing such condition, takaful industry shall see strong development of talents to boost the market penetration in the medium term.  When Bank Negara approved 4 new takaful licenses in 2010, it has selected those with strong and established conventional insurers (mainly foreign) with the intention to promote the transfer of knowledge and technology to takaful operators. This can only be achieved provided that the takaful operator is required to be independent from the conventional insurer within specified timeframe. Therefore, all those relevant takaful operators must establish a clear roadmap to indicate their specific deadline to separate themselves from the conventional insurer in totality. The separation between conventional and takaful is vital to ensure that the takaful business is 100% sharia compliance end to end.  

ING PUBLIC Takaful Ehsan part of AIA AFG Takaful

18 December 2012 marked a historic date for ING Malaysia group of companies where the acquisition by AIA Malaysia was completed.  Companies affected were ING Insurance Berhad, ING Employees Berhad and ING PUBLIC Takaful Ehsan Berhad (IPTEB).  With the closure, AIA now owns two takaful licenses thus it must relinquish one of the licenses under several options.  It may sell one of the entities entirely to any interested party without affecting the business as well as the resources.  However, after several meetings with Bank Negara Malaysia (BNM), AIA had decided to merge the two entities and return one of the licenses to BNM for their further action to offer to new investor.  In the process of integrating the two takaful entities, four senior management including CEO of IPTEB have been terminated and it is expected similar casualties may happen to other levels in the near future.  It is interesting to note that the four senior management terminated had a total relevant working experience of close to 100 years. Whilst the regulator and industry had identified shortage of talent as one of critical success factors for takaful industry, it is amazing to note that talents with about 100 years of relevant working experience can easily be laid off.

Takaful Ehsan was established on 11 March 2011, obtained takaful license from BNM on 1 April 2011 and officially launched the operation and business on 5 April 2011.  It embarked on a multi-distribution channel strategy namely agency, bancatakaful and employees benefit (EB) or corporate business.  Among several achievements, Takaful Ehsan had successfully introduced a full-fledged e-submission or iPOS since it launched it’s business thus making it the first among takaful companies to embark on full-fledged iPOS.  With the facility, customer or intermediary can easily submit cases via online and can print the letter of approval on the spot within 1-2 minutes upon successful online underwriting using smart underwriting.  Takaful Ehsan had also received tremendous acceptance on it’s EB business in view of stability of the system.

Now, upon completion of integration between the two takaful operators which is expected by mid of 2013, Takaful Ehsan will no longer exist in the industry.  It may be the shortest life span for a takaful company in the world and should be recorded accordingly.  May Allah bless all those who had contributed tremendously in the establishment of Takaful Ehsan and wish them all the best in the future pursuit to enhance Islamic financial sector in Malaysia as well as global.