Some
opinions saying that the local takaful operator is less competitive and
creative than the conventional insurance companies? What is your opinion?
Well, let’s understand the situation by looking at the
lifespan and size of the two different industries namely takaful industry
versus conventional insurance industry. AIA
group of companies was established for more than 90 years ago with presence in
Malaysia since 1948 or more than 60 years ago.
Prudential Assurance had started their business operations in Asian
region for more than 60 years ago. However,
the first Takaful operator in Malaysia was just established in 1985 or about 30
years ago whilst most other takaful operators had an average lifespan of only
about 10 years.
Obviously, the longer the lifespan of the industry the
bigger will be the size of their assets and funds. With bigger funds, the companies have higher
allocations for management expenses in terms of absolute amount. Thus, higher amount can be spent for
advertising and promotions to reach the potential market. In addition, the bigger funds will enable those
companies to take higher risk in the investment activities which lead to higher
return as well, irrespective of Shariah matters.
On the other hand, takaful industry has been growing
at a tremendous growth rate of double digit or more than 20% in the past
several years, whilst their competitor in the conventional is growing at single
digit growth and negative growth during economic downturn. With this tremendous growth rate, the experts
are optimistic on the future of takaful industry and some are of the opinion
that the takaful industry may surpass the conventional industry in terms of
business performances, in near future. By
then, we can definitely observe a fair level playing field between both
industries.
The critics may be biased in claiming about the
competitiveness and creativity of takaful industry as their allegation are
based on certain type of risk such as oil and gas, aviation, marine,
liabilities, etc. These are mainly
general type of insurance or takaful which require huge amount of capacity or
capital adequacy in order to offer protection or coverage. Almost all takaful operators are not ready to
venture into such risk due to their limited size of takaful funds relative to
the conventional insurance funds. This
is a prudent decision making by takaful operators to ensure that the takaful
funds are not over exposed to the liabilities.
However, in terms of family takaful business, there
have been tremendous improvement in the product developments which had led to a
“threatening” status to their counterparties in conventional insurance
industry. More competitive products are
introduced from time to time under the category of investment-linked, medical,
etc. Customers are given broad range of family takaful products to choose which
suit with their expectations. The “ease
of doing business” tagline is becoming common corporate strategies in takaful
industry to compete with conventional insurance. Cutting-edge technology is
embedded in the takaful process in order to generate good customer experience
under ease of doing business. This is
evidenced via the influx migration or participation of conventional life
insurance agents into takaful business. Some
agents had totally switched to takaful business while the rest adding takaful
license as their secondary business.
Based on the above arguments, takaful industry has
been progressing very well and offering competitive products to the market in
most general risk. Nevertheless, due to
limited capacity and capital, the industry is yet to be ready to venture into
large risk type of protection.
