Takaful Distribution Models A Practical Approach

Transcription

1 Takaful Distribution Models A Practical Approach Presented by Muktisjah Ramli, Director Takaful Outsource Ltd. Turin Islamic Economic Forum / November, 2014 / Torino, Italia

2 1. Introducing Takaful Outsource, LTD 2. History and Development of Takaful 3. Developing Takaful Products 4. Islamic Principles of valid sale 5. Takaful Distribution Models 6. Bancatakaful as Distribution model 7. Bancatakaful Products 8. Big Data and Social Media 9. European challenge for Takaful

3 Takaful Outsource, Limited (TO) is a consulting and outsourcing firm specializing in serving the global takaful industry, particularly insurance/takaful companies, reinsurance/retakaful providers, private institutions, training institutes, and government regulatory authorities.

4 History and development of takaful Takaful : Ta awun: Mutual guarantee among the group members The act of mutual help and assistance of the participants within the group Promotes brotherhood, mutual assistance, piety and a sense of caring for the community. System of Takaful began 14 centuries ago on Arabian peninsula and was modernised in Sudan (1979) and Malaysia (1983).

5 History and development of takaful Hadiths of the Prophet S.A.W. Tie the camel and then submit to the will of Allah (Sunan Al Tarmizi, 1981) This hadith implied a need to mitigate risk Verily, it is better for you to leave your offspring (heirs) wealthy, than to leave them poor asking help from others (narrated by Amir bin Saad bin Abi Waqqas)

6 History and development of takaful Wakalah Model Participants Shareholders fund Wakalah fee Qard Hassan (if deficit) Takaful Fund (Participants Fund) Contract Benefits Reserves Operating Expense Investments Investment profits Underwriting profits Retakaful Surplus Source: Swiss Re Sigma, Islamic Insurance (2008)

7 Developing Takaful Products Market Research, Product Features Sales & Marketing, Distribution Terms and Conditions, Forms Claims, Underwriting, Actuarial Finance, Retakaful Shariah, Legal & Compliance IT systems, Customer Service (Ops) Investments, Asset Management Regulatory approval

8 Developing Takaful Products Waiver of Contribution (100euro/month until maturity) Basic Life cover ( euro) Family Income Benefit (2.000euro/month) Investments (100euro/month) Top up (2.000euro) Permanent Disability ( euro) Critical Illness ( euro) Temporary Total Disability (1.000euro for 2weeks)

9 Developing Takaful Products Adopt Islamic principles for valid sale (1): Offer and Acceptance (customer has the right to know every feature of the product, before signing the contract) Price to be mentioned (exclusion of riba to be mentioned, highlight prudent /ethical investment principles in case of unit-linked products) Parties to be sane and legally competent (parties must have attained puberty and avoid selling products to persons, who are emotionally not stable)

10 Developing Takaful Products Adopt Islamic principles for valid sale (2): Valid contract (agent to know each part and section of the contract, the company obligations and also client obligations) Disclosure of material including any mishaps (disclosure of charges/fees/commission, any exclusions) Not hurting the Community (mis-selling can hurt the Community as a whole as takaful products are being promoted to the public)

11 Takaful Sales Remuneration Challenge Product Mix Bonus Persistency Bonus Production Bonus Basic Commission Basic Salary

12 Takaful Distribution Models Agency (tied sales agents or independent agents remunerated on commission only or salary plus commission, fit for complex individual products) Bancatakaful (Banks distributing takaful provider s products through bank s branches or channels (ATM, online, mobile) using bank s client base. Fit for simple, high volume products Brokers (Independent distributor of multiple takaful providers products. Fit for distributing corporate / group takaful products) Social Media (Website, FB, Twitter, Linkedin, Whatsapp, Mobile; Fit for simple individual protection only products, upgrades)

13 Bancatakaful as Distribution Model Initial Considerations Branch employees generate quality referrals Takaful agents concentrate on selling Bankers don t understand insurance/takaful Bank staff simply identify customers with potential needs for takaful products

14 Model Definitions for Bancatakaful Integrated models (where the bancatakaful activity is closely tied to the banking business) Advice-based models (where there is less integration and the distribution is based on using professional takaful advisers to sell to the clients of the bank) Open architecture models (banks can tie-up with multiple takaful operators / takaful operators can offer products through many banks with multiple tie-ups

15 Family (Life) Takaful Product Simplicity vs Bancatakaful Model Choice

16 Takaful Products Bancatakaful? Family (Life) Individual (Bancatakaful Distributable) Group (Non-Bancatakaful Distributable) Term (Simplified Issue, "Bundled") Protection ONLY Credit Life (Personal Loans, Credit Shield, Mortgage Takaful) Personal Accident Rental N/A Tuition Retirement Retirement Investment w/ Protection Marriage Pension Education Employee Thrift General (Non-Life) - Bancatakaful Ready [Yes / No]? Motor Vehicle [eg, Malaysia, Qatar, Bahrain] Homeowners [e.g. Bahrain] Fire & Allied Perils / (Homeowners) [e.g. Malaysia, Bahrain, Pakistan] Travel "Safe" [e.g. Bahrain]

17 Key Issue in Alternative Distribution Big Data Paradigm Shift: Potential customers and prospects are interacting over phone, social, mobile and in person. The mountain of data captured at each of these touch points can make it challenging to respond to prospects and customers in a streamlined fashion. Big Data is high-volume, high-velocity, and/or high-variety information assets that require new forms of processing to enable enhanced decision making, insight discovery, and process optimization. Big Data comes from multiple sources: online access mobile devices social media scientific devices e.g. Twitter Tweets, generated every day

18 The European Challenge for Takaful Pan European / National Approach Fragmented Market Takaful mainly targeted to Muslims only Small scale Ops Limited products Limited Distribution Lack of understanding in need for insurance/takaful Lack of Takaful Human Capital Lack of financial resources from community to set up own takaful company Grass root approach

19 The European Challenge for Takaful National Approach Existing insurance company set ups takaful window Sell takaful products besides conventional products Use existing distribution channel Expand client base to ethical market and increases volume Use own asset management / mutual funds or external fund provider Insurance co takes over existing takaful co. Takaful Co from Gulf / Asia takes stake in European insurer Grass Root Approach Community set ups own takaful mutual (OWM in NL) Community members as initial client / member base Start with simple protection products Set up another mutual once max members reached Merge smaller mutuals into larger takaful co. Expand into EU through passporting Set up new full-fledged Takaful Co.

20 Dawud Abdus-Saboor Director +1 (267) (USA) Muktisjah Ramli Director (The Netherlands) Follow us on:

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