Takaful Stagnant Growth

The takaful industry in Malaysia has been "very stagnant for the last five years," said Malaysian Takaful Association chairman Muhammad Fikri Mohamad Rawi and so "the mode of delivery requires serious consideration".

Delivering the industry keynote address at the Takaful Rendezvous 2018 in Kuala Lumpur, organised by Asia Insurance Review and sponsored by ReMark and Takaful Malaysia, Mr Rawi said, “The takaful industry is undergoing disruption,” and pointed to changes in regulation, the splitting of insurance licenses, variations to taxation rules – coming on top of technological disruption.

This has meant that the stellar growth rates that the sector saw up until 2011 have not been repeated in recent years. Single digit growth rates have been the norm of late, while before 2011 annual growth of almost 20% was common.

Over 65% of Malaysians have an internet connection, but in spite of having a tech-savvy population, the takaful market has only reached 14% penetration in its target markets, Mr Rawi said. “It is timely that the Malaysian takaful industry should go back to basics.”

Holding Back Growth - Impediments to the growth and adoption of takaful in Malaysia come from many quarters, he said, including “the long and tedious claims process.” But, said Mr Rawi, “the industry may need to revisit the nature of demand.”

The four general takaful players plus two retakaful companies in Malaysia are “not adequate to build a commercial pool that can handle volatility,” he said.

“Technology isn’t disrupting takaful business in Malaysia,” said Mr Rawi, “humans are.” He urged the industry to allow InsurTechs to help cultivate demand for takaful. “There will be no more ‘cut and paste’ and white-labelling of conventional insurance.”

Compensation Models - Several change musts take place in order for takaful growth rates to pick up – but the most necessary change of all was for a change in the “compensation model.” This is an allusion to the acknowledgement that sales agents work most effectively when their compensation is tied to the volume of their sales – and this has been lacking in the takaful sector.