The huge potential for growth in Malaysia’s takaful market has attracted FWD Group to set up its presence in the country. Over the week, the Hong Kong-based insurer emerged as the largest shareholder in HSBC Amanah Takaful (M) Bhd after completing its acquisition of a 49% stake in the latter, which would soon be renamed FWD Takaful Bhd.
The acquisition marks FWD Group’s ninth market entry.
Founded in 2013, FWD is the insurance business of private investment group, Pacific Century Group (PCG), whose business interests span financial services; technology, media and telecommunications (TMT) and property.
PCG, in turn, is a group founded in 1993 by Hong Kong billionaire and businessman Richard Li – the youngest son of tycoon Li Ka-shing.
Prior to establishing its presence in Malaysia, FWD Group already has a foothold in Hong Kong and Macau, Thailand, Indonesia, the Philippines, Singapore, Vietnam and Japan, offering life and medical insurance, general insurance, employee benefits, syariah and family takaful products across a number of its markets.
Through FWD Takaful, the group aims to expand its business and footprint in Malaysia’s insurance and takaful market.
Leading the charge is Salim Majid Zain, who has recently been appointed as the CEO of FWD Takaful. He shares with BizWealth his view on the takaful industry and plan to grow the company in an email interview:
For a start, what are some of the changes you would like to make in your new role?Let me first introduce you to what FWD Takaful intends to bring to the industry – we are here to change the way people feel about takaful.
We want to be known as a challenger brand that does things differently compared to the others, ultimately for the benefit of customers.
In making this aspiration a reality, I plan to leverage on what the FWD Group is good at and has successfully implemented in the other markets we operate in.
What are some of the challenges/consideration in relation to growing the takaful business in Malaysia?We’re all aware that the takaful market in Malaysia is still underpenetrated, yet continues to be a growing market. The takaful market is expanding faster than the conventional insurance business as it continues to register double-digit growth rates over the past decade.
I must say one of the main challenges faced by takaful operators, is finding the right formula to reach out and penetrate the underserved market. This relates well to the next few corresponding challenges: limited product innovation suited to the underserved customer segment’s needs and building a differentiated yet cost-efficient solution to reach out and service them.
This is where FWD Takaful intends to differentiate itself from its competitors with a focus on implementing its customer-led strategy and delivering technology-driven customer experiences and innovative yet easy-to-understand products.
What are the reasons for the low penetration rate of takaful in Malaysia despite having being in the market for 30 years?Over the past decade, a lot of effort and initiatives have been put in by the various players with the intention of increasing the penetration rate in Malaysia. This has shown meaningful results as the penetration rate for family takaful exceeded the 10% mark in 2010.
However, the market has been stagnant over the past five years or so where the penetration rate has been hovering around 14% to 15%. This illustrates that the market has reached a roadblock in reaching out to new customer segments – be it at the industry or at an operator level.
There are many reasons contributing to this including lack of awareness towards takaful-related products and product affordability.
To me personally, the main challenge is developing the right distribution capabilities to reach out to the untapped markets out there. We can have the best and most affordable products but if there are no distributors – the product will remain on the shelf.
The main problem is also with us – we continue to do the same thing we have been doing for ages but expecting different results. This is where we need to come to a realisation that the world today is different and we need to find ways of doing things differently, more effectively and cost efficiently.
The benefits go beyond commercial returns for a takaful operator and, in actual fact, it will benefit customers more. Customers will have access to more affordable products, with better customer and service experience as well as convenience.
The best way to do this is to holistically innovate our approach towards products, distribution and services via digital solutions – either for it to be embedded into the traditional channels such as bancatakaful and agency or introduce cutting edge direct to customer online channels.
How do you think the penetration rate of takaful will change in Malaysia?We’re upbeat about the industry’s long-term growth. Both the Malaysian Takaful Association and Life Insurance Association Malaysia issued statistics showing that in 2018, family takaful industry recorded year on year new business growth of approximately 10% compared to approximately only 2% for life insurance. This illustrates how saturated the life insurance market in Malaysia is today.
We firmly believe the gold mine of potential is the takaful market. With takaful operators starting to diversify and embarking on digital strategies, it’s only natural that the penetration rate in Malaysia will continue to improve on an upward trend.
The only variable now is how high and how fast it will improve, which will depend on how aggressive we, the takaful operators in the market, want to change the way we do things. As a new entrant and without the legacy issues that other players may have, we’re confident that FWD Takaful has a unique opportunity to successfully change the way people feel about takaful in Malaysia.
What is the major trend you observe for the takaful segment in recent years?FWD Takaful will be focusing on the next generation of customers. This particular customer segment will shape the future of takaful in Malaysia and statistics already show that the future demographic population will be skewed towards the takaful market.
Coupled with the fast-rising working population, higher out-of-pocket healthcare spend and improved life expectancy, the opportunity horizon for takaful growth will continue to remain positive.
Even if we were to take a step back and look solely from a customer experience and expectations point of view, the millennial generation today are looking for protection that is linked to positive life events, rather than obtaining policies based on notions of fear and insecurity. They want products that help them lead more fulfilling lives without being constrained by worries and doubt.
Is the current regulatory environment conducive to promote the growth of takaful?The Malaysian regulatory framework for takaful remains the most mature, complete and advanced globally. When it comes to takaful, especially family takaful, the world comes to us to refer and learn.
And even then, Bank Negara continues to enhance and improve their regulatory frameworks to provide a robust and conducive environment for takaful players to operate in – be it in terms of shariah governance – critical to provide assurance to customers, market liberalisation to promote distribution balance as well as product differentiation and introducing frameworks that creates an environment that encourages digital innovation.
If the industry embraces all these frameworks, I believe we will successfully achieve the national objective of increasing the family takaful penetration rate.
What do you think is lacking now in the takaful industry?There is underutilisation of digital technology within the takaful sector.
At FWD, as part of our customer-led approach, we have developed both technology-enabled traditional and new distribution models that hopefully will allow customers to engage with us in ways most convenient to them.
What are the untapped areas of growth you see? Among them would be the lower-income customers that have limited access to the rights plans for them; tech-savvy millennials, whose purchasing behaviours are unpredictable; and protected/insured customers who are under protected/insured.
According to a protection gap study conducted by the industry, 90% of insured Malaysians are still underinsured.
Today, the onus is on takaful providers to take advantage of new technologies – especially when rolling out products that are affordable, accessible and easy-to-understand for customers, which, if done right, will open up access for us to penetrate the untapped areas while at the same time achieve profitability for the takaful operator.
Will takaful agents go extinct?No, of course not. Agents will always have a place in this ecosystem, especially in a country such as Malaysia where people generally still prefer human interaction and connection.
However, their form is likely to be different; the profile of an agent 30 years back and the profile of an agent today is totally different. We wouldn’t know what kind of form it will be 30 years or even 10 years down the road. Agents that continue to remain relevant will be the ones that adapt well to the demanding and ever-changing market today that is customer-driven and digital-enabled.
With information now readily available at people’s fingertips, customers today expect higher professionalism, faster service quality and turnaround time from service providers and representatives – in our case the agency force. What other best way to do it then by embracing digitalisation and embedding it into the distribution delivery and management ecosystem.In order to stay relevant, agents today need to be different.
At FWD Takaful we intend to provide our business partners and advisors across all channels with the tools and capabilities that will differentiate us from the others:
> Fully digitise our business across the entire customer life cycle by streamlining our underwriting and claims submission processes;
> Evolve FWD Takaful to be a modern and digital company in the takaful/insurance sector in Malaysia; and
> Equip our business partners/distributors with a digitalised needs-based analysis tool to make financial planning seamless yet accurate, enabling our advisors to provide financial consultation with increased efficiency.
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