The Prospects of the General Takaful Industry
in Malaysia
Takaful industry has
demonstrated resilient growth despite global economic turbulence. In 2021, the
Malaysian takaful industry's contribution growth has been led by family
takaful, which jumped 46.7% in the first half of the year from 7.08% in 2020.
On the other hand, general takaful grew by 13.5% in the same period from 4.61%.
Malaysia’s general Takaful contribution accounts for 14% of the total general
insurance premiums. The amount compares favourably with Indonesia’s takaful contribution
at 5% of the total, despite the fact that the latter’s Muslim population share
is larger than Malaysia’s. This article discusses the factors and
recommendations to improve the takaful market, from awareness building to retakaful integration.
Factors that help in building a robust takaful
market
This achievement is
largely attributable to a robust regulatory framework, as Malaysia is the first in the world to implement a risk-based capital
(RBC) framework for Takaful. Additionally, the framework also
made it a requirement for companies to disclose their wakalah (agency) fees in
their sales documents. Other than that, the government has also been supporting
the sector in terms of awareness building and providing suitable assets for
investment. Takaful stakeholders have also launched innovative solutions such
as universal life and accumulation/decumulation retirement products.
Recommendations to accelerate the takaful
industry
a)
Awareness building and more effective branding
rank first. Fundamental (and distinguishing) features such as profit sharing
are still insufficiently understood.
b)
Leveraging on technology to rely much less on
agents to gain an advantage over conventional counterparts.
c)
Coming up with innovative product
differentiation to compete with conventional insurance
d)
Integrate retakaful as a tool to reduce
financial and insolvency risks
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With the expansion of
the takaful market, operators have to come up with innovative products together
with ways to diversify their financial risks to avoid insolvency during
disastrous events. Malaysian Re, under its Malaysian Re Retakaful Division
(MRRD), is a key player in the retakaful market. It was established to
complement Malaysian Re’s conventional reinsurance operations by extending the Shariah-compliant
supply chain to local & international takaful operators. Head over to https://www.malaysian-re.com.my/our-solutions/retakaful to read more.