Malaysia’s Islamic insurers are seeking to double policy holders in five years by investing more in digital technologies to attract a younger audience, according to the industry association’s head.
Takaful operators should also step up educational campaigns to boost customers to 8.4 million by 2020 from about 4 million now, Ahmad Rizlan Azman, chairman of the Malaysian Takaful Association, said in an interview from Kuala Lumpur Tuesday. The Shariah-compliant industry is aiming for a 25 percent market share compared with 14 percent at the end of 2014, he said.
Islamic insurance in Southeast Asia has the potential to catch up with the leader Saudi Arabia, driven by increasingly young populations and strong economic growth, according to a report from Ernst & Young LLP, which forecasts global assets will climb to $20 billion by 2017 from an estimated $14 billion last year. Attracting more professionals is another prerequisite to achieving Malaysia’s targets, Ahmad Rizlan said.
“There’s still much to be done in increasing awareness of takaful insurance amongst Malaysians,” said Mohamed Hassan Kamil, group managing director of Kuala Lumpur-based Syarikat Takaful Malaysia Bhd. “With less than 60 percent of the population having a life insurance or a family takaful policy, there is still very high upside potential.”
Takaful is based on mutual assistance, where policy holders contribute a sum of money to a common pool managed by a company. The funds are used to pay for claims and any excess is returned to customers. Shariah law prohibits the payment of interest and embraces both profit and risk-sharing.
Malaysia is seeking to bolster its position as a global Shariah-compliant hub after pioneering Islamic finance 30 years ago. About 61 percent of the country’s 30 million people are Muslim. U.S. government data estimates 46 percent of the population are 24 years old or younger, compared with 43 percent of Indonesia’s 253.6 million.
Islamic insurance assets within the Association of Southeast Asian Nation’s may grow to $6.4 billion in 2016 from $4.2 billion in 2014, according to Ernst & Young’s report. Asean countries account for 30 percent of the global takaful market led by Indonesia and Malaysia, compared with 48 percent in Saudi Arabia, it said.
“We are targeting the underserved and the younger people who are entering the workforce,” said Ahmad Rizlan, who is also chief executive officer of Etiqa Takaful Bhd., Malaysia’s biggest Islamic insurer. “We are doing this by embarking on awareness campaigns at the tertiary level.”
In countries such as Malaysia, Singapore, Indonesia and Thailand there’s an impetus for companies to embrace digital in financial services, the public sector and media and telecommunications, according to a Deloitte Touche report in May as it started Deloitte Digital in Southeast Asia. Smartphone penetration in the region is expected to expand at a compound annual growth rate of more than 20 percent, it said.
“Digital is the CEO’s next battleground,” said Jonathan Rees, executive director of Deloitte Digital in Southeast Asia. “As the engine room for growth in emerging markets, responsibility for digital cannot be delegated. It must start at the top.”
Malaysia’s central bank introduced new rules in 2013 requiring insurers to have clearly defined licenses for takaful and those covering conventional policies to ensure transparency and Shariah compliance. That should help boost efficiency and market growth, according to Ahmad Rizlan.
Syarikat Takaful’s Mohammad Hassan said the nation’s Islamic insurers have to push for innovative new ideas to keep their growth momentum going. The company is considering an acquisition in the next two years to increase its customer base, he said.
“Takaful operators need to be innovative and to offer products that are competitive with conventional insurers to entice policy holders,” said Mohd. Effendi Abdullah, Kuala Lumpur-based head of Islamic markets at AmInvestment Bank Bhd. “If that can be done, then it’s possible for takaful operators in Malaysia to double policies in five years.”