There was a recent article with comments from the Commissioner of Insurance Nigeria which talked about the challenges of increasing insurance penetration rates in Nigeria. It was mentioned that this was due to the challenge of public apathy to insurance. Thus, by introducing insurance arising from religious and cultural beliefs it will get more public attention and solve the challenges. With this in mind the Commission introduced takaful and micro-insurance products in the country in an attempt to reach the segment of the market that is uncomfortable with conventional products since the country is dominated by Muslims.
From our perspective, it is great that Nigeria has pushed forward with takaful. This is useful and positive. It is very impressive to see the passion of Nigerian people towards their religion: the Muslims with a passion for Islam and the Christians a passion for Christianity. It has been witnessed, that during conferences, mentioning the word Shariah has provoked multiple people to stand up and object strongly to the concept of Takaful. Hence, we need to explain to the public that Takaful is NOT insurance only for Muslims but rather insurance based on Islamic values of transparency, fairness and people getting together to help each other. By pointing this out during the said conference, the mood softened greatly.
This leads to a concept promoted by Dr Rafik of Munich Re (Retakaful) which has been presented several times and that is the concept of ethical insurance, which Takaful would be a part of. This is a great idea actually, discussing what it means to have ethical insurance and implementing it for all who wish to adhere to it. In Nigeria this perhaps would mean two shariah (religious) councils, one for Muslim scholars and one for Christian scholars. As much as this sounds chaotic the reality when looking at the decisions of Christian insurance companies (see Christian Super in Australia) is that the similarities are far greater than the differences. This would be innovative; it would help to define in more detail exactly what ethical insurance would look like and would be completely in line with the goals of the Commissioner.
The challenge we face when helping some companies start Takaful operations is the underlying belief that as soon as an Islamic solution is available everyone will line up to purchase Takaful. At the core of Takaful is the need for risk management. There must be an awareness of risk management and how Takaful products can solve risk management needs.
The Takaful model as well would need to be consistent with what is common in the community. There is no verse in the Quran which says “thou shalt use Takaful”. Takaful is a foreign term to many Muslims, even though it is designed to help Muslims. However, it is common for a village to join together when tragedy strikes one family to collect funds to assist the grieving family. Thus, if Takaful is designed to be as close as possible to the traditional practices of villages to combine funds together to help each other Takaful can truly succeed.
