Whilst there isn’t a “perfect” Takaful company, there are certain situations which we see as being conducive to succeeding. We have listed some important factors based on our nearly 40 years of experience assisting clients to develop Takaful operations in a number of markets, with so many different types of value propositions and ideas:
- A ready sales force. This could be existing conventional insurance agents (from a sister company perhaps) or the ability to tap into the operations of a sister company for sales, such as through a bank, cooperative or similar structure.
- Takaful regulations in place. It is not necessary to have Takaful regulations set up in order to succeed in Takaful. Take Singapore as an example. As long as an insurer follows all the rules of the insurance regulator they are welcome to call themselves Takaful or any other name. However, with formal Takaful regulations there is at least the effort to ensure that Takaful is being treated fairly versus conventional insurance. An example of an environment where there is perhaps a lack of fairness would be Bangladesh, where Takaful operators must invest in conventional bonds as a part of the insurance regulations.
- A variety of potential Islamic assets to invest in, especially from Islamic banks. Again having Islamic assets are not required to succeed, as a Takaful operator can perhaps structure their own assets, but traditionally Islamic banks and Takaful have had a very symbiotic relationship, where once Islamic banks start to thrive Takaful is normally close behind.
- An attitude of respect for the unique aspects of Takaful. This is perhaps the most controversial of aspects. In Malaysia the majority of Takaful operators are owned by a global conventional insurance company. This is great, but within these Takaful operators there are varying levels of respect for the unique aspects of Takaful and a desire to dive into market segments which would be unique. To state this differently, when there are two insurance operations in a market from one owner (Takaful plus conventional), either they would have similar products for different market segments or different products for similar market segments. Where a Takaful operator actively explores the unique features of Takaful this allows for differentiation and the ability to push into new market segments.
- Strong technical assistance. Takaful requires the same level of guidance and oversight as a conventional insurance operation, perhaps even more since treating customers fairly is an implied strength of Takaful which can never be taken lightly. Thus with an actuarial team (or outside assistance) helping with model and product design there is a much better chance at success. “Insha’Allah” (God willing) is good to say, but as the often quoted hadith (saying of the Prophet) in Takaful says: we must “tie our camel” first.
It is with the above in mind that we were happy to hear of the establishment of a new Takaful company in Turkey: Bereket Takaful. Bereket Sigorta is a subsidiary of the Turkish Agricultural Credit Cooperatives (ACC) and has the slogan of being “Beyond Insurance”. The ACC is Turkey’s largest farmers’ organisation, with 17 regional unions, 1,625 cooperatives, 197 branches, 20 domestic and overseas companies, 12,000 employees and approximately 850,000 partners. Turkey has had a Takaful law since 2017. With strong technical support and guidance this would certainly be good conditions for this new Takaful operation to succeed.
The original article announcing Bereket Takaful is here: