What will happen to the Takaful industry?

This is just an adaption of a very interesting talk by Yoon of BNM at the SOA Symposium. Digitalization is coming and actually here to stay, as much as things have changed things will continue to change ever faster. Branding and marketing will completely change (see Lemonade), company culture will change and even company culture. There is a strong advantage to new players over incumbents as new players can design themselves for the new generation. Takaful is younger than conventional insurance. It is up to us to design ourselves looking to the future rather than mimicking our conventional insurance counterparts.

The internet of things is also here to stay. We are generating more and more data online and giving it away for free. We will need to connect with the huge global players such as Google or they will find ways of replacing us! As Takaful how can we connect in and use this tidal wave of data? 

The online presence of the insurance industry is well behind other industries, which means less touchpoints with the public. Less touchpoints means fewer insights to consumer needs. Others / new players can lower operational costs and understand customer concerns relative to incumbents. This again clicks to the heart of Takaful – we all fight to get our expenses lower than our wakalah fees. If we are forever copying conventional insurance we will never get there, but if we embrace the digital opportunities we can make a quantum leap. We are younger with much less baggage, we have no excuse! A huge cost when starting Takaful is the IT costs. Skimping on the system dooms us to inferiority. How can we create an online system which all operators can use and pay as they use? We can put global best practices in place and fight on service rather than needing to grow at all costs. We can then focus on people who need Takaful rather than where the easy money is (the mass affluent).

In Malaysia 35% of the adult population have at least one insurance policy. This is lower than the known statistic of 55% as it eliminates double counting of people with multiple policies. I would suggest that this is actually lower if we eliminate compulsory products and products which are overwhelmingly savings oriented (and might not be considered insurance under IFRS 17). Within this though only 4% of households below age 40 have insurance. This is incredibly sad as these are the people who need insurance and Takaful the most as they have young children! Agents as well in Malaysia are 60% focused in the Klang valley, Penang and Johor. The Muslim heartland is mainly ignored, how can we use technology to change this?

Regulators are spurring innovation with things such as regulatory sandboxes, how can we use this to design Takaful the way we always envisioned it to be? In Malaysia motor and fire is being liberalized to promote more equitable pricing, innovation and sustainability. Isn’t this the heart of Takaful?

Takaful actuaries will not be replaced by robots as long as we are driving innovation through creativity. We drive technology adoption such as big data and telematics (yes IBNR is fun but time to focus on the bigger picture!). We leverage on our knowledge to advise our boards and management on the confusing topics of this new digital world. If we cannot get our minds around these issues, who will? Our ability to make confusing issues simple is what will bring Takaful into this new world. Finally we understand the idea of trust in insurance and Takaful and can use the principles of affordability and value in everything we do to increase trust. This will be key to the future of Takaful and we are best placed to drive this. The future is exciting and bright!

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