Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani Head of Marketing &...
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Transcript of Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani Head of Marketing &...
TakafulOpportunities &
Challenges for the Pakistani Market
Azeem Pirani Head of Marketing & Alternate
DistributionPak-Qatar Family Takaful
August 11th, 2007 – Avari Hotel, Lahore
11th August 2007 1
Takaful – A product and an ideologyDifferences between Takaful &
InsuranceThe Pakistani Market
OverviewChallengesOpportunities
Our responsibilityConclusion
Agenda
11th August 2007 2
Takaful- A product and an Ideology
Takaful comes from the Arabic root-word ‘kafala’- guaranteeTakaful is not only a tool to mitigate loss or to make halal profits. It is an ideology which promotes
Solidarity and joint guarantee Self reliance and self sustainability for community well beingAssistance to those that need itCommunity pooling system
11th August 2007 3
Differences between Takaful & Insurance
What is Insurance?A tool for Risk Mitigation and Financial ProtectionA tool to enable people to save (Life Insurance)
Key differences between Takaful and Insurance are:
Risk Sharing Vs. Risk TransferWakeel Vs. GuarantorAmeen Vs. OwnerDifferent type of Contract
11th August 2007 4
Issue Conventional Insurance
Takaful
Basis Risk Transfer Co-operative risk sharing
Laws Secular/Regulations Shariah & Prudential regulations
Ownership Shareholders Participants
Mgmt status Company Management
Operator
Form of Contract Contract of Sale Cooperative, Wakala or Mudarbah with Tabar’ru (contributions)
Investments Interest based Shariah compliant
Surplus Shareholders’ account
Participants’ account
Differences between Takaful & Insurance (cont.)
The Pakistani Market – An Overview
Pakistan - OverallPopulation: 6th amongst global nations. 166 m.Population in 2015: Still 6th . 193 m.Urbanization: Presently at 33%Urbanization by 2015: 39%GDP Per Capita: $753
11th August 2007 6
The Pakistani Market – An Overview (cont)
Pakistan – Insurance MarketPenetration of Insurance
Pakistan: 0.7% of GDPIndia: more than 3% of GDPIran: approx. 1% of GDP
Family & General CompaniesFew Innovative Products. Very recent change in this area
11th August 2007 7
The Pakistani Market – Challenges for Takaful
Resistance to Insurance, and its benefits, due to different reasons
Conservative spending habitsIgnorance of its benefitsProducts which do not meet buyers needsReligious reasons
Tawakkul issue“Tie your camel first, then put your trust in Allah (SWT)”. <Tirmidhi>“It is better for you to leave your heirs wealthy rather than poor and asking others for their needs”.
Non-Shariah compliant elements11th August 2007 8
The Pakistani Market – Challenges for Takaful (cont.)
Government regulations untestedHuman resources for the sector
Shortage of trained human resources in insuranceNegligible knowledge of Takaful present amongst the publicFew training programs available for Takaful and insuranceInsurance has generally never been the occupation of first choice for new graduates
11th August 2007 9
The Pakistani Market – Challenges for Takaful (cont.)
Education and AwarenessLack of knowledge about Takaful and insurance amongst the massesIgnorance of Takaful amongst the ulemaSignificant budget required just to ensure that knowledge permeates to all segments/levels of society
Marketing & Sales issuesPoor impression of insurance sales persons amongst the publicGenerally poor ethical standards amongst insurance sales personsGeneral lack of faith on insurance companies meeting their obligation in a efficient and polite manner
11th August 2007 10
The Pakistani Market – Challenges for Takaful (cont.)
Operational IssuesLimited avenues for revenue at Takaful co. as compared to insurance onesTo be competitive Takaful co. will need to use effective IT systems – heavy investmentsNew Takaful co. will need to ensure that they do prudent underwriting; thus eating into the possibility of having a larger number of customers
11th August 2007 11
The Pakistani Market – Opportunities for Takaful
Economic/Social conditions in Pakistan make Takaful a NECESSITY
Lack of govt. social safety netNegligible provision of reliable health care by the govt.Quality education is beyond the reach of the average citizen and the institutions provided by the govt. lack the required standards
11th August 2007 12
The Pakistani Market – Opportunities for Takaful (cont.)
Strong growth in the Islamic financial sector provides Takaful with a natural market
Islamic Banks and mutual funds will need Takaful to package with their other productsIslamic Financial institutions presently have no Family coverage for their staff
Massive untapped market in Pakistan for risk mitigation tools
Given the necessity of these tools insurance has not even touched the surfaceGiven the ‘plain vanilla’ menu provided to customers there is a great opportunity for innovation
11th August 2007 13
The Pakistani Market – Opportunities for Takaful (cont.)
Ethical and Shariah compliant model for risk mitigation and financial protection
Large number of people who stay away from insurance due to religious beliefsLarge number of our population can be considered as ‘religious’ and so Takaful will be in line with their beliefsEducated citizens, although not religious would prefer to use an ethical model than one which is built on making profits by trying to avoid having to pay claims
11th August 2007 14
Takaful – What should you do about it?
As educated professionals WE have a responsibility to our fellow citizens to guide them to what is good for them. This is especially important when the people are living at a level where income equals expenses
Convey the critical nature of financial protection to othersExplain the benefits of getting financial protectionIntroduce the new concept which is not only ethical but also Shariah compliant
Just start from those around you….11th August 2007 15
Conclusion
Takaful is not only here to stay; it’s going to GROW!It’s ethical and Shariah compliant nature allows Takaful to overcome the inherent problems with InsuranceThe Pakistani market has challenges but also has a lot of opportunitiesThere are a lot of opportunities for Takaful operators to make healthy profits in PakistanAlthough Insurance coverage is not the norm in Pakistan we need to work to make Takaful something everybody uses
11th August 2007 16
Conclusion (cont.)
11th August 2007 17
Jazak-Allah khair
For further information contact:
(021) 438-0357 to 61
www.pakqatar.com.pk (launching soon!)
11th August 2007 18