Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani

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Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani Head of Marketing & Alternate Distribution Pak-Qatar Family Takaful August 11 th , 2007 – Avari Hotel, Lahore 11th August 2007 1

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Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani Head of Marketing & Alternate Distribution Pak-Qatar Family Takaful August 11 th , 2007 – Avari Hotel, Lahore. Agenda. Takaful – A product and an ideology Differences between Takaful & Insurance The Pakistani Market - PowerPoint PPT Presentation

Transcript of Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani

Page 1: Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani

TakafulOpportunities &

Challenges for the Pakistani Market

Azeem Pirani Head of Marketing & Alternate

DistributionPak-Qatar Family Takaful

August 11th, 2007 – Avari Hotel, Lahore

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Page 2: Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani

Takaful – A product and an ideologyDifferences between Takaful &

InsuranceThe Pakistani Market

OverviewChallengesOpportunities

Our responsibilityConclusion

Agenda

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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

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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

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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.)

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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Conclusion (cont.)

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Jazak-Allah khair

For further information contact:

(021) 438-0357 to 61

[email protected]

www.pakqatar.com.pk (launching soon!)

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