JEDDAH – The Takaful industry is currently concentrated in limited markets, segments and business lines. However, there is immense unrealized potential that can be achieved. Ernst & Young's World Takaful Report 2011 forecast that the current takaful growth trends would suggest $12 billion in gross contributions by 2012. Excluding Saudi cooperative contributions, total takaful contributions are expected to reach $7 billion by 2012 from $9.1 billion last year. The results have been lower ($8.3 billion) due to industry slow down in core markets relative to the high growth rates seen in previous years, the report added. The anticipated compulsory medical insurance regulation in Dubai and other UAE emirates was not rolled out either. A sizable portion of Muslim populated countries are characterized by having low income/lower-middle income households (Indonesia, Pakistan, Bangladesh, Sudan). They are also characterized by having low insurance penetration rates. "This may be due, in part, to religious views towards conventional insurers but is also due to the unavailability of products suitable to the low income target market," it said. Micro takaful products can allow tapping into the large low income and lower middle income segments characterizing most Muslim populated countries. However, there is limited awareness of insurance products, savings and retirement plans in most Muslim majority countries, the report noted. The market is there for risk mitigation tools but traditional mechanisms are relied upon, it pointed out, and conventional distribution channels are being used to target the takaful market. Moreover, direct sales force, agencies, takaful partners have limited training on takaful and its unique selling proposition. Share of Islamic Finance in GCC and Malaysia is 25 percent and 22 percent whereas takaful market share is 15 percent and 10 percent respectively. Takaful as a predominantly retail driven in most markets, has at least 10 percent of the known Shariah-inclined market that they have not yet tapped. Corporate business is attracted through a value proposition based on the operators reputation, history, product suite, service standards, relationships and pricing. For takaful, the corporate customer segment has significant room for growth. The GCC takaful market predominantly comprises of general takaful business with family takaful accounting for as little as 5 percent in certain markets. With high disposable income average and low market penetration, the GCC presents potential for family takaful large Muslim markets such as Libya, Egypt, Bangladesh, Indonesia and Brunei are opening up to takaful. Besides, recent regime changes in MENA countries including Egypt, Libya and Tunisia have brought forward governments that are encouraging Islamic finance. Bangladesh, Brunei and Indonesia are emerging as important frontier markets for takaful, showing also healthy growth. India, China, Russia, Turkey and CIS countries have immense potential for takaful based on the size of their Muslim populations and the growth in their economies. Takaful has not been permitted and/or facilitated in these markets until now, the report added. Further, these markets hold considerable potential for takaful should there be encouragement from their governments. – SG
