Takaful Opperunities and Challenges By Azeem Pirani
Takaful
Opportunities & Challenges
for the Pakistani Market
Azeem Pirani
Head of Marketing & Alternate Distribution
Pak-Qatar Family Takaful
11th August 2007 August 11th, 2007 – Avari Hotel, Lahore 1
Agenda
Takaful – A product and an ideology
Differences between Takaful & Insurance
The Pakistani Market
Overview
Challenges
Opportunities
Our responsibility
Conclusion
11th August 2007 2
Takaful- A product and an Ideology
Takaful comes from the Arabic root-word ‘kafala’-
guarantee
Takaful 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 being
Assistance to those that need it
Community pooling system
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Differences between
Takaful & Insurance
What is Insurance?
A tool for Risk Mitigation and Financial
Protection
A tool to enable people to save (Life Insurance)
Key differences between Takaful and Insurance are:
Risk Sharing Vs. Risk Transfer
Wakeel Vs. Guarantor
Ameen Vs. Owner
Different type of Contract
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Differences between
Takaful & Insurance (cont.)
Issue Conventional Takaful
Insurance
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
The Pakistani Market –
An Overview
Pakistan - Overall
Population: 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 Market
Penetration of Insurance
Pakistan: 0.7% of GDP
India: more than 3% of GDP
Iran: approx. 1% of GDP
Family & General Companies
Few 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 habits
Ignorance of its benefits
Products which do not meet buyers needs
Religious 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 elements
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The Pakistani Market –
Challenges for Takaful (cont.)
Government regulations untested
Human resources for the sector
Shortage of trained human resources in insurance
Negligible knowledge of Takaful present amongst
the public
Few training programs available for Takaful and
insurance
Insurance 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 Awareness
Lack of knowledge about Takaful and insurance
amongst the masses
Ignorance of Takaful amongst the ulema
Significant budget required just to ensure that
knowledge permeates to all segments/levels of society
Marketing & Sales issues
Poor impression of insurance sales persons amongst
the public
Generally poor ethical standards amongst insurance
sales persons
General 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 Issues
Limited avenues for revenue at Takaful co. as
compared to insurance ones
To be competitive Takaful co. will need to use effective
IT systems – heavy investments
New 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 net
Negligible 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 products
Islamic 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 surface
Given 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 beliefs
Large number of our population can be
considered as ‘religious’ and so Takaful will be in
line with their beliefs
Educated 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
others
Explain the benefits of getting financial protection
Introduce 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
Insurance
The Pakistani market has challenges but also has a
lot of opportunities
There are a lot of opportunities for Takaful operators
to make healthy profits in Pakistan
Although 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
info@pakqatar.com.pk
www.pakqatar.com.pk (launching soon!)
11th August 2007 18
