innovating family takaful products and linking to … · innovating family takaful products and...
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Innovating Family Takaful Products and Linking to Better Consumer Needs5th Annual World Takaful Conference, Family Takaful Summit Malaysia 2014
11 June 2014
Farzana Ismail, [email protected]
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Agenda
Family Takaful in Malaysia
What do customers want?
Where are the gaps in the market?
Opportunities and challenges
Conclusion
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Family Takaful Market in Malaysia
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Total US$5.31 billion excluding Saudi Arabia and Iran, from 2013 EY World Takaful Report. Total Africa is
527 million, split for Sudan is estimated
The Current Takaful Market
2012 Takaful Sales (US$ million):
1. Malaysia 1,931
5. Qatar 305
2. UAE 1,142
4. Sudan 491
3. Indonesia 666
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2013 Malaysia Total Insurance Market
Product Total
Premium (US$ million)
%GDP %GNI
Spending
Per Capita
APE (US$
million)
TakafulFamily New Business 1,086 0.4% 0.4% 37 302 Family Renewal 809 0.3% 0.3% 27 376 General 585 0.2% 0.2% 20 585 Total 2,480 0.8% 0.8% 83 1,263
ConventionalLife New Business 2,496 0.8% 0.8% 84 1,361 Life Renewal 5,540 1.8% 1.9% 187 5,540 General 4,791 1.6% 1.6% 161 4,791 Total 12,827 4.3% 4.3% 432 11,692
Grand Total 15,307 5.1% 5.1% 515 12,954 Sources: ISM Statistical Bulletin Family Takaful Market Performance Report 2013
BNM Monthly Statistical Bulletin (March 2014)
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2006 2007 2008 2009 2010 2011 2012 2013
2,001 2,477 3,249 3,697 4,399 4,834 5,832 6,219
717768
8741,054
1,3461,600
1,7471,918
Family Business General Business
Overview of Takaful Market in MalaysiaContribution Total gross contributions for Family and General Takaful businesses were at
RM8.1 billion in 2013, an increase of 7% from 2012. Family Takaful is growing at a higher rate than General Takaful. Over 75% of the total contribution comes from Family Takaful.
Family Business General Business Total Takaful Business
2006 – 2013 CAGR 18% 15% 17%
• Total gross contribution from Family Takaful includes new and inforce businesses.
Source: Actuarial Partners’ analysis of Takaful Statistics by Bank Negara Malaysia
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Banking deposit size in MalaysiaConventional vs. Islamic Banks
Source: Bank Negara Malaysia
• Strong growth in credit-related takaful business due to the growth of Islamic finance and mortgage business
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Current Malaysia Family MarketSplit by Product
Annual Contribution Equivalent (ACE) Jan – Dec 2013ACE is determined as 100% of Regular Contributions and 10% of Single Contributions
Source: ISM Statistical Bulletin Family Takaful Market Performance Report 2013
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Popular takaful products in Malaysia
Products Factors driving its growthInvestment-linkedproducts
• Lower Risk-Based Capital (RBC) requirements
• Flexibility of the product to cater for client’s individual needs
• Growth of agency forceCredit-relatedproducts
• Driven by the growth of the Islamic banking sector in Malaysia
• Growth in mortgage businessMedical products • Demand from the consumers
• Players develop capabilities to write business
Largely credit-related products sold via the banca channel
and investment-linked policies sold via agency force
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What do customers want?
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What do customers want?
Credits to the movie “Jobs” (2013)Source: http://www.youtube.com/watch?v=NMQDTQnNsZ0
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Do customers know what they want?
“How does somebody know what they want if
they haven’t even seen it?”
Steve Jobs
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What customers do not want?
To be pestered and bothered To be confused To be pressurised
e.g. product pushing
To feel time is wasted To feel ripped off
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What customers might want?
To get a good deal To feel important Sales process that is efficient
To have control To deal in trust and confidence Purchase satisfaction
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How can Takaful products be better shaped to meet market needs?
What are the gaps in the market?
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Key gaps in the Malaysian market
Rural areas
Younger age groups
Low income groups (particularly self-employed)
Takaful operators need appropriate distribution
channels and suitable innovative products
to counter these challenges
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68%
19%
10%
2%
Malaysia Takaful Industry (ACE)
Agency ForceBancatakafulFederal TreasuryDMTM
Source: Actuarial Partners' estimates based on internal analysis of industry data.
Malaysia Takaful Market New Business By distribution channel
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Using banks to target rural market in Malaysia
Muslim majority rural areas are defined as Kelantan, Terengganu, Pahang, Kedah and Perlis
Bank Total Branches
BSN 402 PruBSN TakafulAgro Bank 196 STM and MAATMaybank Islamic 398 Etiqa TakafulCIMB Islamic 290 Sun Life TakafulBank Rakyat 142 Tends to work with IkhlasBank Islam Malaysia 127 STM Public Islamic Bank 258 IPTEB now AATBRHB 195AM Islamic 188 AM TakafulHL Islamic 182 Hong Leong MSIG Takaful17
Branches in Muslim areas Bancatakaful Partner
9262
4857
3734
37
2124
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Alternative channels to reach rural areas
Tie up with existing infrastructure e.g. postal services
Other existing infrastructures which can be utilized include insurancesales via mobile phones and small retailers.
Telemarketing as those in rural areas are typically more receptive totelemarketing compared to those in the urban areas
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Reaching out to the younger populationsThe younger generation, even the urban poor, use smartphones, sotakaful may best be sold via their cellphones combined with the internetor/and social media.
“Then there are unique generational preferences – chief among themthe propensity of younger people to conduct as much as possible oftheir lives online”
Source: (1) Google – Our Mobile Planet March 2014 (graph) (2) French, O’Neill. The future of life insurance. E&Y Fall 2012.
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Lower Income Market
The lower income market are generally members ofcooperatives, who they trust for advice. Thus low cost solutionsthrough cooperatives can be used for sales
Source: ABI Quarterly Consumer Survey 2010 Q4 (2608 responses)
Whose financial advice would you trust the most?
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Mosques are a natural means of sales and collections for a pure takaful pool
Sultan Omar Ali Saifuddin Mosque (Bandar Seri Begawan, Brunei) (Image Credit: Tylerdurden1)
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Reaching out to Muslims in non-Muslim countries
Put a map of the world and color in countries with Islamic banks and put some names of banks in. Intern….
American Finance House LARIBA Bank with 19 Branches
Islamic Bank of Britain with 5 Branches
Bank Muamalat/ Affin Bank
Al-AmanahIslamic Bank of Philippines with 11 Branches
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Percentage consumers with positive consumer experience on insurance
A complicated buying process combined with a poor understanding of productscan lead to the perception of insurance or takaful having poor value.
Source: “Voice of the Customer Survey, World Insurance Report 2014”, CapGemini
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Simplifying the sales process
The need of medical underwriting only gives opportunities forbuyers to procrastinate.
Remove underwriting burdens from frontline sales using newsolutions in processes and technology.
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Selling the appropriate products to the target market
Products sold need to be appropriate to the distribution channel.
Banca products:
Savings and investment products is consistent with thetypical mindset of banking consumers.
However it should not be in competition with bankingproducts, but complements it.
Direct sales channels (e.g. online, telemarketing) is onlyappropriate for simple products and for certain market segments(e.g. internet savvy and financial savvy individuals).
Products for the younger generation ideally should be packagedtogether with another commodity (e.g. gym membership)
Products for the low income group need to be very simple and takeinto account affordability of consumers.
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Takaful annuities
With increasing longevity risk in most parts of the world, there is ademand for retirement products.
Defined ambition pensions:
Sharing the unknowns
Minimising guarantees
Addressing some of the financial needs at retirement
Takaful annuities can be structured similar
to defined ambition pensions, sharing the risk with
participants and minimising capital requirements
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Conclusion
Developing affordable products and using the appropriatedistribution channel are essential factors to tap into the marketgaps of younger ages as well as the lower income groups.
The product gap at retirement continues to be a challenge.
Diversification into other distribution channels will likely gainstrength.
The sales process should be simplified.
In developed and internet-savvy countries such as the UK,France and Germany with a large proportion of Muslimminority, banca and the internet are likely to be one of themore effective approach to sell takaful.
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Q & A
Suite 17.02, Kenanga InternationalJalan Sultan Ismail
50250 Kuala Lumpur, MalaysiaTel 603 2161 0433
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