Family takaful business lacks awareness

Indeed, Pakistan has witnessed a significant growth in family takaful business post-coronavirus pandemic but the overall industry is still not recognised in terms of getting maximum lives covered under the umbrella of Islamic Insurance (takaful), better yet, insurance.

“The way society feels that banking is a basic need, it does not feel the same when it comes to takaful, or even insurance for that matter, Pak-Qatar Family Takaful chief executive officer Azeem Pirani said.

Pakistan is a country with a population of over 200 million, of which, over 100 million are registered adults. Yet the country only has fewer than 40 million bank accounts and less than 10 million individual life insurance coverage. The latter represents 0.9 per cent of gross premiums of Pakistan’s GDP, compared with the regional average of 2.2 per cent and the global average of 6.6 per cent.

“We, as an industry, have still a long way to go in creating awareness and underlining the importance of getting health and lives covered for individuals, because protection, whether for healthcare or life, should be a basic need,” Pirani said.

The primary reason takaful business does not flourish is the lack of knowledge. When it comes to takaful, that too being an alternative to conventional insurance, the population of Pakistan is still not aware and educated enough to understand the true essence of the product offering.

According to a study, most of the people surveyed termed insurance ‘haram’. But when it comes to the banking system, these people avail the most lucrative interest-based banking facilities, which shows that the issue is less related to faith and more towards the lack of awareness of the essential nature of this product, he said.

A few other reasons for this difference regarding the growth would be head-start in terms of time, very strong and organised support from their regulator and peers in the industry, and sheer financial strength of banks in terms of their capitalisation, compared with the insurance/takaful sector.

Pirani also said that there is no doubt that the entire takaful and insurance sector needs a major drive to increase awareness in the society. This cannot be done by just having ad hoc workshops, trainings, and seminars.

This requires a more all-encompassing education across the society so that if not the current generation, at least the next one will realise the benefits of proper financial planning and protection. To achieve any level of critical mass of this level in effort, it will have to be done by the industry and the regulator combined by taking into consideration the education system, as well as other pillars of the society, he added.

There are minor aspects where improved regulations can provide a more level-playing field but, as with any other part of the economy, these will also improve with time and experience.

“We are seeing positive signs from the regulator, in its efforts to involve the industry when developing regulations, as well as from our peers in the industry, who are more willing to sit with each other to find better ways and to work out issues of concern to all the players.”

“This gives us hope that we will soon be seeing things improving on a collaborative basis and; thus, providing for a more sustainable and balanced growth in the industry,” the Pak-Qatar Family Takaful chief executive officer said.

“We, as Pakistan’s pioneer and the largest takaful group, led by setting examples; we partnered with IBA CEIF (Center for Excellence in Islamic Finance) and hosted webinar sessions to educate the masses about the concept and how it functions. This not only helped us in the process but highlighted the takaful industry, as a whole.

“Besides, we are also working collectively with our regulating body to bring out solutions, which will help the overall cause,” Pirani added.

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