In Pakistan, to maximize advantage of the potential of Islamic alternative of non-life Insurance, the general takaful operators in early years (2007 onwards), failed to adopt a cohesive approach in promoting the cause of Takaful as a Shariah compliant risk-coverage mechanism. Ironically, overlooking the desired Islamic spirit of transparency in dealings, they aggressively competed (adopting typical marketing practices of conventional such as undercutting rates); thereby creating a poor non-professional and unethical image of the Takaful industry. Rather, questioning the workability of the general takaful Wakala model (Pak Kuwait - the first and largest of their time to disappear from the scene).
With regard to HR factor generally, opportunism has been the deciding factor for individuals with conventional insurance background, to join newly formed takaful operators at senior/middle management levels, while entirely missing the required spiritual motivation to appreciate the Shariah requirements, and to faithfully contribute for the cause of Takaful on sound and prudent commercial practices within the Shariah framework, to this effect not much has changed, despite entry of 21 windows in general Takaful.
For obvious reasons, the basics of Islamic principles, are lacking on the part of general takaful operators to practically demonstrate attraction for zealous Muslims to opt for takaful - as a system to meet their risk-protection needs in a Shariah compliant manner.
Earlier, Motor Takaful has been the dominating class (being well over 50% as against conventional around 20%), and there has not been any of the entire business, significant change in the said trend, after Windows.
All classes combined loss ratio, has come down to a commercially viable level, whereas the expenses exceeding 40% against Wakala Fee ranging from 35-40% remained a source of concern for the general takaful industry.
The cause and sprit of Takaful in Takaful Rules 2012 (the Rules) have not been sufficiently addressed to up-held the writ of the Shariah. The Rules present Takaful as a product rather a true reflection of a legal frame work featuring supremacy of Shariah, distinctly distinguishing Takaful from conventional insurance. Particularly, allowing insurers to transact takaful via "Window" without ensuring a clear divide (to avoid mingling) between takaful and insurance related activities.
Non - existence of a Shariah Advisory Board, leaving Shariah Advisor of each company at the helm of Shariah matters of respective companies, which understandably would create confusion/chaos, thereby generating/promoting corrupt practices to nurture greed and selfishness; thus, tarnishing importance of Shariah.
A brief of challenges / opportunities for general Takaful Industry is summarized below:
-- In 2016, SECP specifically mandated through an amendment, for regulating and facilitating the growth of Shariah Compliant financial products.
-- Share of Shariah Compliant assets of NBFI industry has steadily grown from 12% to 35% in seven years, whereas mutual funds have sharply risen from 9% (2010) to 43% (2017).
-- A new concept of Shariah Compliant Company has been introduced through the Companies Act 2017.
-- Under the enabling provision of the Companies Act, 2017, a holistic Shariah Governance Frame Work is being drafted.
-- Capacity in non-motor Takaful is a serious issue as 'A' rated Retakaful Operators are few and highly demanding.
-- Underdeveloped Bond and Sukuk markets, which are yet to be focused for opportunities these hold.
"Takaful Pakistan Limited", now being MCR compliant, with the potential, capacity and capability vying to leap forward demonstrating workability of "The Takaful-Wakala Model", and Insha Allah will turn into a success story.
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