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EFU Life Assurance set up 27 Takaful branch

EFU Life Assurance set up 27 Takaful branch

The entry of conventional insurance players into the Takaful market will result in high growth in the Shariah-tahir seachekcompliant segment of the industry, said EFU Life Assurance CEO Taher G Sachak.The largest conventional life insurance company in the private sector in terms of total assets, EFU Life Assurance became the country’s first company to receive regulatory approval in February to launch window Takaful operations.With Rs50 million capital contribution to the statutory fund set up to launch Islamic products, EFU Life Assurance aims to achieve “high growth” in the Takaful segment, particularly in initial years.In a recent interview, Sachak said the expected share of Takaful in the company’s overall gross premiums after three years is between 15% and 20%.“EFU Life Assurance has already set up 27 Takaful branch offices in over 14 cities with a dedicated sales force of more than 300 consultants. In addition to the field force, jobs have also been created in operations and training,” he said.After the introduction of regulations governing the Islamic insurance market, two full-fledged Takaful companies started operating in Pakistan in 2007. Although these companies have grown substantially in the last eight years, their size relative to the conventional insurance footprint in Pakistan is still miniscule.Total assets of Pak-Qatar Family Takaful and Dawood Family Takaful at the end of 2014 amounted to a little over Rs9 billion. It equalled only 6.5% of the total assets of private conventional life insurance companies, which equalled Rs139.1 billion in 2014.Takaful companies resisted the revised set of insurance rules that the Securities and Exchange Commission of Pakistan (SECP) released in 2012. The rules allowed conventional companies to sell Islamic products through window operations. Saying that conventional companies selling Islamic products would result in cannibalisation, existing Takaful players contested the regulator’s decision in court. The two-year-long legal battle ended in an out-of-court settlement last year, thus paving the way for the implementation of the new set of insurance rules.“The advent of dedicated Islamic banks has not stopped the growth of conventional banking and the same phenomenon will apply to our Takaful business – the size of the pie will increase,” Sachak said.Besides being capital intensive, setting up a subsidiary would have meant that the company could not fully leverage its human capital, technology and the substantial distribution channels and that would negate the objective of promoting Shariah-compliant products, he added.Just like its conventional business, EFU Life Assurance runs three primary distribution channels for its Takaful segment: sales force including dedicated Takaful consultants, group family Takaful channel servicing corporate clients, and bancassurance, which is the sale of products through commercial banks. Sachak says the company has tie-ups with seven banks this year for its bancassurance distribution channel.“With only six private players in the market, (insurance) is still considered to be in its infancy stage. There is massive potential in the industry and it is bound to grow in the coming years,” he stated.