Pakistans insurance industry may see a breakthrough in the coming years. Reportedly, the long held stay order on Takaful Rules 2012 has been taken back by Sindh High Court, thus allowing conventional insurers to jump into Takaful business–a Shariah compliant insurance alternative.
To recall, Takaful rules issued back in 2012 sent conventional insurance companies the green light to participate in window Takaful operations. Later, Takaful players in the industry objected and filed a petition in the court against the provisions of the rules.
The consent, however, hurled positive vibes amongst conventional insurance companies who have been itching to step into Takaful business. Muhammad Asif Arif, Commissioner Insurance at SECP in a conversation with BR Research stressed on the fact that a large chunk of Pakistans population consider insurance against the principles of Islam.
He attributed this as one of the key reasons why insurance penetration in Pakistan has been trifling.
Much to the industrys woes, Pakistans insurance penetration remains one of the lowest in the region, thus pleading the industry to fill the gap and stand at par with regional counterparts.
And, with the allowance of Takaful window to conventional insurers, it looks like the gap can soon be filled. “Takaful can turn out to be a way out for a large chunk of Muslim population in Pakistan that has been turning down insurance just on religious grounds,” Asif enlightened further.
While the existing Takaful operators might be mulling over the decision, it should be pointed out that opening the doors for conventional insurers will bring in the required resources and expertise in the Takaful industry in terms of sales force and extensive network of distribution channels.
“With conventional insurers entering into Takaful business, the share of Takaful industry in Pakistan can go up to 15 percent in the next three to four years from its existing share of five percent,” Asif added.
With a number of life and non-life insurers feathering nests to enter the Takaful business, a growth of 15 percent doesn seem surprising!