Friday, May 21, 2021 / 01:00 PM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: Ecographics
For Takaful insurance to experience increased adoption and penetration, there must be concerted efforts towards increasing awareness and providing investment platforms for its growth in Nigeria. Mrs. Thaibat Adeniran, MD Cornerstone Takaful Insurance, made the point while discussing "Takaful and the Growth of Nigeria's Insurance Industry".
According to Adeniran, there is a need for an enabling environment that encourages the activities of Takaful Operators by promoting healthy competition.
Speaking on her expectations concerning the market in 2021, she stressed the need for investor education around the value of Takaful to the insured.
She noted that Takaful was for the middle and lower classes in the economy, which would mean the need to develop innovative products and services that could promote financial inclusion.
Considering Takaful operations in Nigeria, she observed that this segment of insurance was a way of bringing people together and mobilizing funds that could be kept in a pool to help whoever faces a challenge within the group.
The principle of Takaful was to find solutions to a catastrophe or calamity and provide assistance through what is seen as a collective contribution. She added that equal investments should be made within the group and must be acceptable to ensure that there is no interest rate misalignment with Shariah principles.
She explained further the types of Takaful which include;
For the family Takaful, she said there are two guiding principles which are Al-Mudaraba where the savings that every participant (Policy owners) called the insured in conventional insurance will take a portion from the savings. Mudaraba is an Islamic system of investment whereby profit and loss are shared. The smaller proportion goes to a pool of funds where all participants must be involved to support any of the participants.
Also, the second Takaful known as General Takaful is a way of savings to cover assets. To protect the occurrence of the risk in asset Takaful is being introduced. For building, you must provide a valuation report which will bring confirmation that the value of the building is either worth the cover, undercovered, or overcovered. Takaful covers Shariah-compliant businesses.
Speaking on the challenges facing the industry, Adeniran said Takaful came into existence in 2003 as a window to support people with savings. According to her, it has contributed to the growth of Nigeria's economy and is a platform that has helped to support economic activities.
On challenges with Takaful, she identified pricing as a major problem, stating that the price of insurance has dropped down while the cost has risen. She encouraged Nigerians to patronize Takaful for their buildings whether residential, rental or for business purposes.
Another challenge she identified was the issue of investment platforms, she noted that most Takaful operators still have idle funds. She said there should be an asset class to invest these funds to achieve reasonable investment income that could cover operating expenses.
She recognized that there has been a remarkable increase in non-interest investment organizations, but called for more of such organisations in the country. Adeniran said there was a need for platforms like the Stock Exchange to sell both primary and secondary instruments to improve the value of Takaful operators.
The insurance specialist noted that the major learning point from the Takaful Industry, through the COVID-19 period has been the ability for operators to leverage digital platforms to improve their operations, carry out virtual conferences, training, and meetings with several innovative steps taken to mitigate the impact of the pandemic.
The Global Takaful market size is currently around $23.5bn and is projected to reach $49bn by 2026.