Takaful in the Mediterranean Coming of Age

Presented by Muktisjah Ramli, Director

Takaful Outsource Ltd.

The 2nd Islamic Finance Summit / 28 November, 2014 / Barcelona, Spain

1. Introducing Takaful Outsource, LTD2. The Need For Takaful3. Classical Way of Underwriting4. Age of Big Data and Social Media5. Takaful and CRM6. Training and Sales Activity Monitoring7. The Need for Pension Provision8. Mediterranean challenges for Takaful

1. Introducing Takaful Outsource, LTD2. The Need For Takaful3. Classical Way of Underwriting4. Age of Big Data and Social Media5. Takaful and CRM6. Training and Sales Activity Monitoring7. The Need for Pension Provision8. Mediterranean challenges for Takaful

Takaful Outsource, Limited (TO) is a consulting and outsourcing firm specializing in serving the global takaful industry, particularly insurance/takaful companies, reinsurance/retakaful providers, private institutions, training institutes, and government regulatory authorities.

The Need for Takaful

Why Takaful?

Everyone is exposed to uncertainties and misfortune

Types and degrees of risk differ in value and timeThe risk of dying prematurely (Family Takaful)The risk of living too long (Pension Takaful)The risk of losing income during illness/disability (Critical Illness /PTD/PPD)The risk of leaving debts unpaid after death (Credit Life Takaful)

Unable to determine when risk will strike.

To protect the Financier and family of the Customer in case of non-repayment of lease, finance or obligation due to Death and/or Permanent and Total Disability of the Customer

Why Takaful?

Everyone is exposed to uncertainties and misfortune

Types and degrees of risk differ in value and timeThe risk of dying prematurely (Family Takaful)The risk of living too long (Pension Takaful)The risk of losing income during illness/disability (Critical Illness /PTD/PPD)The risk of leaving debts unpaid after death (Credit Life Takaful)

Unable to determine when risk will strike.

To protect the Financier and family of the Customer in case of non-repayment of lease, finance or obligation due to Death and/or Permanent and Total Disability of the Customer

Leads ToLeads To

Consequences

Protection

Immediate Ongoing Future

Reimburse Losses

Reimburse Losses

Pay IncomePay Income Fulfill DreamsFulfill Dreams

The Need for Takaful

Life Risks

DGH Question 1 Yes

DGH Question 2 No

DGH Question 3 No

DGH Question 4 No

DGH Status

Are you presently suffering from any sickness, health disability, physical condition, mental condition, medical condition, or impairment? (Choose Yes if female covered member is pregnant)

OK, Please proceed to Section Three

Section Two: Declaration of Good Health

Have you been in good health? If no, please provide details.

Have you suffered from any illness, accident, injury, or disability?

Has there been a recent change in your health/life style/habits/occupation or has your country of residence changed?

Classical way of simplified takaful underwriting

Big Data is “high-volume, high-velocity, and/or

high-variety information assets that require new forms of processing to enable enhanced decision making, insight discovery, and process optimization.”

Big Data comes from multiple sources:•online access•mobile devices•social media•scientific devices•e.g. Twitter Tweets, generated every day

Key Issue in Alternative Distribution – “Big Data”

Paradigm Shift: Potential customers and prospects are interacting over phone, social, mobile and in person. The mountain of data captured at each of these touch points can make it challenging to respond to prospects and customers in a streamlined fashion.

شركة التكافل

Takaful Operators’ Customer Relationship Management (CRM)

Takaful Sales’ Activity Management Metrics (KPIs)Metric Definition

Time ManagementAccurately measures the tasks and the fraction of time needed for each task

Call ManagementAccounts for the fraction of command center reps that comply with the process and have successful calls

Opportunity ManagementMeasures the fraction of command center reps that use the tools and comply with the objectives.

Account ManagementThe account is measured by the tools, process, and objectives for multiple opportunities with a customer

Sales Force ManagementProcess includes training, IT systems, control, coaching, and is shared with key people from bank and takaful company

Training – A Critical Component of takaful

Key Issue in Takaful Distribution – Training

Create the right environment in which personal motivation can thrive Develop a whole range of sales skills courses, based upon best practices of relationship selling Customize to provide clients with instant up skilling Ensure that new sales teams or telephone sales agents are equipped to optimize sales opportunities Offer a full range of courses available to take sellers through compliance procedures, technical

product/industry knowledge, financial planning skills, customer prospecting and relationship building

Soft Factors Hard Factors

feedback KPIs

managerial skills performance management systems

communications appraisal systems

leadership reward and remuneration systems

interpersonal skills career planning

team working management information

coaching monitoring processes

Key Factors in Creating Motivational Enviroment

Life Expectancy at Birth (males)Life Expectancy at Birth (males)

Coming of Age : Need for Pension Provision

Source: OECD

Life Expectancy at Birth (females)Life Expectancy at Birth (females)

Coming of Age : Need for Pension Provision

Source: OECD

Average insurance spending per capita, direct gross premiums life and non-life in USD per capita

Average insurance spending per capita, direct gross premiums life and non-life in USD per capita

Coming of Age : Need for Pension Provision

Source: OECD

Total gross insurance premiums, life and non-life in million USDTotal gross insurance premiums, life and non-life in million USD

Coming of Age : Need for Pension Provision

Source: OECD

New growth area: Takaful pensions

Pension assets as percentage of GDP:

New growth area: Takaful pensions

Pension assets as percentage of GDP:

Country %of GDP Pension Assets (euro)

Netherlands 135 1135 mln

Switzerland 110 703 mln

Spain 7.8 116 mln

Italy 4.9 107 mln

Greece 0.0 0.1 mln

Country %of GDP Pension Assets (euro)

Netherlands 135 1135 mln

Switzerland 110 703 mln

Spain 7.8 116 mln

Italy 4.9 107 mln

Greece 0.0 0.1 mln

Coming of Age : Need for Pension Provision

Source: OECD

New growth area: Takaful pensions

Pillars of Provision Model: (example ratios)

New growth area: Takaful pensions

Pillars of Provision Model: (example ratios)

Individual Pension 30%

Corporate Pension 40%

State Pension 30%

Total 100%

Individual Pension 30%

Corporate Pension 40%

State Pension 30%

Total 100%

Target Replacement Ratio:

80%-100% of average salary earned

Target Replacement Ratio:

80%-100% of average salary earned

Coming of Age : Need for Pension Provision

New growth area: Takaful pensions

Pillars of Provision Model: (simplified ratios)

Individual Pension 600 euro

Corporate Pension 900 euro

State Pension 600 euro

Total 2.000 euro

Monthly Pension:

2.000 euro

Coming of Age : Need for Pension Provision

The Challenge for Takaful in the MediterraneanNational Approach

• Existing insurance company set ups takaful window• Sell takaful products besides conventional products• Use existing distribution channel• Expand client base to ethical market and increases volume• Use own asset management / mutual funds or external fund provider

National Approach• Existing insurance company set ups takaful window• Sell takaful products besides conventional products• Use existing distribution channel• Expand client base to ethical market and increases volume• Use own asset management / mutual funds or external fund provider

Grass Root Approach• Community set ups own takaful mutual (OWM in NL)• Community members as initial client / member base• Start with simple protection products•Set up another mutual once max members reached• Merge smaller mutuals into larger takaful co.•Expand into EU through passporting

Grass Root Approach• Community set ups own takaful mutual (OWM in NL)• Community members as initial client / member base• Start with simple protection products•Set up another mutual once max members reached• Merge smaller mutuals into larger takaful co.•Expand into EU through passporting

Insurance co takes over existing takaful

co.

Insurance co takes over existing takaful

co.

Takaful Co from Gulf / Asia takes

stake in European insurer

Takaful Co from Gulf / Asia takes

stake in European insurer

Set up new full-fledged Takaful Co.

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