This article first appeared in The Edge Financial Daily on June 11, 2018
KUALA LUMPUR: Syarikat Takaful Malaysia Bhd, a 59.72%-owned subsidiary of BIMB Holdings Bhd, is targeting a double-digit growth of 10% to 15% in contribution (premium) for the current financial year ending Dec 31, 2018 (FY18), driven by both its family takaful and general takaful businesses.
The group’s gross earned contributions grew 5% to RM1.82 billion in FY17 from RM1.73 billion in FY16. For its first quarter ended March 31, 2018 (1QFY18), the figure rose 8% to RM506.28 million compared with RM470.5 million a year ago.
Group chief executive officer Datuk Seri Mohd Hassan Kamil is upbeat about the group’s growth as he believes the penetration rate of takaful in the country is still low on the back of increasing medical costs, growth of the Islamic banking and finance sector, financial technology disruption, as well as the phased liberalisation of the life insurance and family takaful industry.
“We registered strong bancatakaful business growth [in 1QFY18], and further growth in the motor takaful contributions generated from our online sales portal called ‘Click for Cover’, as well as [saw] the expansion of our sales force to boost our growth in the family takaful and general takaful businesses,” he told The Edge Financial Daily via an email interview.
Takaful Malaysia’s net profit for 1QFY18 rose 23% to RM69.98 million from RM56.75 million in 1QFY17, mainly due to higher net wakalah fee income. Quarterly revenue also increased 13% to RM746.17 million from RM659.84 million in 1QFY17, thanks to higher sales generated from both its family takaful and general takaful businesses.
Family takaful business currently contributes 65% to the group’s revenue, while 35% is derived from the general takaful business.
For the family takaful business, 55% of the revenue contribution is derived from the mortgage protection and the balance 45% from non-mortgage-related business, including employee benefits.
Under its general takaful business, 47% of the revenue comes from the motor takaful business, 35% from the fire and personal accident business, and the rest from other classes.
While earnings from the Indonesian operations have been less than encouraging, Mohd Hassan remains positive about the life insurance segment there, driven by the economic growth potential and the staging of regional elections that will stimulate public consumption.
“However, there are constraints and limitations for takaful operators [in Indonesia], especially in terms of capital requirement to compete effectively with other general insurers.
“The presence of numerous takaful ‘Islamic window’ operations in Indonesia has put the full-fledged shariah-compliant operators at a significant disadvantage compared to their competitors due to a higher operating cost,” he explained.
On its part, Mohd Hassan said, Takaful Malaysia is providing technical support to its Indonesian operations as part of its ongoing initiatives in exploring alternatives to increase productivity.
Going digital aggressively
Takaful Malaysia is targeting to increase its market share in the domestic takaful market to 30% by 2020 from 23% now.
“As the takaful industry is projected to accelerate growth, outpacing its conventional counterpart, driven by innovation and digital transformation, Takaful Malaysia has been ramping up its digital strategy to meet the ever-rising consumer expectations and also stay relevant in the ongoing digital revolution,” said Mohd Hassan.
“While affordability [of insurance products] is an issue, consumers can now opt for other alternatives such as purchasing insurance online, for example via our online sales portal ‘Click for Cover’ that offers comprehensive coverage at affordable prices,” he said, adding that the group will focus on leveraging its digital strategy this year by expanding its product suite to provide more options with greater convenience to customers.
Currently, Takaful Malaysia’s total contribution from its online sales stands at RM40 million.
While Takaful Malaysia is projecting its online sales to increase by about 20% to 25% this year, Mohd Hassan said the group does not see earnings increasing significantly, but rather it is seeking to further penetrate the market and strengthen its foothold in the industry in the next five years.
Apart from embarking on digital initiatives, including system integration with its key business partners, online self-service options and a mobile application, Takaful Malaysia has three products in the pipeline: term life, critical illness and travel PA takaful.
Mohd Hassan said the three products will offer a relatively lower cost of insurance, which will be more appealing and affordable to the mass market.
“But we are expecting minimal financial impact of these three products in 2018, taking into account our investment costs in IT infrastructure and the marketing and promotion campaigns,” he said.
Nevertheless, he expects the group to reap greater profits with a wider network of new customer base, similar to its online motor business, in one to two years.
Today, about 10% of Takaful Malaysia’s motor business comes from its online customers since the launch of its online motor product a year ago.
“We have started to witness increasing and greater acceptance of online motor business, and we are poised to achieve greater penetration of these three products in the near future,” said Mohd Hassan.
“We are open to both local and foreign partnerships as and when the opportunity arises,” he added, noting that it is part of its ongoing initiative to explore other business opportunities.
Mohd Hassan noted that Takaful Malaysia has partnered a premier global IT solutions provider and a leading global insurance distribution and consultancy company to help support its online marketing initiatives to increase the exposure and visibility of online sales portal to consumers via the social media and mobile platforms.