Brunei Darussalam: Promoting takaful

The Sultanate’s sharia-compliant insurance sector is looking to expand its market share, stepping up efforts to promote takaful products and increase the range of policies on offer, with the sector likely to see greater segmentation as a result.

The sharia-compliant insurance sector is tightly regulated, with Takaful Order 2008 being the central document setting out the terms and conditions under which the industry operates. Issued in October 2008 and coming into force the following month, the order codified takaful operations, ensuring that the industry as a whole was based on a firm foundation and that, just as importantly, its products and activities met the requirements of sharia law.

To guarantee this, Takaful Order 2008 mandates that any product to be offered by a service provider has to be assessed and approved by the Sharia Financial Supervisory Board before it can be deemed as meeting the necessary standards and requirements.

The board, established in 2006, is tasked with monitoring and controlling the administrative and business dealings of institutions operating in the sharia-compliant segment of the financial sector, including takaful. Consisting of at least eight members, a mix of state officials, scholars and financial experts, the board serves as a guarantee that both best practices and sharia compliance are maintained across the sector.

The order also sets out the minimum financial requirements for a company to operate in the takaful segment, puts in place checks and balances for the sector, and mandates standards that senior officials must meet before being employed in positions of responsibility.

The industry has of late undergone something of a shake-up. Late last year, two of Brunei Darussalam’s three sharia-compliant insurance firms – Takaful IBB and Takaful BIBD – merged to form Syarikat Takaful Brunei Darussalam, with the two operating as separate units. Takaful IBB, which focuses on general policies, now trades as Takaful Brunei Am (TBA) while Takaful BIBD is now known as Takaful Brunei Keluarga (TBK), the unit dealing with family coverage. Along with Insurans Islam TAIB, they comprise the Sultanate’s takaful sector. Their conventional competition consists of nine policy writers, mainly subsidiaries of overseas firms.

Currently, general takaful policies – those covering vehicle, property and other business insurance – account for 80% or more of the total, with the remainder being private or family coverage, in the main life and health policies. In total, Brunei Darussalam’s takaful insurers account for around one-third of all premiums written.

The relatively low take-up of family coverage, especially health policies, can be largely attributed to the extensive social services provided by the state. With universal health coverage the right of all citizens, selling supplementary medical coverage can be difficult. However, this has not deterred TBK from relaunching its sharia-compliant health policy, Takaful As Syifa, which was first offered in 2002. The policy has been redesigned to meet the needs of Bruneians who travel overseas by linking with international medical services provider International SOS, and it also covers additional health costs at home, including for alternative medicine services.

Recently, Brunei Darussalam’s takaful firms have been taking their message on the road, conducting information sessions to brief the public about the benefits of their products. Both TBA and TBK have been holding exhibitions in shopping malls, schools and community centres.

According to Mohammad Fuad Hamdi PD Hj Awang Salim, the assistant general manager at TBK, there is a need to develop an understanding of takaful insurance products in the marketplace. “Takaful As Syifa is a takaful medical plan coverage which provides reimbursement of medical expenses in respect of medical treatment due to illness or accident borne by the participant, and not many people are familiar with the matter,” he said during an exhibition in Gadong on June 5.

For the moment local operators in the takaful market will likely to continue to dominate the local market with little room for new international players. Though there is strong potential for growth, it will probably be only on a relatively small scale, given the limited size of the domestic market. For the foreseeable future at least, it will be up to the established local players to expand the existing product range and create an environment in which sharia-compliant products can flourish.