Operational and Actuarial
Aspects of Takaful
Topic 8
Product Distribution and
Servicing
Sub Topics
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Introduction
Types of Distribution Channels
Shariah Issues related to Distribution
Development of Marketing Strategy
Compensation Structures
Intermediary Management
Customer Services
Introduction
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Product distribution and servicing plays a
vital part in the success of any insurance
or takaful operators
Takaful operators may have the following
distribution channels :
Agency system;
Bankatakaful system;
Broking system;
Direct marketing system; and
E-channel/internet system
The Agency
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Many takaful companies use agents for
marketing Family takaful rather than
General takaful products
In Family takaful one Principal approach
In General takaful max is two principals
Mainly commission based
In Malaysia max is 3 tiers (hierarchy)
Most effective for the retail market
Bankatakaful
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An adaptation of the bancassurance
concept as a result of the merger between
banking and insurance services – one stop
center
Emerged in the 80’s in Europe
Tax driven
Blurring of regulation between the 2
industries
Banks sees commissions as additional
profits from existing clientele
Bankatakaful
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Citigroup, HSBC, Credit Agricole are
successful examples
Product bundling - particularly credit
based types
Very rapid expansion – in Malaysia
about 30% of Premiums but mainly
single premium
Broking
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Mainly General Takaful
In Malaysia additional license needed
for Takaful Broking
Others
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Direct Marketing includes Direct
Mailing, Press Ads, Telephone Sales
etc.
Response level is low, hence profits
are dependent on volume
Internet sales is new. E.g. Takaful
Ikhlas and Tune Money
E- Biz success presently towards
servicing than sales
Shariah Issues
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Intermediaries can act on a wakalah contract
Related from Busr bin Sa’id that Ibn Sa’di al
Maliki said, “Umar aksed me to collect zakat and
after I handed it over to him, he ordered that I
be paid a fee. I said, ‘I work for the sake of God.’
He answered, ‘Take it. I used to work like you
during the Prophet’s time and he paid me a fee
and I told him exactly what you said to me. Then
he said to me, ‘When you are given something
without asking, take it and give charity.’”
Imam Shaukani said, “The hadith of Busr bin
Sa’id showed that a person doing something with
the intention of tabarru’ (in this case as an
agent) may receive a fee.”
Shariah Issues
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Legal perspective -Who does the agent act
for?
Brokers are not agent of the Operator!
In the Malaysia the Act clearly indicates
that the agent is the agent of the
operator.
Property in the possession of an agent is
considered to be property deposited with
him for safe keeping.
Twisting or replacement of certificates is a
major concern
Shariah Issues
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The hadith of the Prophet says, “Indeed
the action is by intention and every action
will be rewarded with what is intended.
Thus whoever migrates for the sake of
God and His Messenger, his migration is
for God and His Messenger, and whoever
migrates for the sake of this world and its
content, or for a lady to marry, his
migration is for what he migrated for.”
Shariah Issues
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Shariah perspective on promotions and
advertising: The Quran says, “O ye who believe!
Betray not Allah and His messenger, nor
knowingly betray your trusts.”
Issue on monopolistic practices and deception:
“Woe to Al-Mutaffifin. Those who, when they
have to receive by measure from men, demand
full measure, And when they have to give by
measure or weight to men, give less than due.
Do they not think they will be resurrected” (AlMutaffifin, 83:1-4).
Shariah Issues
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Can a takaful intermediary market conventional
products as well?
• “ ..Allah (s.w.t) permitted trade while prohibited Riba.”
(Al-Baqarah 2:275)
• “Help you one another in righteousness and piety; but
not in sin and transgression…” (Al-Maidah, 5:2)
• Allah has explicitly forbidden all business transactions
including injustice in any form to any of the parties,
whether in the form of deceit or fraud or undue
advantage or peril leading to uncertainty in the business
or any dealing. (Al An’am, 6:151-152).
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This is practiced in other countries
Developing Marketing Strategy
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7 P’s:
Product
Positioning
Place
Price
Promotion
Packaging
Process
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3 P’s
Product
Place (market)
People
(distribution)
Examples in Marketing Strategy
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Agency/Brokers – ease of communication
to prospects, niche market
Direct Marketing – simple products (no
explanation needed), mass target market,
ease of processing
Bankatakaful – Target segmentation,
product bundling, clean skin underwriting,
competitive pricing
E Biz – Self service customers, no
downtime on processing, self explanatory
products, cheapest prices
Compensation Structures
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Basis
• Operator’s Model
• Products
• Regular v Single Contribution
• Different Channels
• Regulation
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Very transparent; life insurance do
not disclose commissions.
Intermediary Management
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Recruitment Process
Training Process
Leadership Development
Biz Monitoring and Development
Recruitment
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Muslims only?
Bumis in conventional biz is small in
number.
Bumis are not enthused to sales jobs
Full time v Part time sales people
High current unemployment can be
an opportunity
Training
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Takaful Basic Exams (TBE) to be
introduced
Passing the Basic Agency Mgt Course and
Agency Mgt Training courses are
requirements for promotion
A Shariah Financial Planning course is a
must towards professionalism
enhancement
CPD hours requirements to be in placed
Customer Services
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Criticism that Takaful operators lacks
proper service standards.
Shariah based companies should have
higher standards than conventionals –
Hadith; “Love others as you love yourself
then would you be a man of faith”
Good customer service help retains
customer and can also be the company
‘unique selling proposition’
End
Thank you