The Takaful industry, which is based on Shari’ah principles of absolute prohibition of Gharar and loss, has expanded rapidly and is going through a rapid change. In my capacity as a Jordanian Business leader, I passionately support the advent of Islamic finance, it is important for me to explain the existing trends in this rapidly growing sector.
DIGITALIZATION IN TAKAFUL: THE FUTURE
In the last few years the advancement of a fixed communication technology transformed the Takaful industry. Digital Takaful allows insurance services to reach a larger audience especially the youths, and the tech-natives in this generation. Including policy issuance, claims processing to even the settlement of claims has been made easier boosting policy holder’s experience while cutting on costs.
When it comes to the evolution of the industry, I have noticed that, although the emphasis is on digitalization, it is crucial to retain the uniqueness of Takaful, which has its ethical and communal priorities. Thus, innovation for us a leader in the industry should be balanced with the set principles of Shariah obedient requirements.
EXPANDING GEOGRAPHICAL REACH
The Takaful industry is slowly moving out of its tradition markets in Middle East and South East Asia. Shariah compliant insurance products are required in countries where Muslims are settling in large numbers, and the population is becoming aware of ethical financial products.
In my view, this expansion is part positive and part negative. On the one hand, it enables organizations to spread risks and have the possibility of entering in to other related markets. On the other, it needs high level of knowledge of local regulations, culture and ability to customize Takaful products according to the needs of the society and the principles of Islamic shariah.
REGULATORY DEVELOPMENTS
The rules governing Takaful are changing daily as different countries come up with new guidelines to foster the industry. For these reason, these regulations are fundamental important for the profitability and sustainability of the Takaful industry as I have seen. They assist in restoring consumer confidence and at the same time insisted that Takaful operators have complied to the best practices in corporate governance and financial reporting.
However, dealing with these regulations can be somewhat complex. This means that the Takaful operators need to be on the alert and act in relation to the implementing of these recommendations. In my opinion, the greatest challenge is the interplay with the regulators and the constant discussion within the industry hence the need to work together in order to provide the right environment for Takaful business to grow.
THE FUTURE OF TAKAFUL: SUSTAINABILITY AND ETHICAL INVESTMENT
Based on the analysis above, I have identified sustainable and ethical investment as the direction for the future of Takaful. With the rising global concern for ESG matters, Takaful operators along with other financial institutions are experiencing growing demands for adopting ESG (Environmental, social, and governance) factors in their investment decision-making process.
In my understanding, to involve Takaful in ESG is a very logical step given its Islamic values but also a very beneficial step from the perspective of attracting investors/policyholders. Once we stick to the principles of sustainability and ethics they help Takaful to grow and develop in a way that will be clearly beneficial to everybody.
Last Words
Yes, the Takaful industry is at an exciting junction over which digitalization, geographical expansion, product development and innovation, regulatory change, and sustainability are poised to shape the future of the industry. I, Dr. Raed El Omari, have been very much involved in the development of Islamic finance, and therefore, I have a good feeling for the future of Takaful. This ensures that Takaful will be resilient and relevant in the global market as the company is guided by the strength of its values and the embrace of the change processes.
Visit my https://drraedelomari.com/for any queries or insights. As a Jordanian business leader, I am here to help you navigate the complexities of the business world. Contact me today, and let’s work together to achieve sustainable growth in different industries.
