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Capable Takaful set to rule insurance sector in next 5 years; more awareness, regulatory reform still a key

Capable Takaful set to rule insurance sector in next 5 years; more awareness, regulatory reform still a key

Interview with Muhammad Nasir Ali Syed – CEO, Pak-Qatar Family Takaful Limited

PAGE: Tell me something about yourself and your organization, please:

Muhammad Nasir Ali Syed: My nature of work involves helping people in times of need. There is no bigger satisfaction in the world than to help a fellow human being and get his honest blessings in return. I firmly believe in developing a vision in life and to plan accordingly. Without vision and purpose, one cannot manage life. My parents have been a source of continuous inspiration and I try my level best to follow their professional approach and positive traits in my daily routine. I enjoy reading and my favorite book is Quran Kareem (the ultimate source of all knowledge and guidance). Due to my busy routine, I hardly get time to read but I mostly enjoy reading management and science books.

The formation of Pak-Qatar Family Takaful Limited began in 2006, a year after Takaful rules were introduced by Securities and Exchange Commission of Pakistan (SECP). In 2007, we got the license as the first Life Takaful company in Pakistan, which makes us the pioneer of Takaful in the country. Pak-Qatar Family Takaful achieved its financial break-even within four years of its inception which reflects our exceptionally rapid and stable growth, as insurance companies generally take 9 to 11 years to break-even. Today, we offer both Life Takaful and General Takaful services, with a wide range of protective covers for our valued clients.

PAGE: Kindly tell us about the current state of insurance sector in Pakistan:

Muhammad Nasir Ali Syed: The insurance penetration rate in Pakistan is low compared with other sectors, which provides huge opportunities for growth. However, despite this low penetration, the growth in the insurance sector has been quite steady in recent years. The sector has witnessed an increase in competition, particularly due to the spread of Takaful over the past decade or so. There are more than 45 insurance companies in Pakistan, most of which are non-life insurance companies. Moreover, conventional insurance companies are also joining the Takaful industry by as Window Takaful Operators. Today, the penetration of Takaful in Pakistan has reached 12 percent in Banca sector, while the overall penetration is nearly ten percent of the private sector. In the life insurance business, State Life Insurance Corporation, being a government entity, has the exclusive rights to retain 60 percent of the market share. The rest of the 40 percent can be acquired by the other private companies. Despite being the youngest company in the sector, Pak-Qatar Takaful Group stands 4th among the seven private companies in this business. We are offering very competitive prices to the customers, while we offer all kinds of Shariah-compliant Takaful products.

PAGE: What is your take on growth in conventional and Islamic insurance in Pakistan?

Muhammad Nasir Ali Syed: The growth potential for Takaful is very promising which has led the conventional insurance companies to create their Takaful windows. I can foresee that within the next five years, the Takaful business will take a considerable share of the total insurance industry in Pakistan. The global growth of Takaful business is nearly 28 percent per annum, while the growth of insurance is only 8 to 10 percent. The Takaful products are absolutely competitive, more rewarding and flexible for the customer, compared to the traditional insurance products. So it is competing in the market purely on merit, without indulging in the interest-based financing models. The Takaful products have also won many prestigious international awards. The regulatory institutions in Pakistan are taking concrete measures to create a supportive regulatory environment for the growth of Takaful. However, as most of regulations are developed in line with the conventional insurance industry, there is a need to realign the regulatory framework. As this industry is in its infancy phase, it will take some time to optimally evolve and mature. Before granting the regulatory licenses, the regulators must evaluate and recognize the level of commitment of each operator.



PAGE: How could Pakistanis be convinced to opt for insurance products?

Muhammad Nasir Ali Syed: The Takaful industry is only 37 years old, whereas insurance services originated over 325 years back. The biggest challenge for the Takaful industry is still the creation of public awareness, to create a distinction and gain consumers’ confidence in its values. The consumers must be aware that the Takaful model is totally unique and different, with very few similarities to the conventional insurance. Unfortunately the common man still thinks that Takaful is actually a viable alternative for conventional insurance, promising the same benefits. In fact, this is a false perception.

The Takaful consultants have a critical role to play in creating more awareness among the masses, by educating them to distinguish between Takaful and conventional insurance, and how Takaful promises a higher level of protection and financial security, which is an essential need for today’s fast-paced, multi-faceted commercial and social arena. Through such factual and informative communication-campaigns, the penetration of Takaful can be increased rapidly, with wider awareness, inspiration and a more convenient mechanism of distribution. Recently, educational institutions all over Pakistan have started offering university courses and diplomas in Islamic finance which is a very positive development.

It is important to educate Islamic finance, including Takaful, to the youth through high profile educational institutions that can provide them with the right perspective on Shariah-compliant finance. This is not only likely to create greater acceptance for Takaful, but also provide the industry with professionally trained personnel. The real task is to build an image of Takaful as a modern-day protection system that promises financial security while adhering to the high moral values and the non-exploitative, humanitarian principles of Islam.

PAGE: How could we lure foreign investment from across the world in this sector?

Muhammad Nasir Ali Syed: Foreign direct investment is directly linked with the economy of the country, hence, political and economic stability is of utmost importance to attract foreign investors. Indeed, foreign investors have begun returning to Pakistan as security conditions have improved across the country, particularly in Karachi and primarily due to the China Pakistan Economic Corridor (CPEC). With Chinese firms buying major stakes in Karachi Electric (KE) and the Pakistan Stock Exchange (PSX), a Turkish investor acquiring Dawlance (Pakistani manufacture of major home appliances) and Europeans taking over Engro Foods, the ‘investor confidence’ appears to be surging over the last few months.

PAGE: Your views on competition in insurance sector of Pakistan:

Muhammad Nasir Ali Syed: The insurance industry is of considerable importance to any developing country. I firmly believe in healthy competition in the market as it will post a challenge to existing to excel or survive in the market by focusing on service quality, new products, competent staff, and a customer-centric approach. Although the insurance sector has always, and is playing a significant role as far as marketing and advertising are concerned, one sees a lot of commercialized TVCs running on different channels. The insurance companies spend a lot on print and electronic media campaigns through which they are able to grab the attention of the common people, thus building the brand recall.

Furthermore, insurance companies are currently dominant in the market owing to their long history whereas Takaful companies are relatively new entrants in the market, and still in the experimental phase. I feel glad that due to dedicated Takaful operators, the insurance companies were forced to offer Takaful Windows, and I see this as a positive move for the industry. Furthermore, in future, only those insurance companies/Takaful operators will excel that offer exceptional service quality, innovative products, and prices at par with those of its competitors.

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