Interview with Muhammad Nasir Ali Syed — Executive Director Health & Emerging Lines, Salaam Takaful Limited
PAGE: Tell me something about yourself, please:
Muhammad Nasir Ali Syed: I did my master’s and gained my professional experience in Insurance & Takaful Industry. I chose that field because of my nature, and I’ve always been interested in helping people in a time 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 planning accordingly. Without vision and purpose, one cannot manage life. My father has been a source of continuous inspiration and I try my level best to follow his professional approach and positive traits in my daily routine. Due to my busy routine, I hardly get time to read but I mostly enjoy reading management and science books.
PAGE: How would you comment on risk management in the form of Takaful contracts?
Muhammad Nasir Ali Syed: There are numerous references to Ta’awun in the Quran in the context of cooperation and solidarity for the good of society. One widely quoted reference is from Sura al-Maidah, as follows:
“And help one another in righteousness and piety and do not help one another in evil deeds and enmity” (Al Quran: Al Maidah 2). Financial Risk management in the form of Takaful is a noble and Shariah-compliant mechanism. Risk management is of vital importance in Islam and Takaful provides a way to manage risks in business according to Shariah principles. Financial Risk is the chance of happening of something that will have an impact on our objectives. It is measured in terms of likelihood and consequences. Traditionally, the concept of risk has been associated with the uncertainty of the events in the future. The higher the uncertainty of events, the higher the risk. In insurance/Takaful, the risk is the amount of loss associated with property or life.
Risk to property can be a loss or damage to the car, building, house, etc. Risk to life can be described as poor health, premature death, bodily injuries as a result of an accident, etc. Risk management is a process that identifies loss exposures faced by an organization and/or any individual. Risk management is the process of identifying and analyzing potential loss exposures in order to select the best way to protect assets and reduce loss possibilities. Risk is all around us and claims will always occur, but their impact can be minimized and contained within acceptable limits through an effective risk management program.
Under the insurance contract, financial risk is transferred from the insured to the insurance company, whereas under the Takaful contract, participants will share the risk of each other based on the principle of brotherhood. Takaful is an alternative to insurance in conventional financial planning. In the Takaful plan, the participant would pay a particular amount of money as a contribution (known as the premium) partly to the risk fund (the participants’ special account) using the concept of Tabarru (donation) and partly to another party (known as Takaful company) with a mutual agreement that, the Wakeel (Takaful company) is under a legal responsibility to provide for the participant financial protection against unexpected loss, should it happen within the agreed period. In essence, this shares the risk with the company and all members participating in the Waqf Pool. The understanding is that with more members sharing the risks, the costs of contribution should shrink proportionately.
PAGE: Insurance/Takaful is regarded as a slow-growing, safe sector for investors. What is your perspective about it?
Muhammad Nasir Ali Syed: Insurance/Takaful is often viewed as a product of the sophisticated, capitalistic system of the West. And those who are outside this cultural group are less likely to value insurance protection. They rely on informal insurance, such as a family network. Therefore, it is right when you say that Asians are typically less focused on buying insurance. It is also this same set of people who hold the belief that insurance has no value, and consider any money spent on insurance to be a waste. It is often futile to discuss with them their potential risks, or how insurance can be helpful and will have any impact.
Unfortunately, in Pakistan, we are not a saving nation and people have less tendency or awareness related to saving products. We have a lack of awareness when it comes to the insurance/Takaful business. The reason is, that we have not been taught the importance of coverage or savings in an early age. However, if we go in-depth and look out for its importance, there is a new universe where you are being covered from everywhere, whether it’s you, your family, your assets, marriage plans, education plans, and even retirement plans.
Many people buying insurance don’t have the experience or understanding of potential financial risks. For example, many among the middle-class can afford health insurance but choose not to buy it. What they don’t realize is that a major injury or illness can cost far more than they think. Their choice not to buy at least a catastrophic health insurance plan speaks to the lack of understanding of their potential risk.
The biggest hurdle facing the insurance industry is that consumers simply don’t trust insurance companies. Added to this is a lack of awareness and failure of professional advice. Due to excessive fragmentation of the insurance market, many insurers don’t have the critical size to build adequate risk pools, underwrite contracts, and innovate. The lack of professional skills in the industry has been another major deterrent. Finally, weaknesses in regulation and consumer protection have also hindered the development of the sector. However, if we talk about Salaam Takaful Limited – we are the largest insure-tech and first dedicated Takaful operator in Pakistan. Recently we have announced the surplus distribution among our 13,737 participants. This is a step towards building trust in the public and hence we will be able to create awareness.
PAGE: Not all insurance companies offer the same products or cater to the same customer base. Your comments, please:
Muhammad Nasir Ali Syed: Every company working in the Takaful/ insurance sector develops the product as per their observation. They work on the needs and what the customer actually requires. We at Salaam Takaful Limited, provide complete protection against risk, which is further protected through Re-Takaful by world-leading Islamic Takaful companies like; Hannover Re, Takaful-re, and Munich Re. Thus the risk is shared in a Global Pool, which enhances the company’s flexibility and increases its capacity for claims payment.
Salaam Takaful Limited offers a wide variety of services including; Individual and Group products, which are customized according to the customer’s financial position and needs. Under Health Takaful, we are covering emergency hospitalization, chemotherapy, radiotherapy, and dialysis, etc. We are providing and giving maximum return and value for money to our members.
PAGE: Some companies engage in reinsurance/ReTakaful to reduce risk. Could you give your views on it?
Muhammad Nasir Ali Syed: ReTakaful is an important mechanism to mitigate the risk. The Retakaful performs two functions. First, it helps to secure significant risks of high financial value, as well as unforeseen or extraordinary losses that companies are unable to insure. Second, it allows Takaful operators to increase their hedging capabilities, and thus increase their earnings. Under conventional insurance, companies buy to protect themselves from excessive losses due to high exposure.
Reinsurance is an integral component of insurance companies’ efforts to keep themselves solvent and avoid default due to payouts, and regulators mandate it for companies of a certain size and type. For example, an insurance/Takaful Operator may write too much hurricane insurance, based on models that show low chances of a hurricane inflicting a geographic area. If the inconceivable did happen with a hurricane hitting that region, considerable losses for the insurance company could ensue. Without reinsurance taking some of the risks off the table, insurance companies could go out of business whenever a natural disaster hits.
PAGE: One of the more interesting features of insurance companies is that they are essentially allowed to use their customers’ money to invest for themselves. How would you comment on it?
Muhammad Nasir Ali Syed: With reference to your question regarding the usage of customer’s money I would like to draw your attention that insurance companies are properly regulated and monitored for the usage of public money. The regulation sets all the processes, procedures, requirements, and predicably audits and monitors all such activities.