November 6, 2024 | 12:00am
MANILA, Philippines — The government has issued the first Takaful or Islamic insurance license in the country amid the need to bridge the gap in social protection and offer a more affordable option to Muslim and non-Muslim Filipinos.
The Insurance Commission (IC) has given Pru Life UK the first Takaful license, a Shariah-compliant form of insurance which means joint guarantee.
During the Takaful launch late Monday night, Pru Life president and CEO Sanjay Chakrabarty said Takaful products would focus on savings and protection. These will initially target the seven million Muslims residing in the Philippines.
Muslim Filipinos are largely unprotected due to restrictions in the traditional insurance policies that do not comply with Shariah rules and principles. This has also contributed to prevalent poverty and lack of financial security within their communities.
“The market is ready for Takaful. They start small but the way we are structuring this business line will not be restricted to seven million,” Chakrabarty said.
Pru Life is also looking at Takaful in a different way considering that traditional insurance policies are sold either through banks or agents. For Takaful, products may be coursed through local government units and communities.
As such, this would allow for a distinct penetration rate – one that could be much faster and deeper.
The premium for Takaful products is also expected to be cheaper than the traditional insurance considering the need to tap a segment that has been underserved or unserved at all and with poor financial literacy.
“We have to educate people on the need for insurance and on all of the products that will address the gaps that they are seeing today and also the question of affordability,” Chakrabarty said.
IC commissioner Reynaldo Regalado, for his part, emphasized that the Takaful initiative plays a crucial role in improving insurance penetration and developing a more resilient financial sector that serves every Filipino, regardless of their faith and background.
Unlike conventional insurance models, Takaful operates on a cooperative basis where participants will have pooled funds. This can be utilized to support individuals in times of need.
Regalado, however, admitted that take-up will not be as immediate considering that insurance in general is a long-gestational sector.
“We really need the coordination of local governments and we need to have credible partners on how we’re supposed to go about it, even including the sales and marketing and the people who would be carrying this,” Regalado said.
Pru Life UK has developed training programs for its selected agents, equipping them with knowledge of Takaful principles. It will also launch public awareness campaigns to educate communities on the benefits of Takaful.
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