New forays: State Life to enter Islamic insurance market

By Kazim Alam, The Express Tribune

KARACHI: Within days of regulators announcing that conventional insurance firms would be allowed to set up “Islamic windows”, State Life Insurance Corporation – the largest insurance company in the country – has made clear its intentions of launching its own brand of Shariah-compliant insurance products.

In an exclusive interview with The Express Tribune, State Life Chairman Shahid Aziz Siddiqi said that the insurance giant, which is wholly owned by the federal government, would launch its new range of Islamic insurance within a year. “The launch could be by mid-2013. We’re currently assessing the target market for Takaful (Islamic insurance). We have to fulfil various conditions that the SECP has imposed for Takaful window operators in its recent rules,” he said.

The Securities and Exchange Commission of Pakistan (SECP) recently waived the condition that forbade conventional insurance companies from launching Takaful operations in the newly launched Takaful Rules, 2012.

The conditions that the SECP has introduced for conventional life insurance players wishing to roll out Takaful products include the appointment of a Shariah adviser, a Shariah compliance auditor, a Shariah compliance officer, and setting up  one or more statutory funds exclusively for the Takaful business.

Currently, there are only three General Takaful (non-life insurance) and two Family Takaful (life insurance) companies operating in Pakistan. The latter category include Pak-Qatar Family Takaful and Dawood Family Takaful. The entry of State Life, and possibly other conventional insurance companies, into the Takaful business is likely to result in its rapid expansion because of their years of expertise, brand loyalty, larger resources and extended branch networks.

The total gross premium collected by Takaful companies in 2011 was Rs3.3 billion, which was only 2.8% of the corresponding amount that conventional insurance companies received in the same year. The premium income of State Life in individual life insurance during 2011 alone was Rs40.1 billion.

Siddiqi said one of the target markets for State Life’s Takaful operations would be Khyber-Pakhtunkhwa. He refused to give any estimate of the number of jobs that the Takaful arm of State Life will create. However, looking at the industry-wide trends, it seems the number of new jobs at State Life will be in thousands. Pak-Qatar Family Takaful operates in 32 cities with a sales force of over 1,400 people.

“The Takaful business is limited in Pakistan. We’ll have to develop this market,” he said, adding that entering the Islamic insurance business meant recruiting and training the entire workforce in accordance with the conditions of the SECP. The Takaful operation will require a dedicated sales force that cannot sell conventional life insurance products, according to Siddiqi.

Under the Takaful Rules, 2012, each operator must provide training to all its managerial level personnel and entire sales force on the concept and operations of Takaful. The rules also stipulate that operators may arrange an in-house training programme with an SECP-approved course outline.

“We’ll have to make sure that each member of the work force is a practising Muslim who fully understands Takaful principles,” Siddiqi said. “I’m optimistic that our foray into the Takaful business will be successful.”

Published in The Express Tribune, July 25, 2012.

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