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2.

How do legislation, transparency, disclosure, taxation, capital requirements and

solvency margins play roles in strengthening the Takaful industry and what are the

countermeasures that need to be taken?

Most of the experts (10/12 or 80%) agree that all the areas mention: legislation,

transparency, disclosure, taxation, capital requirements and solvency margins play

significant roles in strengthening the

Takaful

industry. One of the experts fromMalaysia

is of the view that all new regulations provided by Bank Negara put customer interest

first in terms of transparency and fairness. He also stated that the Malaysian

Takaful

industry no longer uses solvency margin, and instead it uses risk-based capital. He

further elaborated that from 2013 Malaysia introduced a new

Takaful

framework,

Shari'ah

governance and Value-Based Intermediation (VBI) under the Islamic Financial

Services Act [IFSA 2013]. Nearly 50% of the experts raised the concern that most of the

members of the public are unaware of what the solvency margin and capital ratio are

and they are not really bothered about knowing them. One of the experts from Saudi

Arabia is of the opinion that the

Takaful

industry in most countries is generally weak

because the legislation, transparency, disclosure, taxation, and capital requirements and

solvency margins in those jurisdictions are not technically in compliance with the

Shari'ah

. Furthermore, he also feels that the conflict of interest with conventional

insurance is weakening the

Takaful

industry. In view of these challenges, the experts

have recommended the following. Firstly, regulators must give serious attention to the

Takaful

industry to ensure a meaningful reform. Secondly, all the areas mentioned

[legislation, transparency, disclosure, taxation, capital requirements and solvency

margins] if seriously practised can positively strengthen the

Takaful

industry. For

example, it is easier to apply solvency margins, which will be lower for

Takaful

as all

risks are borne by policyholder’s fund and hence no liability is put on the company’s

finances.

3.

How can product development, innovation, new business models, and Quality of

operations play roles in the growth of the Takaful industry and what are the

countermeasures that need to be taken?

Nearly ninety per cent of the experts agrees that all the areas mentioned above [product

development, innovation, new business models, and quality of operations] play positive

roles in the growth of the

Takaful

industry. The six experts from Malaysia stated that in

order to achieve good product development, innovation, new business models, and

quality of operation

Takaful

companies must significantly invest in research. They also

mentioned that

Takaful

companies need to be innovative; focusing on human, green

environment and sustainability; and that a good business model would reduce the

agency cost and the overall costs. For good quality of operation, features of

Takaful

products must be explained in detail to consumers to ensure they properly understood

the contract before committing themselves to the policy. Other relevant requirements

to enhance operations, as recommended by IFSB-9, include a mandated ‘cooling-off’

period within which the policyholder may terminate the contract, enabling the purchase