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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