Some new Islamic Insurance Companies (Takaful) will commence operations in the country in the next couple of months, thus becoming the first set of fully-fledged Takaful Insurance companies in the country.
Takaful insurance guarantees profit sharing between the insurer and the policyholders, a trait that is absent in the conventional insurance business as the conventional insurer takes the whole profit made from its investment. Hence, when the three Takaful operators start operations, they are going to rival conventional insurer, especially in the grassroots where this concept would sell faster.
LEADERSHIP reliably gathered that five investors had submitted applications to the National Insurance Commission (NAICOM) to float Takaful insurance companies in the country; the regulatory body had only given approval to three of them. The remaining two applications, it was learnt, are still receiving attention from the insurance industry regulatory body.
Findings revealed that one of the three licensed Takaful insurers, Noor Takaful Insurance Company Plc, is expected to officially start operations next month (November) in Lagos, while the two others are putting finishing touches to their setup and could commence operation latest by next year.
Investigation revealed that the new insurance firms are mostly owned by foreigners, especially investors from the Middle East and Asia, who have the needed expertise in the area of Islamic insurance and had operated successfully in some other parts of the world. They are now set to use the template to operate Takaful insurance business in the country.
The local insurance firms, it was learnt, are not ready to float Islamic insurance subsidiaries because of their modus operandi, which allows profit sharing between the insured and the insurers, although some of them are operating it at a window level (having a department or product for Takaful insurance).
The likes of African Alliance Insurance, Niger Insurance Plc, among others, are operating it on a window level, following the launching of Takaful insurance guidelines in 2013 by NAICOM.
Although, there are still some misconceptions about Takaful Insurance in Nigeria, being a Muslim scheme, experts said increased awareness will correct these misconceptions.
Insider source disclosed that, currently, Takaful insurance is selling fast in the northern part of the country, with the window operators making their major profits from communities, while the three fully-fledged operators are also targeting the North and the Muslim communities for a start.
The Takaful Guideline of 2013 put the capital base of any interested party willing to float a Takaful insurance at N100million for either family or general Takaful business.
Speaking in an interview with LEADERSHIP at the weekend, the director, Authorisation and Policy, NAICOM, Mr. Plus Agboola, described Takaful insurance as a concept that will deepen insurance penetration and acceptance, especially at the grassroots, explaining that Takaful insurance is not restricted to a culture or religion.
‘‘It is a concept that preaches sharing of risks and profits. One of the objectives of this insurance is to encourage savings. So, it’s a programme that has both short and long term perspective: short term perspective because within one year, whether you have claims or not, you still share from the profit; long term perspective is that anytime you have a loss, once you are a member of that scheme, in one to 10 years’ time, you will still benefit from it,” he pointed out.
On how many applications the commission had received since the launch of the scheme in 2013, he said: “For window operation, we have so many applications, but for fully-fledged, we have about five applications, but we have given licences to about three.”
On his part, the chairman of one of the licensed Takaful operators, Noor Takaful Insurance Plc, Ambassador Shuaibu Ahmed, explained that Takaful is about joint guarantee, whereby individuals in a community jointly guarantee themselves against any loss or damage. This function, he said, is undertaken by insurance companies whereby the insuring public transfers its financial risks of loss or damage of their assets or lives to the insurance companies at a price called premium.
‘‘In Takaful insurance, claims are paid, and whatever is left, some part of it comes to insurers. It is like mutual assurance, where a group of participants comes together and puts funds together. At the end of the day, it’s their money, not insurance firm’s money. Once claims are paid to some participants that record some calamities, whatever balance is left in those funds belong to participants,” he clarified.
Speaking on how Takaful insurer makes profits, he noted: “We make our profit from the contributions that are made by the participants. We, the company, normally take an agency fees, because I want to play a role of managing those funds. We manage the claims, because if you don’t manage the claims, everybody will come and make claims, and some of them might not be genuine.
“So, we are supposed to invest those funds and also manage the claims. At the end of the day, we have agency fees and we also share in the profit that we are making from the investment.”
The key essential driver of Takaful Insurance, according to him, is transparency, as there must be full disclosure of the terms from the company to the participants, and that claims must be paid as at when due.
He added that once a claim has been verified and its genuineness ascertained, the claimant get his claim within three days.
However, the managing director of Riskguard-Africa Nigeria Ltd, Chief Yemi Soladoye, explained why some operators are hesitant to leverage on opportunities in Takaful and micro-insurance.
He said: “Most operators are neck-deep in running businesses the old style; they are faced with the challenge of meeting the boards’ and shareholders’ expectation and this makes it difficult for them to invest in future market developments like micro insurance and Takaful insurance. They have not come together for united market development. And whether we like it or not, retail insurance is key.”