First PHL takaful insurance offering may be launched within the year — IC

THE COUNTRY’S first takaful insurance product may be sold within the year, with two insurers already prepared to roll out their offerings, the Insurance Commission (IC) chief said.

The pilot or sandbox initiative was pushed back from the initial plan to offer takaful insurance by the first quarter, Insurance Commissioner Reynaldo A. Regalado told BusinessWorld on the sidelines of an event on Wednesday.

“But it’s important we’re having it. It’s sure to follow through this year. They’re already submitting the requirements and the products to be offered, which will be approved by us,” Mr. Regalado added.

Takaful is a type of Islamic insurance where members contribute a certain sum of money to a common pool. Takaful insurance needs to be compliant with Shari’ah law, which prohibits riba (interest), al-maisir (gambling), and al-gharar (uncertainty) principles.

Mr. Regalado said the two companies that have takaful insurance products ready for rollout are Pru Life Insurance Corp. of UK Philippines (Pru Life UK Philippines) and Etiqa Life & General Assurance Philippines, Inc.

He added that one of the companies already submitted a product for review, but the IC cannot approve it yet as it still has to set official regulations for this kind of product offering.

The IC also still needs to send correspondents to countries that already offer takaful insurance to help it create a framework for selling these, Mr. Regalado said.

The IC already sent people to Malaysia and will send people to Indonesia in June, he added.

The regulator will also be going to Thailand to study how takaful insurance is being distributed there, Mr. Regalado said.

“You know, in Thailand, the Muslim population is small, but they already have takaful insurance. We need to get the other countries’ [inputs] on how they’re doing it,” he said.

The IC will also conduct discussions with Shari’ah groups to help certify the takaful products that will be offered, he added.

It has talked with mutual benefit association groups and cooperatives to clarify Shari’ah law principles, he said.

Takaful or Islamic insurance can improve financial inclusion and expand insurance penetration in underserved areas, the Philippine Insurers and Reinsurers Association (PIRA) earlier said.

“There is a move for financial inclusivity in our country and around the world,” PIRA Executive Director Michael F. Rellosa said in an e-mail. “Parts of our population remain unserved or are underserved and they are the ones who need the protection that takaful or traditional insurance can bring. Any move towards this should be welcome.”

Insurance penetration, or premium volume as a share of gross domestic product or the sector’s contribution to the economy, inched up to 1.78% in the first quarter from 1.75% a year prior, latest IC data showed.

Insurance density, or the amount of premium per capita or average spending of each individual on insurance, rose by 10.66% to P965.56 in the first quarter from P872.56.

The Bangko Sentral ng Pilipinas’ (BSP) Financial Inclusion Survey also showed that fewer Filipinos had savings and insurance in 2021. The share of adults with insurance fell to 17% in 2021 from 23% in 2019.

“There are multinational companies with offices in Muslim-majority countries where takaful originated. They already have takaful experience in these jurisdictions and it would just be a matter of replicating the program here with perhaps minor changes,” Mr. Rellosa said.

“The IC can replicate its successes in the microinsurance field where the Philippines is considered a global leader, as we are the first country to come up with a legal framework for microinsurance. The same is needed for takaful.”

He said the IC must develop a legal framework to ensure an “orderly rollout.”

Micro-takaful products can also be explored, Mr. Rellosa said. “(This) is popular as it allows certain sections of the population who may not be able to afford traditional insurance or traditional takaful to be protected via micro-insurance.’

“A huge portion of the population belongs to this sector, so micro plays a major role and fills the protection gap,” he added.

On the other hand, Liberty Insurance Corp. Vice-President for Corporate Strategy Antonio Roderick B. Cabusao warned that takaful may not be well-received by the market.

“Regarding takaful insurance, the premiums collected are managed by an investment company (a third party) and that only a portion of it is given to the insurance company,” he said in a Viber message.

“Whereas in general insurance (nonlife) premiums are collected and managed by the insurance company. The insurance company invests portions of the premium and some portions are passed on to a reinsurer which assumes a portion of the risk in the event of a loss. So that being the case, it may not be attractive to the Philippine insurance market,” he added.

FINANCIAL INCLUSIONMeanwhile, aside from takaful insurance, Mr. Regalado said the IC is in talks with the BSP regarding other ways to boost financial inclusion, such as allowing banks to have more than one partnered insurance company.

“Right now it may not be required, but we’re reviewing the rules in our manual and the BSP’s. Hopefully, it will now be an option for the banks so they can have more than one insurance company as a partner,” he said.

However, he noted customers might be confused when presented with a variety of available products.

The IC will also be talking to rural banks and other financial institutions to increase bancassurance distribution channels, Mr. Regalado added.

The Philippine Life Insurance Association and the Committee on Bancassurance were onboard with the idea, but noted that banks are not keen on offering insurance products digitally, he said.

“Insurance companies can market their digital products on their own… I think we really have to make it open,” he said. — Aaron Michael C. Sy and Luisa Maria Jacinta C. Jocson