Because Takaful companies are competing for the same market as conventional insurers, with much the same product offering, local markets could come under strain, according to Vasilis Katsipis, General Market of Market Development for A.M. Best
Takaful is growing faster than traditional insurance, which increases the competition to conventional insurers, according to Katsipis. “Very few Takaful companies have actually focussed in developing new offerings, they are competing with a Shari’ah-compliant product for the same type of business,” he explained.
Katsipis explained that a Takaful company’s portfolio doesn’t differ much from a conventional insurer’s. “If you look at the average portfolio of a Takaful company, it’s mainly motor followed by medical and the question is, how do they differentiate? They don’t. There is very little differentiation other than the fact they are Shari’ah-compliant,” he said.
“For that reason, most of what these Takaful players are doing is putting pressure on the market, and they have the same impact as a conventional insurer when they enter a market. They will need to offer something new to add value,” he added.
source: CPI Financial