MANILA, Philippines – Our Muslim brothers and sisters will soon have access to an insurance policy that is Shariah-compliant or one that follows Islamic law.
PruLife UK has obtained the first Takaful license in the Philippines, allowing the company to offer Islamic insurance by next year, targeting the 7-million Muslim population in the country.
“We expect to launch the product in quarter 1 of 2025. Of course, it’s subject to regulatory approval and so forth… but tentatively, I think early part of next year, we will actually have the Takaful product out,” PruLife UK CEO Sanjay Chakrabarty told reporters on Monday, November 4.
Takaful offers Muslims a financial safety net — although this is quite different from how a traditional insurance policy works as its key feature is it operates on the principle of “mutual support.”
In traditional insurance policies, the agreement is between the client and the company — where the client pays a premium to be covered by the policy for a certain period of time. The insurance company will then use the premiums to invest in financial products or investments, which does not necessarily have to be Shariah-compliant.
Most traditional insurance policies are interest-bearing, which is not allowed for Muslims.
Meanwhile, in Takaful plans, members contribute to a common fund. This essentially covers all members who contribute to the fund and the money pooled is invested to Shariah-compliant businesses.
All contributors to the Takaful fund are covered in case something happens. Meanwhile, payable claims are also distributed equally among members.
Specific products to be launched soon
While the license for PruLife UK’s products has already been approved by the Insurance Commission, specific details on the products they are planning to offer have yet to be fleshed out. Chakrabarty, however, noted that their first products will be focused on savings and protection.
“They will sort of address simple needs of people… [such as] being able to come across a small corpus of funds when they are maybe sending the kids for education or if there is something bad that happens with the breadwinner of the family, then the insurance company kicks in to support the family,” he said.
PruLife UK has yet to put a price on its premiums, but Chakrabarty did say that they plan on offering it at an affordable rate as they are still trying to penetrate the market.
“You’re trying to penetrate a community that has been traditionally underserved or unserved even, and financial literacy is poor… affordability is also a question mark. So you have to take all these factors into account so you have to get simple, very simple, easy to understand, intuitive products out at [a] very affordable prices,” Chakrabarty said.
PruLife UK has acknowledged that financial literacy is one of the challenges they will be facing once they roll out the product. However, Chakrabarty assured that they have plans on addressing them.
Overall, insurance penetration in the Philippines is still quite low, but the company is banking on collaborating with local governments to introduce the Takaful product to the market.
“If we do our jobs correctly, if we set up the products right, then at some point, we do expect this to start contributing to the profitability of PruLife UK,” Chakrabarty said.
“But it’s difficult for me to stand here today and say when that will happen,” he added. “But I’m very confident that it will play a role — a big role — in PruLife UK’s business strategy going forward.” – Rappler.com