BNM: Takaful Industry Urged to Adopt Ta'awun Concept for Enhanced Social Cohesion, Wealth Distribution

KUALA LUMPUR, Oct 15 (Bernama) -- Takaful industry players are urged to embrace the aspirations of the recently issued exposure draft on the broader application of Ta`awun in takaful to explore new models in promoting social cohesion and wealth distribution. 

Ta`awun emphasises the ethical obligation of individuals and societies to support one another, embodying the values of solidarity and collective responsibility.

Bank Negara Malaysia (BNM) assistant governor Suhaimi Ali said the central bank remains committed to providing an enabling environment for the industry to test and introduce innovations.

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“For areas that may require regulatory flexibility, we welcome interest in tapping into the financial technology regulatory sandbox. This allows innovation to be piloted and refined, thus accelerating the integration of the Value-based Intermediation for Takaful (VBIT) in product solutions.

“The sandbox now incorporates a green lane; this accelerated track offers a simpler and quicker path for financial institutions with a strong track record in risk management to test innovative solutions that are facing regulatory impediments,” he said in his speech at the VBIT Conference 2024, organised by the Malaysian Takaful Association (MTA), here today.

For industry players aspiring to drive greater market competition via digitalisation, Suhaimi said the formal application window to carry digital takaful business will be open from Jan 2, 2025, until Dec 31, 2026. 

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“With technology, not only will the end-to-end experience of consumers from securing access to takaful cover to claims and settlement processes be elevated, but digital takaful solutions can go a long way towards increasing consumer trust in the value of takaful protection, enhancing product affordability through better pricing and expediting purchasing and claims experience,” he said. 

During the event, Suhaimi also launched the Maqasid Shariah Scorecard (MSS), a transformative initiative aimed at assessing the industry’s impact and sustainability, aligning with the objectives of Maqasid al-Shariah, which focuses on the preservation of faith, life, wealth, lineage, and intellect.

“I'm encouraged to witness the industry's effort in developing the MSS, which I believe supports the bank's call for better impact creation through meaningful disclosure. 

“While the scorecard is a measurement tool to demonstrate and validate VBIT based on Maqasid al-Shariah, it ultimately seeks to drive positive change in behaviour and measure broader outcomes to the communities served by the takaful industry,” he said. 

The MSS is available to takaful operators upon request from the MTA.

Meanwhile, he said that impact reporting, most commonly demonstrated in the climate and sustainability space to show how companies and financial institutions support the broader environmental, social, and governance goals and sustainable development goals agenda, has become increasingly important.

“We urge the industry to consider what needs to be done for the MSS to be effectively implemented, commencing with strategies to ensure a firm understanding of its objectives and measurement methodology by each industry player,” he added. 

This year marked four decades of takaful since the enactment of the Takaful Act 1984. From a modest beginning, the size of takaful contribution has expanded nearly three times compared to a decade ago.

The expansion of micro takaful products aimed at underprivileged segments has flourished in recent years, providing affordable and accessible protections to nearly 970,000 individuals in 2023.

“We are also pleased to observe developments within the industry that support the bank's Financial Sector Blueprint 2022-2026 vision to mainstream social finance, which now has use cases in the takaful sector,” he said, adding that before this, it is all predominantly use cases in the banking sector. 

-- BERNAMA