THE EXPRESS TRIBUNE, KARACHI, 05th NEVEMBER 2013: In the slow-moving life insurance business environment where the gestation period of a company ranges from 10 to 12 years, it is rare for an entity to become profitable within five years of its establishment.
Pak-Qatar Family Takaful, which is one of the only two family Takaful companies operating in Pakistan, posted its first-ever profit of Rs26.6 million in 2012 as opposed to a loss of Rs9.4 million the previous year. The company’s financial year runs from January to December.
“The share of Takaful is growing rapidly in Pakistan. Our company is getting stronger by the day mainly because of an exceptionally high customer loyalty,” said Pak-Qatar Family Takaful Deputy CEO Muhammad Menhas while talking to The Express Tribune in a recent interview.
“In our case, the policy renewal rate is 90% as opposed to conventional companies where it is roughly 80%,” he observed.
According to the company’s statement of contributions for 2012, total gross contributions that Pak-Qatar Family Takaful received in the 12-month period were Rs3.3 billion, up a massive 78.2% from the preceding year when they totalled Rs1.8 billion.
A look at the breakdown of gross contributions collected by the company shows that third-year onwards contributions in 2012 were Rs595 million, which is 147.5% higher than the corresponding figure in 2011.
The only other family Takaful company in the country, Dawood Family Takaful, received total gross contributions of Rs523.3 million in 2012, up 60.4% compared to the preceding year. However, the company posted a net loss of Rs42.9 million last year, as it is still in its gestation period.
“Takaful is not just a business, it’s a cause. Most people at Pak-Qatar Family Takaful work here while foregoing far more lucrative opportunities in the conventional insurance sector. They are not here for money, they are here for the cause,” Menhas said.
Menhas joined Pak-Qatar Family Takaful in 2011 after spending well over a decade at some of the leading conventional insurance companies in the country. He saw the proverbial light during a Dars in Madina when a cleric hailing from Faisalabad told pilgrims that insurance was forbidden in Islam.
“It’s a matter of Sawab to popularise Shariah-compliant insurance services, as it curbs the element of interest in the economy,” he added.
Despite a robust attempt by the regulator to facilitate Takaful operations, the fact remains that the share of Islamic insurance is still miniscule compared to conventional life insurance in Pakistan. While seven life insurance companies sell conventional products, the number of Shariah-compliant insurance companies is still two.
Combined gross contributions of the two Takaful companies in 2012 were Rs3.8 billion. In contrast, the total premium of the life sector in the same year was Rs85 billion, according to provisional figures provided by the Securities and Exchange Commission of Pakistan.
This shows that the size of Takaful market was only 4.4% relative to its conventional counterpart in 2012.
He refused to comment on the legal battle against the SECP and conventional insurance companies that the Takaful operators have been engaged in since August 2012. Islamic insurance companies, including Pak-Qatar Takaful, have filed a constitutional petition in the Sindh High Court, challenging the Takaful Rules 2012 that the regulator issued last year, allowing conventional insurance companies to run Shariah-compliant operations through parallel windows.
However, Menhas said his company is not against competition and welcomes new players in the Takaful business.
“Please keep in mind that it is extremely difficult to set up an insurance company in Pakistan no matter it is conventional or Islamic. We lack trained insurance personnel. Also, an insurance company’s gestation period is normally very long while investments are pretty high,” he said while commenting on the limited footprint of Islamic insurance in Pakistan.