Takaful insurance: One in four customers still not convinced

Banks have managed to enroll more than 70% of customers who have already taken out Takaful insurance financing. There are still resistant ones. They fear an additional cost, which in the end amounts to only 0.5% of the outstanding capital.

Last July, Takaful insurance finally came into force. Several products have since been marketed, including life and death, Takaful investment, as well as insurance business against the risk of bodily accidents, against fire and natural elements, against glass breakage and against damage.
Today and at the moment, the participating banks are limited to cover the stock of crowdfunding linked to the property Murabaha has already contracted. They have developed several awareness and popularization campaigns with video capsules and TV and radio commercials to get customers to join. The contacted banks claim to be progressing according to the planned schedule. “As soon as we got the permission to market these products, our challenge was to migrate the 50,000 customers who had already contracted financing for this insurance,” says Abdessamad Issami, chairman of the board of Umnia Bank. He adds: “In 4 months, our achievement rate is more than 72%”. In other words, almost 3 out of 4 customers are currently covered.
We find more or less the same achievements in his colleagues. This is especially the case with Bank Assafa, which even considers itself to be ahead of the originally planned programme. To Abdelkrim Fazazi, CEO of Al Maghribia Takaful, a participatory insurance subsidiary of La Marocaine Vie (Societe Generale Group’s insurance company in Morocco): “Since the announcement of our launch at the end of June last year, almost 70% of the nearly 6,500 customers benefiting from crowdfunding from Dar Al Amane (Societe Generale Morocco’s crowdfunding window), out of the nearly 6,500 to be covered, initiated the process of taking out a Takaful creditor insurance contract, including three quarters have already actually complied the.” .However, while some, such as Bank Assafa and Al Maghribia Takaful, have chosen to prioritize the coverage of real estate owners and consumer finance before expanding their product offering, especially to Multi-risk Building, other institutions, such as Umnia Bank, have chosen to market both offers at the same time. “Some have not sought permission from ACAPS to market comprehensive home insurance. This created a mess in the market in the sense that information was circulated about the non-compulsory nature of this insurance when contractual That’s not the opinion of another operator, who, for his part, believes that the customer has to suffer a small additional cost in connection with death and disability insurance, and that it is not worth adding another one to him on the pile. “The challenge is first to get the customers to join this Takaful insurance system. Then it would be easy to subscribe to other products, as the mindset is already established”, explains the director of a participating bank. Fazazi, meanwhile, plans to market Al Maghribia Takaful its Multi-Risk Building offering during the first quarter of next year, while at the same time continuing efforts with its customers and the general public to create conditions of trust.

Benefits to encourage customers to subscribe

And precisely to attract customers to be covered, and although the system is designed in such a way as to enable the financial inclusion of people excluded from the conventional system, banks, including Umnia Bank, among others, have given their customers a big advantage. , by exempting them from going through the medical visit, at a time when this process is important, if the financing agreement exceeds a certain amount or if the customer is of an advanced age.
However, there are stubborn ones, “either they refuse to accept the idea of ​​a profit in relation to their milking, or they take time to think,” these operators tell us. However, as soon as the financing agreement was concluded, customers signed an undertaking that they will take out Takaful insurance when it is launched. What to do in this case? Having exhausted all means of persuasion and client approach, the latter only has to bear the consequences of his reluctance in the event of inability to fulfill his obligations due to death or disability, because in the end the bank is covered by the mortgage and it is the client or his family to bear the burden of his refusal. It should be noted that, similar to the classic insurance system, the customer is not obliged to produce Takaful insurance, with the insurance company, a subsidiary of the bank with which he has contracted his financing. He may turn to another; the important thing is to first cover yourself against death and disability and then insure your home.
Moreover, according to the directors of banks and participating insurance contacted, the participatory system is aligned with the conventional one in terms of costs. The additional cost is estimated at a maximum of between 0.4% and 0.5% of the financing amount. And even ! “Takaful insurance covers the outstanding capital. In other words, if the customer dies, the bank gives up its remaining profit margin and is satisfied with the coverage of the overdue debt”, explains Issami. In any case, the banks and insurance companies that have obtained approval are continuing their efforts to recover existing stock and claim to have no problems getting new customers to sign these contracts.
Once all customers have taken out death and disability insurance and multi-risk building insurance, banks should start marketing Takaful investment contracts.

What about the investment of accumulated savings?

Outstanding crowdfunding reached 22.5 billion dirhams at the end of September. It shows an increase of 16.6% compared to the beginning of this year. Since the beginning of the activity of the participating banks, the Murabaha property continues to monopolize the majority of financing with a share of 83%. Its outstanding amount therefore reached 16.7 billion dirhams in the 3rd quarter. And it is precisely this amount that the participating banks try to cover with Takaful insurance. Statistics on prizes collected since July are still not available. Having said that, the Moroccan Association of Participating Finance Professionals (AMFP) had estimated that Takaful activity should generate no less than 100 MDH by 2022. All customers still need to play the game!
Now that the participating banks have managed to cover more than 70% of the financing files, what about the investments in this savings? It is not necessary to remind that financial investment instruments are still not available. The only issuance of sukuk Ijara was completed in 2018. As a result, the collected insurance will be placed in investment deposits, the outstanding amount of which totaled 2.4 billion DH. It will also be used for refinancing of participating banks from their parent company or another participating institution through wakala bil istithmar. The latter, combined with demand deposits received from parent banks, reached DKK 7.4 billion. DH. The whole interest of this ecosystem is henceforth to create investment funds for Sharia compliance, in which the insurance companies will place the customers’ savings. Your profitability depends on it!

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