Is Takaful Industry Innovative? Examining the Perception of Takaful Operators in Malaysia

Takaful is a social and ethical insurance based on the principle of Ta'awun (cooperation) and Tabarru (donation) where the risk is shared collectively by members of a policy. The concept of Takaful is providing financial assistance to the participants on a basis for mutual assistance, brotherhood and solidarity in cases where the participants face some misfortune. Takaful is an alternative to the conventional insurance, and its primary objective is to protect the participants based on the ethical and moral foundations. Due to its unique characteristics, Takaful is one of the fastest growing areas of International finance. An industry that started with less than 10 players in the early eighties has become a multi-billion-dollar global industry that currently spans across South-East Asia, Middle East, Africa, Central Asia and Europe with more than 200 players. The purpose of this research is to understand how Takaful operators view Takaful products that are being created with innovative methods and techniques in Malaysia. As compare to most of the prior research that are centred on the demand side (i.e. consumers), this research however focuses on the supply side of Takaful industry (i.e. the Takaful operators). The findings of this research are significant as it pushes the industry to be innovative in their products and services. Not only innovative products are good to the customer, but also enhance the Malaysian Takaful products to become global models. To achieve this objective, in-depth and semistructured interviews were conducted with the relevant fourteen officers among the Takaful Operators (TOs) to obtain their views regarding the objective. From the findings, it can be seen that there is a negative trend of innovation in the Takaful industry as the respondents highlighted a lot of issues and challenges that hamper innovation in the whole industry. Only a few respondents thought that the industry is already innovative and not facing any major issues at the moment. They also suggested various possible solutions to the current situation which indirectly shows that there are many aspects that can be improved in the Takaful industry to achieve innovation that meets consumer requirements and satisfaction.