Trust-based vs profit-driven insurance models

Are we overdoing “Tijari” in takaful? Takaful was never meant to be a conventional business. At its heart, it is a cooperative system built on mutual help & shared responsibility, ta’awun, not profit. It was designed to serve as a community safety net, pooling contributions to protect members in times of need. Yet, over time, the industry’s form & function have begun to mirror the very commercial models it was meant to offer an alternative to. The push for market share, returns to shareholders, & regulatory capital compliance has nudged many Takaful operators into adopting strategies common in conventional insurance—aggressive bundling with loans, performance-driven product pushes, & prioritising profit margins. The tabarru’ fund, once symbolic of voluntary contribution, is now tightly managed under actuarial targets. Surplus distributions increasingly resemble profit-sharing schemes rather than the spirit of shared protection. This drift raises fundamental concerns. First, the ethical foundation of Takaful risks becoming blurred. Participants are increasingly seen as customers, consumers of a product, rather than members of a mutual pool. Second, the unique identity of Takaful erodes when it looks & behaves like conventional insurance. Third, this commercial focus can sideline lower-income groups who lack purchasing power, even though they are the very segment that cooperative protection is meant to uplift. Some may argue that such commercialisation is necessary for survival. To be fair, financial sustainability is vital, no operator can serve its mission while running at a loss. However, there is a difference between running a sound business & losing sight of purpose. Operational discipline must serve the ethical mission, not override it. The danger intensifies as Takaful shift toward wealth accumulation & investment-linked plans. When marketed primarily for returns, Takaful begins to compete with conventional products & risks losing its soul. The narrative changes from helping others in hardship to gaining benefits for oneself. Over time, this weakens the concept of solidarity & undermines long-term trust. This is not a call to reject profitability or innovation, but rather to recalibrate priorities. Profit is not inherently un-Islamic. But when it becomes the dominant driver, the ‘niyyah’ behind Takaful shifts dangerously. The business engine must serve the ethical mission, not replace it. The way forward is not to dismantle what has been built, but to reflect, realign, & renew. Takaful’s strength lies not in mimicking the conventional market, but in offering an alternative rooted in ethical values, social solidarity, & spiritual consciousness. It is time for the industry to look inward, at its models, its messaging, its motivation & to recalibrate its trajectory. This means reaffirming its identity as a cooperative system driven by compassion, fairness, & shared responsibility. And that begins by going back to basics of Takaful.

Universal Life & ILPs in Vietnam: Profit for Insurers, Pain for Customers? Vietnam’s life insurance market is in overdrive. Since July 1, insurers have rushed to file new products under the updated Insurance Law. The results? - 60% of all products sold in H1/2025 were Universal Life (UL) (IAV data). - A wave of Investment-Linked Products (ILPs) is being relaunched to “protect” insurers’ margins. But here’s the uncomfortable truth: in today’s Vietnam, UL and ILPs are built more for insurers’ profit models than for customers’ financial realities. Why UL/ILPs Work in Hong Kong & Singapore: In aspirational markets like Hong Kong or Singapore, these products make sense: - Customers are wealthier, financially literate, and bank-savvy. - Income streams are stable. - Distribution is concentrated, trust in banks is high. - Products like UL/ILP meet real needs: wealth growth, legacy planning, portfolio diversification. Why They Don’t Fit Vietnam (Yet): Vietnam is a different story: - Average income is far lower, and household cashflow is unstable (family businesses, informal jobs). - Financial literacy remains limited. - Bank reach is uneven across the country. - Government data infrastructure for underwriting and claims is still weak. Against that backdrop: - Traditional ULs launched post-July do offer a minimum crediting rate - but they remain complex, hard for customers to understand, and priced for insurers’ stability, not customer flexibility. ILPs shift investment risk to the policyholder - a dangerous proposition when most households are still navigating essentials and lack financial planning tools. What Gets Lost? Simple, trust-building products like endowment and whole life are often the most suitable for Vietnam’s mass market: ✔️ Predictable ✔️ Affordable ✔️ Easy to understand ✔️ Build long-term trust Yet they’re sidelined because: - Commissions are less attractive for agents. - Margins are lower for insurers. The outcome? The industry risks repeating a cycle we’ve seen before: aggressive sales → high lapses → premature surrenders → customer distrust. A Better Path Forward If the industry wants sustainable growth, it must: - Rebalance product portfolios toward simplicity and customer need. - Align agent incentives with persistency, not just first-year sales. - Rebuild trust by matching products with Vietnam’s economic reality - not just with insurers’ profit motives. Vietnam doesn’t need more “complex” products. It needs products that customers can actually keep. That’s how we move from headline growth to lasting trust. #TuesdayChat #ChiefCustomerOfficer #LifeInsuranceReimagine

Earlier today at Clouds Media Group, I had a chance to discuss about Takaful (Islamic Insurance) In the dynamic landscape of insurance, two models stand out: conventional insurance and Takaful, Islamic Insurance. While both offer financial protection, they differ significantly in principles, structure, and benefits, making it crucial to understand their distinctions. Principles and Structure: Conventional insurance operates on the principle of risk transfer, where the insurer assumes the risk in exchange for a premium. Takaful, however, is based on the principles of mutual cooperation and shared responsibility (Tabarru) among participants, who contribute to a common fund to support each other in times of need. This cooperative structure not only fosters a sense of community but also aligns with ethical and transparent practices. Transparency and Risk Management: Takaful emphasizes transparency in its operations, ensuring clear disclosure of fund management and distribution. Moreover, it promotes risk management and loss prevention measures among participants, directly impacting the collective fund. In contrast, conventional insurance may not always provide the same level of transparency or focus on risk management. Community Benefits and Ethical Considerations: One of the key benefits of Takaful is its promotion of shared responsibility and community welfare, aligning with Islamic principles. Any surplus in the Takaful fund is returned to participants, fostering a sense of ownership and cooperation. This stands in contrast to conventional insurance, which is often criticized for its profit-seeking nature and potential conflicts of interest. Inclusivity and Impact: While Takaful is rooted in Islamic principles, it is not limited to Muslims alone. Its ethical and inclusive nature appeals to individuals seeking a more transparent and community-driven approach to insurance. By emphasizing cooperation over competition, Takaful offers a model that transcends religious boundaries, providing financial security for all. Why? CRDB Bancassurance Members interested in Takaful are welcome at CRDB Bancassurance, where they can access Takaful products and services tailored to their needs. CRDB Bancassurance's commitment to providing ethical and inclusive insurance solutions aligns with the principles of Takaful, making it a trusted partner for those seeking financial security. In a world where ethical considerations and transparency are increasingly valued, Takaful stands out as a viable alternative to conventional insurance. Its principles of mutual cooperation and shared responsibility not only offer financial protection but also foster a sense of community and inclusivity. As we navigate the complexities of the insurance industry, let us explore and embrace models that prioritize ethics, transparency, and collective well-being. #TakafulInsurance #EthicalFinance #InclusiveCoverage #InsuranceIndustry #CommunityDrivenCoverage