INSURANCE: AN ISLAMIC WAY!
AHSAN A. SHAH
M.B.A. Marketing - SZABIST
Apr 14 - 20, 2008
Captivating the International Scenario into contemplation, the entire "service" industry since World War II has seen a certain boost and that too at an accelerated rate. Insurance falling in the same grouping has seen an annual average growth of 10 % internationally. And after 80's the average rate was further augmented to 25 % and higher. Two further categorizations of this genus turned out into Life Insurances and Non-Life Insurances. These classifications reveal even better and clearer results of growth. Life insurances have seen a growth of 30% and non-life insurances a growth of 19 %. However the facts that make these international statistics so astonishing do differ from country to country. The basis for variation of this nature are explained through many variables such as; Income level, Literacy Rate, Dependency Ratio, National Income, Government Spending and most importantly whether Islam is a dominant religion of the country or not.
It's quite difficult to trace roots of Islamic Insurance and its concepts but surely there are elements which insinuate similar techniques used to secure transactions back in those days. These without a doubt are based on ideologies which were reformed in the light of Islam by various scholars. Fetching this terminology through nomenclature into existence the expression, "TA"MIN" advanced for insurance as a word in Arabic; while "SUKARA" (SECURITY OR SECURITE) a closer word comes into contention. This word was suggested by ABIDIN-A-HANAFITE; a Muslim jurist in 1836, he is also considered to have suggested this name for the first time in the annals of Islamic History. It was then that concept of insurance and semi insurance came into some concrete existence in Islam.
A bit of history is necessary because even though Islam is a modern religion compared to many, a lot of concepts and methodologies are very conservatively quoted. Few people do not even comprehend whats and whys but incessantly involve themselves in debates. The religion Islam; surely educates and nurtures a civilized society in a more meticulous fashion that most religions talk about and actually do. However there is definite catch; Islam always enthralls a strong notion and that is benefit at large, a transaction which is win-win always. Insurance too; if considered analogous to the above notion, has to necessitate a process which is synonymous to Islam and its boundaries.
Where Pakistan was found on an ideology based on a separate state for Muslims, concepts like insurance found extremely difficult to progress to any concrete establishments at least in the early stages of the country's economic development. The situation worsens when a state founded on grounds of a separate Muslim entity involves Muslims by mere names that possess perfunctory knowledge obtained through legacy mostly.
However having said all that; Insurance market efficiency in Pakistan has not been as bleak as the history of Insurance in the Country. Having agreed that a start was a dismal one, lately things have shaped up quite extravagantly for the Insurance companies. The early glitches led to a weaker product/service deployment as compared to other countries but that also indicates that there is more room for the Insurance companies to play in. Meaning a lot of insurance plans are yet to be marketed which have done remarkably well in other countries. Out of the few already offered by the companies; general insurance has seen a very steady growth. Veterans in the shape of ADAMJEE and EFU have not only grown in stature and market domination but have actually helped a lot in educating people/companies about the effective uses of such policies and its benefits.
Being one of the most difficult things to sell, insurance plan selling some how have been a blessing in disguise in relieving quite a dismal situation of unemployment in the country. There are at least 100 such insurance companies and few of them are as follows; EFU, Adamjee, Pakistan Insurance Company, Jubilee Insurance Company, Asia Insurance, Askari Insurance, and so on and so forth. These insurance companies further trickle down into foreign insurance companies operating in Pakistan and local insurance companies as well.
Although if compared with India we still stand on superficial grounds but this difference is merely due to the underlying fact of Indian acceptance of such service industry at a faster rate, then our Country's responsiveness. Indian publics are well educated, more in numbers and better understand the needs of assorted insurance policies in their various modes of life. As a matter of fact; the variety of Insurance Policy Offerings in India are so superfluous, that one might think that they are well qualified to be on road to an able-bodied developed country.
The question arises at this point in time, and that is how to come at parity with the other countries as far as the product/service, responsiveness, needs, etc are concerned. And also how to achieve results in a more fruitful manner, considering the Country is indeed an Islamic State.
After doing a full SWOT one thing that really strikes a mind is the concept of Islamic Insurance mentioned above in the article, hence the justification. The subject is quite analogous to Islamic Banking which has an enormous clientele of its own and it's just a matter of time where if it does not over take then at least match the conventional banking in the country, such is the influence of religion in Pakistan. Islamic Insurance has similarly discovered sizable patrons in this market for itself and why will it not? One of the examples that do come to mind is the recent upcoming name of TAKAFUL Pakistan Limited, they have a gigantic potential and if they can survive the early anomalies it can very well play a leading role in our economy. Islamic Insurance can actually achieve an ardent future for Insurance Industry in Pakistan, and without a doubt can lead from the front if given an appropriate time frame to establish itself into.
However, where even the type of crops chosen to be cultivated within the year decides for the percentage yield and risks related to determine the insurance policies and premiums by various insurance companies; considering the nature of this industry, the political situation is of utter significance to its growth. Thus when one tries to fit this into a superior depiction then certainly an issue on which the insurance markets heavily banks upon is indeed the political hand that actually builds the entire country. It is of no use explaining the current chaotic scenario because it is known to most of us; in addition, mere words can't bring about the desired change, there has to be some analytical thinking combined with commanding leadership that can quell such crisis and result a better future not only for the Islamic Insurance Companies but also for various other industries operating in Pakistan. If such is not the case then let alone the Insurance Industry and Islamic Insurance, so to speak, nothing could ever survive.