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Fola Daniel

Takaful: Boosting Inclusive Insurance In Nigeria

By Lucy Nwachukwu,

There is no gainsaying the fact that most Nigerians perceive insurance as an avenue through which insurers and insurance companies enrich themselves by making people pay for insurance policies, which they do not eventually enjoy. While some believe that taking out insurance policies is sheer waste of time and resources, others feel that certain conventional insurance practices negate their spiritual and religious doctrines. Observers insist that the people’s conceptions, whether logical or illogical, have not only hindered the growth of the insurance sector but they have also affected the sector’s contribution to the national economy.

However, as part of efforts to promote inclusive insurance participation in Nigeria, National Insurance Commission (NAICOM) introduced Takaful insurance. “Takaful’’ is an Arabic word that means “guaranteeing each other’’ or “joint guarantee’’. It is a practice whereby individuals in a community jointly guarantee themselves against any loss or damage. For example, individuals can make charitable donations to a common fund, from which they may draw funds whenever they are facing financial problems or other challenges. Speaking at the inauguration of the Takaful Advisory Council (TAC) in Abuja on March 10, Mr Fola Daniel, the Commissioner for Insurance, NAICOM, said that Takaful insurance was the opposite of conventional insurance, adding that it would be attractive to Muslims and non-Muslims alike.

Daniel explained that conventional insurance was all about insuring assets without losses, whereas in Takaful insurance, extra funds generated by the insurance company were given back to contributors if there were no losses at the end of the year, “A lot of people that are insuring believe that conventional insurance is not equitable at all because if there is no loss, the insurer goes away with all the money. “You do not lose all with Takaful; in a year, even when you suffer losses, as long as you have contributed to that fund, there is still the prospect that you can still take something away,’’ he said.

Daniel expressed the optimism that many citizens would buy into Takaful insurance because the scheme was a bridge that cut across all segments of the society. “In other jurisdictions where Takaful insurance has been introduced, its acceptability is very high, significantly higher than conventional insurance. “In countries like South Africa, Takaful insurance is doing very well, and you will be surprised to know that Takaful is also highly embraced by the people in the U.S. “So, we expect that the Nigerian experience will not be different; I believe that Takaful insurance will become a household purchase and many people will want to buy into the insurance scheme,’’ he said.

Daniel explained that Takaful insurance could be marketed via a window system whereby existing insurance companies could engage in Takaful side-by-side with conventional insurance or through a fullfledged platform, where specific companies were licensed to practise only Takaful insurance. Also speaking at the inauguration, Mr Bashir Yuguda, the former Minister of State for Finance, said that Takaful insurance was one of the reforms and means through which the Federal Government intended to deepen insurance penetration in the country. He said that “takaful is a simple way of saying insurance also has an Islamic window’’.

Yuguda said that Takaful insurance would enable people with preference for Islamic-compliant insurance to participate in insurance activities in the country. He explained that the policy was a collective agreement by regulators; operators and agents in the insurance sector who believed that Takaful insurance would add value to the insurance industry and promote inclusive insurance in Nigeria. “It is not about one section or the other or one religion and the other; it is a policy, it is a product and it is what the industry wants,’’ he said. Also, Dr Bashir Aliyu, the Chairman of Takaful Advisory Council (TAC), said that the council would advise the Federal Government and NAICOM about how to ensure inclusive insurance in the country.

“ The whole idea of having the Takaful insurance unit is to ensure that the country’s insurance services are inclusive enough to make provision for those who do not feel comfortable with conventional insurance for flouting some of their religious values. “As part of efforts to encourage such people to participate in the country’s insurance industry, TAC will advise the commission so that areas where people have reservations are taken care of so as to encourage them to get involved in the insurance industry,’’ he said.

Aliyu, however, noted that Takaful insurance would enable many citizens, particularly those in the rural areas to take active part in the insurance business as it would be beneficial to them. He also said that several people might not be willing to get involved in conventional insurance activities if their reservations regarding Islamic values were not adequately taken care of. “I believe that with our services, many citizens, particularly those in the grassroots who were hitherto excluded from participating in insurance due to some reasons, will be encouraged to come on-board. “Apart from advising NAICOM on the rules of Sharia that relate to Takaful, the council will also advise insurance operators, particularly those who provide insurance services for people in the grassroots, on how to operate in line with our rules and regulations and those of the commission.

“This is because from our findings, many of the operators do not actually come to grips with the regulations which the commission has put in place,’’ he added. As Takaful Insurance takes shape in Nigeria, analysts say that the genre of insurance will go a long way to fill certain gaps existing in the insurance industry. They, nonetheless, underscore the need to increase the people’s awareness of the insurance scheme so as to ensure that it does not generate unnecessary controversies. Malam Yakub Abas, an Abuja-based banker, urged all the citizens, irrespective of their religious background, to embrace the Takaful system because of its glaring advantages.

“I know that the Takaful Insurance system will contribute to the rapid growth and development of insurance in Nigeria and I, therefore, advise all Nigerians to take advantage of its benefits. “We should avoid the kind of unnecessary controversy that was generated by the introduction of Islamic banking in Nigeria some years ago,’’ he said. All the same, Mr Bola Adegoke, an insurance broker, advised NAICOM to create appreciable publicity and public awareness about the insurance system so as to encourage Nigerians to buy into it. “For us in the insurance sector, Takaful is a commendable concept but the onus is on NAICOM to create necessary awareness around the concept so that some Nigerians will not start reading religious meanings to it,’’ he added.

The general consensus of opinion among insurance experts is that NAICOM, TAC and other stakeholders should make concerted efforts to sell the insurance scheme to the citizenry, as part of designed strategies to revamp the insurance sector. (NANFeatures)

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