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Apr 2021

Next stop: Digital takaful

Source: Asia Insurance Review | Mar 2021

Brunei is one of the smaller markets in Asia Pacific, with a population base of under 450,000, but the insurance and takaful sector has adopted the use of technology in a serious way as Takaful Brunei’s Mr Shahrildin Jaya told us.
By Paul McNamara
As a market, Brunei is interesting for a variety of reasons. The most celebrated is its wealth, where it is acknowledged as the fifth richest nation in the world, largely because of its oil and gas industry. But it is no slouch when it comes to financial services either.
Takaful Brunei is the largest locally-incorporated takaful operator in the country and leverages two distinct brands – Takaful Brunei Am (TBA) for general takaful and Takaful Brunei Keluarga for family takaful.
Majority-owned by the Sultan Haji Hassanal Bolkiah Foundation (69%) with the balance owned by Bank Islam Brunei Darussalam (31%), its corporate takaful business is well placed to take advantage of opportunities as they arise in protection covers for corporate assets such as buildings, machinery, equipment, inventory goods, vessels, vehicles and employee benefits.
We caught up with Takaful Brunei managing director Shahrildin Jaya to find out how the sector developed in 2020 and what the future holds in store.
Tough market
“It’s a small country and the insurance and takaful industry is quite small as well,” said Mr Jaya. “On an annual basis, we underwrite about B$300m ($226m) in total. So it’s quite a small market that has been contracting for the past few years in single digits. We’re still able to make margin and profits but it’s getting smaller and smaller.”
COVID-19 has not spared Brunei bur Mr Jaya remains confident. “We are blessed by being a small domestic-oriented country and we are mainly focused on servicing the domestic market rather than international markets,” he said. “Hospitality business has suffered a lot. Tourism suffered a lot. Airlines suffered a lot. But when it happened in March 2020, the government took a very quick stance to mitigate community spread. After two or three months everything was pretty much back to normal and the domestic market was thriving again.”
Some in the insurance industry had forecast a depressed market but thankfully business was robust. “Travel insurance was heavily affected and we couldn’t insure foreign workers as much because they were not allowed to come in,” said Mr Jaya. “But people were still buying cars, although smaller value cars, so Takaful Brunei was able to surpass its top line target for the year by double digits and surpass the bottom line target as well.”
Strength in numbers
Being a market leader helped too, especially in project insurance. “Because we are one of the larger market players in the country, it was a natural progression for people to continue buying their takaful or insurance from us,” said Mr Jaya.
“In terms of projects, it was stop-and-start. In the middle of the year, major projects were halted but many were restarted again in the final quarters. Fortunately contractors were still buying all-risk insurance. Oil and gas and prices have stabilised as well and that’s why we see a lot of these contracts restarting in the second half,” he said.
Growing market share
General takaful seems to have outperformed family takaful and Mr Jaya concurs. “It was more so on the general side where the top line was achieved because we were fortunate to get business projects restarted and they required project insurance, such as oil and gas companies renewing with us,” he said.
But there are further interesting industry insights to come. “When Takaful Brunei grew, it wasn’t really organic growth of the industry,” Mr Jaya said. “Business was moving from one insurer to the other. The overall industry in Brunei has become stagnant or even contracted and it is because of our brand, the strategies we implemented, such as providing underwriting expertise coupled with pricing incentives, that we are seeing companies moving their insurance protection services to us.”
And there is every sign that the growth will continue into 2021. “We are cautiously optimistic, confident again in the domestic market, because that’s primarily where we are focused,” Mr Jaya said.
“Projects will depend on government initiatives. The government budget is usually around March and April. That’s a big indicator for us to see what the stimulus package is and the projects that the government wants to undertake. We see that we’ll get more volume but due to pricing constraints or pricing pressures, the margins could be smaller again. Overall, it’s a slight increase from last year’s performance, but only single digit increases - more reliance on the underwriting profit rather than investment income,” he said.
Tabarru’ versus wakalah
Each line of the business is made to work hard. “Our primary way of making money is trying to make sure that we get an underwriting profit for not only the risk fund, the tabarru’ fund, but also for the operator since we operate on a wakalah basis, an agency basis,” he said.
“The digital landscape is where it’s really interesting for us, because the strategy that we implemented two years ago was about moving to mobile,” said Mr Jaya. “About six years ago, we restarted our call centre and increased services when it comes to purchasing through the call centre. We offer free delivery and encourage customers to pay online. We launched our official mobile app in the middle of last year and people can buy new and renew through the app. The first phase was for travel insurance and since then made more products have been made available on the app.”
The pricing strategy used by Takaful Brunei is for the best pricing incentives to be made available through the mobile app, second best pricing incentives through the call centre and normal pricing over the counter.
“So there’s a financial incentive but there’s also a time-saving incentive to go digital,” said Mr Jaya. “This has helped us with the 2020 growth and for 2021, that’s also what we are planning - to move ahead with digital connections with our customers.”
Naturally technology plays a big part in the recent development of Takaful Brunei. “The first half of our digital roadmap is the connection with the consumer,” Mr Jaya said. “The next phase is the back end. This is also in line with the major projects like IFRS17 compliance, looking into what data is required on a granular level.
“Big data and AI are some of the technologies that we have put into our pipeline but we want to make sure that we are still true to our principles and values when it comes to takaful,” he said.
Digital takaful
This begs the question of whether there is space in the market for a digital takaful player. Mr Jaya seems sure: “I think so,” he said. “We are not limiting ourselves to just the Southeast Asia region. We believe that Brunei as a country and as a brand has good standing in the Islamic world. So we believe that there’s an opportunity for us to promote this. We are trying to see, within the regulations, what we can do to diversify our business globally as well. Those are pretty much our ambitions.”
This will mean communicating with new and existing customers digitally too. “We use social media influencers but Brunei is a very close-knit community,” Mr Jaya said. “A lot is still based on traditional word-of-mouth, traditional trust, traditional knowing that this person had a good experience when they purchased takaful or insurance or made a claim.” A 

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