Rizwan Hussain is the Managing Director and CEO of Salaam Takaful Limited. A seasoned professional, possessing an immaculate experience of more than 30 years in a wide range of various leadership roles in local and foreign insurance/Takaful enterprises, Rizwan’s name is well known in the corporate world. He assumed the role of MD and CEO of Salaam Takaful Limited in the year 2018. Following is the edited transcript of a recent conversation he had with BR Research:

BR Research: Why is insurance/ Takaful penetration low in Pakistan and what opportunities and gaps do you see in the insurance / Takaful sector today?

Rizwan Hussain: Before 1972, a lot of multinational insurance companies were operating in Pakistan that gradually started to leave the country when they foresaw weak prospects for economic development. State Life Insurance was working as a monopoly after it came into existence as a result of nationalization in 1972. The mandate of regulating insurance the sector was transferred from the ministry of commerce to the SECP in 2000.

The regulator and government really need to pull up their sleeves and take initiatives to spread financial literacy in Pakistan. Yes, I understand that we have primary issues pertaining to general literacy, and inculcating financial literacy is considered farfetched, however, even the literate and educated in our country do not know the intricacies of financial products despite the very simple value proposition of insurance / Takaful products. Take India’s example: Their Security and Exchange Board started awareness and educational initiatives for their financial sector back in 2012 and now after a decade their general public knows and understands financial products and more importantly understands the benefits of why insurance are a need and not a luxury.

Moreover, government needs to implement the compulsion of mandatory coverage. For example, every registered vehicle in Pakistan that’s on the road needs to have at least third-party liability coverage. This is the law, but it is not implemented in true spirit. There is a stipulation for mandatory group life insurance under labor laws in Pakistan, which is also not implemented as a compulsion for all organizations. We have many case studies from the developed countries with their mandatory occupational health insurance / Takaful schemes that the government mandates on both public and private sectors. Pakistan being agri based country with a huge reliance on agricultural produce must have a national crop insurance / Takaful scheme. Again, India has such a scheme working there for 30 years.

Moreover, the consumer psyche in Pakistan is largely driven by religion in the social, economic and political fabric. And while Islamic banking tried to bring some change, nothing major has been done by Takaful companies to create awareness to bridge the knowledge gap to penetrate the masses for sending their message across. Similarly, as an industry norm, our marketing budgets have not been used adequately for mass marketing, again because of less focus on the consumer market, which has limited insurance /Takaful’ s penetration.

And finally, lack of innovation to address consumer needs and demand has stalled the march towards significant achievements. Pakistan has immense potential for insurance / Takaful companies to flourish, which is only possible on the back of innovative products and services.

Keeping all this in view, we acquired Salaam Takaful Limited, which was then Takaful Pakistan Limited, with conscious efforts to bring a paradigm shift and increase Takaful penetration in Pakistan.

BRR: How did you come into the Takaful business?

RH: I was approached by many companies and their sponsors to join them when I was working in the conventional insurance industry back in 2006-7when Takaful was at a nascent stage. At that time, I foresaw that Takaful had the potential of leaving insurance behind. In 2018, we acquired Takaful Pakistan Limited which was established in 2006 and was not performing well at that time. Post-acquisition and after forming new management, we have been quite focused in devising a business which will eventually become a role model for the whole insurance / Takaful industry, not only in Pakistan, but on a global level. Keeping that in view, we rebranded to Salaam Takaful Limited. Today, in just four years’ time, we have become the largest dedicated general Takaful operator in Pakistan and also the first Islamic Insurtech in Pakistan.

BRR: What is the general Takaful industry’s share in the total general insurance sector?

RH: The general insurance industry is close to Rs133billion and the Takaful industry’s share is about 10 percent. Over 50 percent of the business in the Takaful industry comes from the motor segment; Islamic banks are the main source for auto finance in the country - a trend that we have seen picking up because Takaful gets bundled with this banking product.

BRR: So, what is Salaam Takaful’s USP?

RH: Our USPs have been transparency, governance, product innovation and digitization. Our purpose to exist is to create the social impact by adopting ESG as part of our DNA by bringing up such initiatives which create social impact. We are developing and growing human capital and leveraging technology and innovation to create sustainable impact on society at large. We call these unique because these bases are quite unique for this industry. Working on these platforms we have engaged big 4 audit firms, have devised industry first products, be it on digital front for specifically creating social impact. We have also distributed surplus because of our efficient fund and claim management.

Our policyholders enjoy free online OPD consultation from a panel of qualified doctors. We have developed this virtual clinic in house which has helped many of our policyholders, prescribed them medicines and since it’s free so have helped them in saving too. Fuel costs, doctors fee as well as saving them from the effort wastage of time. No other company is offering this service where they have their own in-house doctors and physicians.

Another first by Salaam Takaful Limited, Pay-As-You-Drive is a tech-based Takaful coverage that tracks and records the vehicle’s mileage and contribution payment is done every month based on the number of recorded driven kilometers. If you are spending less time behind the wheel, then you are definitely paying too much for your car coverage. With Pay as You Drive our policyholders enjoy all the benefits of comprehensive car Takaful without paying the whole contribution up front, and only pay based on their used kilometers, and that too with a daily use capping. As in, no one will ever be charged extra even if they drive more than the stipulated kilometers.

We have also taken initiatives to be as paperless as possible. Presently, we are 90 percent paperless. Though this a part of ESG vision, however, it has enabled us to develop an infrastructure where the turnaround time to serve our policyholders has diminished significantly. Also, scaling is best done through technology. We believe that tech-integration reduces administrative cost, which has always been a hindrance globally. Fintech and insurtech models offer seamless and technological-based solution. We enjoy the advantages of a traditional Takaful company, and we have technology embedded in our DNA.

BRR: You advocate that Takaful is better than Insurance, how?

RH: What differentiates general Takaful from general insurance is Participants’ Takaful Fund which is governed by Waqf Deed. This deed decides what goes in and out of the fund. Being Shariah compliant makes us more vigilant in providing consumer centric products and services and the concept of surplus distribution exists only in Takaful. We have distributed surplus from this fund for the first time in Pakistan last year and this year too, we have announced distribution of surplus to 13,737 of our policyholders. We also have three kinds of audits, so governance and transparency is cornerstone for our business. This is the true essence of Takaful that every stakeholder should feel that they are being dealt with in the best possible manner with complete transparency of operation. Inherently the concept of Takaful is essentially person-to-person (P2P) Takaful. It is a risk sharing mechanism, where the fund’s pool does not become the property of the company but remains a separate fund from the participant for the participant. This mechanism enables the Takaful operator to drive a competitive and an efficient price for products. There are many more things, in facts books could be written on the advantages of Takaful and its superiority over conventional insurance.

BRR: What is Salaam Takaful’s focus in terms of segments you are catering to?

RH: All traditional products are available with us. However, we have been taking strides in developing innovative products. Then we are also looking to get into the untapped yet a significant crop and livestock segment. We launched Livestock Takaful which has been well received by the cow and buffalo farmers.

We entered into a sandbox with the SECP and were the only insurance/Takaful company that presented a proposal and as a result have developed a state-of-the-art parametric based crop Takaful. We believe that livestock and crops are the farmers’ investment into the future and their means of earning that can be wiped away with a single widespread disease, flooding and robbery along with other everyday risks. Therefore, we want to protect the farmers by incorporating technology with value added features such as geotagging, heat sensors, as well as virtual veterinary consultations.

BRR: Can you share some growth and progress features for Salaam Takaful in its last 3 years.

RH: Salaam Takaful Limited’s success recipe is developing and growing human capital and leveraging technology and innovation to create a sustainable impact on society at large .After taking over the company in 2018, the company touched immense heights. It went from revenue of Rs 150 million to Rs. 2.2 billion, a stupendous growth trajectory of 1,382 percent. Total assets of the company rose from Rs. 479 million to Rs. 3.7 billion, making it a 677 percent increase. Combined equity rose from Rs. 206 million to Rs. 889 million, which is a 332 percent increase. Profitability grew from Rs.3.1 million to Rs. 108 million, another astounding take-off of 3,333 percent. EPS rose from Rs. 0.1 to Rs. 1.24, making it an increase of 1,140 percent.

From the lowest rating of BBB to A++, we achieved an upgrade of 3 notches, which has been unprecedented in the insurance/Takaful industry. We recruited human resources of the highest caliber, from only 50 people in 2018, we are now more than 300 strong with top people in their respective fields, increasing intellectual capital. We became the first general Takaful company in Pakistan to distribute the surplus to policyholders. We have had significant adoption of technology with the creation of a state-of-the-art mobile app for policyholders with unprecedented free services.

We also established an in-house virtual clinic with certified physicians for free OPD consultation. We became the 1st Islamic insurtech to be recognized globally, featured in Insurtech100 for 2021 with the development of technology-based innovative products, totally new to the Pakistani insurance/Takaful industry like pay per mile option for motor and parametric-based solutions for farmers. We have also introduced community-based health coverage solutions for the underprivileged segments of society.

Salaam Takaful Limited has been a consecutive winner of best corporate and sustainability report awards by CA/ICMA Pakistan & SAFA.

BRR: What is the way forward for the development of the insurance/Takaful Industry?

RH: Pakistan has a huge potential when it comes to this industry. On the macro level, a win-win situation can only be achieved through the institutionalization of the development agenda. This means that there is a need for a national insurance and Takaful development forum. Such forums exist in many countries with the industry stakeholders like regulators, government bodies, and public and private sector organizations with the sole agenda of the development of insurance and Takaful industry. We have seen a few ad hoc tactics like the introduction of the Federal Insurance Fee back in the 90s; however, without proper planning, commitment, and motivation such beginnings end very quickly as well.

On the micro level or organizational levels, every company needs to take steps to make insurance/Takaful products as convenient as possible. The imperative elements for the service industry are speed, convenience, and innovation, so the only way forward is to make our products’ value propositions quite lucrative for the consumers with innovative solutions for their requirements. Digitization is the key in this industry as well. Insurance and Takaful should not be considered a primitive era concept, in fact, it has a solution for every sort of risk coverage and social protection no matter the age, gender, location, or lifestyle of the person and this will remain so forever.