The Insurance Regulatory Authority(IRA) has taken leaders of various insurance companies through Takaful, an insurance model based on Islamic shariah principles in a bid to drive its penetration.
Takaful is a co-operative system of reimbursement or repayment in case of loss where people and companies make small contributions into a mutual pool of funds, from which they are compensated.
Whereas this model is gaining increased popularity worldwide, this is not the case with Uganda.
Speaking on Monday, Bernard Obel, director supervision at IRA said Takaful can be a gamechanger in driving micro insurance in the country.
“Takaful is going to offer more microinsurance products because, basically, it looks at the poor. It wants to bring the poor within their risk to provide them with risk mitigation methods,” Obel said.
He noted that convention insurance companies can also offer Takaful.
“When you look at the core principles of Takaful, it is not profit motivated but wants to protect the society and see impact .The focus for Takaful is on the poor in the society, how they use this as risk mitigation measures.”
The director for supervision at Insurance Regulatory Authority said a company is about to meet the minimum requirements to be licenced to offer Takaful insurance, noting that they are also in discussion with other operators from Sudan to offer this service in Uganda.
He underscored the benefits of Takaful Insurance model.
“First of all, in terms of sharing of profits, for instance, when a loss does not occur, at the end of the policy, at the end of the year, you agree and the proceeds are shared. The profits are shared with the players, the people, the policyholders, who contributed in the takaful business. So that's a plus that somebody does not question the fact that a loss did not happen and they did not benefit anything,” Obel said.
“So, this is a model whereby you become a key stakeholder in the business. Whatever happens, you also get it, get some profits out of the business.”
He insisted that Takaful insurance is not only for the Muslim community but for people of all faiths.
Dr.Twaha Ahmed Kasule, a senior lecturer at the Islamic University In Uganda said Uganda is ready for adoption of Takaful insurance model.
“What we need is to start this model. Legal reforms for this model have been concluded and perhaps according to officials from Insurance Regulatory Authority, regulations will be signed. We have been training people in Islamic finance and banking and at IUIU we have graduated more than 200. This means the knowledge of Islamic insurance is already in the market,” Dr.Kasule said.
He explained that Takaful is an alternative way of insuring, noting that insurance companies need to learn not to be the owners of the resources but agents of the resources.
“The companies need to know about sharia governance and each company according to regulations must have a sharia committee of at least three so that they can always have reference on sharia compliance. The business model is also very strict on the ethical dimensions of the investment and the handling of resources.”
According to Dr.Kasule, these requirements are easily applicable, noting that education is still ongoing for Ugandans to adopt this alternative model of insurance.
“Among the benefits is to widen the scope of the insurance business. There is always the issue of the group that is always left out on insurance but once you bring on board Takaful, you help insurance inclusion as it is in banking sector. This will improve insurance penetration rate in general and also create greater opportunities in terms of employment and premium collection among others.”