The growing Muslim population in Canada could present new untapped growth opportunities for insurers and brokers willing to provide Sharia-compliant insurance.
Takaful insurance – or coverage that complies with Islamic principles – is already gaining traction in the Willis Group, for example, which recently added to its line of takaful insurance products with the U.K.’s first Sharia-compliant insurance for real estate investors and companies.
Between 1991 and 2001, the Muslim population in Canada grew almost 129 per cent. Those numbers continue to grow, with the total Muslim population expected to triple in the next two decades, according to a new study from the Pew Research Center Forum on Religion & Public Life.
Additionally, separate research suggests that Muslim communities tend to be underinsured or uninsured.
Takaful expert Jamie Reid, a consultant at Finity, suggested to Insurance Business that takaful insurance could launch through a global insurer creating a subsidiary and possibly a “coalition of community-based brokers” who know of Islamic groups and businesses in their local areas.
Takaful insurance operates via two models: the most common model in western societies – wakala – and Mudaraba. With the former model, the policyholder pays their premium into a policyholder fund, operated by the insurer. The insurer charges a fee, which is used to run the insurance operation. If the operator’s expenses to run the program are less than the fee it charges, it makes a profit.
Reid said there are both challenges and advantages to offering takaful (wakala) insurance. He explained that the number of Muslims in Australia is still relatively small and the overheads involved in running such models are larger than running conventional operations. (continued.)
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He also pointed to regulatory issues.
“Takaful insurance providers would have to break the mould in working their way around the regulations which are designed for conventional insurance," he said.
However, Reid explained there are mitigating factors too, including the fact that the Muslim population is growing. He added that ethical companies may seek to invest in takaful insurance companies too and that takaful insurance is not a million miles away from conventional insurance.
“The roots of general insurance are in mutual in communities,” he said. “They are built on people pooling money for cover.”
