After founding Takaful insurance companies in his country, The Gambia and Zambia, Mr Momodou Musa Joof brought together a group of investors to establish Jaiz Takaful Insurance PLC, with him as Managing Director/Chief Executive Officer. In this interview, with TONY ICHEKU, Mr Joof said that the Takaful Insurance model is the panacea for those who shunned the insurance sector owing religion because Takaful is more about fairness and transparency.
What is the Takaful insurance system all about and why did you bring it to Nigeria?
The first Takaful insurance company in West Africa was established in The Gambia. It is called Takaful Gambia Limited, and it was established by me about eight years ago. After six years of running Takaful Gambia, I travelled to Lusaka, Zambia and established the first Takaful insurance operations in that part of Africa within the Phoenix Assurance Group.
Phoenix operates in about 8-9 Countries around that part of Africa, and the idea was to establish a Takaful window wherever they are present. After two years of establishing that first Takaful in Zambia, I am here in Nigeria to establish one of the pioneering Takaful companies in Nigeria.
I was in conventional insurance practice for a period of 14 years, starting from an Accounts Clerk, to Underwriting Clerk, all the way to Assistant Manager before I left for Malaysia to do my Masters in Management at the International Islamic University of Malaysia where I got infected by the ‘virus’ called Takaful. Its common knowledge out there in Malaysia; in the whole of Asia, Islamic finance, Islamic banks are very dominant in their economies. And I had a very jealous heart to protect the conventional world where I was coming from.
So, I went on attachment to one of the Takaful companies, and after two months, I realised that beyond any reasonable doubt, that what they called Takaful insurance or Islamic insurance is not so much about Islam. But rather, it is an alternative to insurance, a concept which is fairer and much more transparent.
Coming back to your question, we would say conventional insurance operates on the law of large numbers, a system where you pool the fortunate many members to help the unfortunate few that suffer losses. For example, if you have in your community, 5,000 people who own vehicles and they came together to protect each other and contribute or pay a premium related to the value of their vehicles, the higher the value, the more premium they would pay within a period of one year.
The few of them that suffer losses, the contributions or premium paid would be used to settle these losses.
When you now compare that practice with the system of Takaful, you come to realise that Takaful uses the same concept of pooling resources, but that capital which is pooled by the fortunate many, whatever capital they are pooling is left to their ownership for ever.
With the conventional insurance, after settling losses, the surplus or profit belongs to the company or its shareholders, but with Takaful, since the premium was pooled by subscribers, it remains in the ownership of those people who paid.
The primary objective of pooling was to settle losses, and having completed or settled that obligation, whatever is realised as profit or surplus in Takaful insurance is redistributed back to those members who have not suffered losses.
So, in summary, we are saying that conventional insurance belongs to the company and it’s shareholders, but Takaful Insurance belongs to its participants, people who pooled their premium to become members.
In conventional insurance, the annual profit belongs to the company and its shareholders, but in Takaful insurance, the annual profit belongs to those members who have not suffered losses or made claims. In conventional insurance, they can invest in all avenues available to them, but in Takaful, they can only invest in sharia compliant investments, they do not take interest, they do not entertain interest and they do not want interest.
But how do you make profit as a company if the premium surplus goes to subscribers?
What motivates the Takaful practitioner?
We say because we are serving the owners of that capital, people who have taken premium, we say because we are serving them, and we have our business premises, we have staff, we have management expenses, so it is just, acceptable and right that they pay us for those services, but transparently.
The same proposal form, or application form that is completed in conventional insurance is what is completed when you patronise Takaful insurance, we are regulated by NAICOM as the conventional insurance are. So we also apply the approved rate for the industry, but the fact is that on the takaful proposal form, it transparently informs you or declares that whatever payment that is made, 30% of it belongs to the company.
So 30% of N1,000 contributed by one person plus 30% of N50,000 contributed by a bank, collectively, these forms our management expenses pool. The 70% must be kept in a separate bank account for participants ownership. What is it used for? It is used to pay genuine claims, it is used to pay zakat and it is used to pay commission or intermediaries. When you are a broker or intermediary, you are not receiving anything less than you would have received if you were doing business with conventional insurance.
With Takaful, we promise to settle your claims faster because we are paying it from a pool which belongs to you, and that pool where it generates profit, at the end of the year must be distributed back to participants who had not suffered losses.
Takaful is fair and transparent –MD
Generally, the objective of investors is to maximise profit, would you say that this is applicable to a Takaful investor, given what you have narrated?
When you come to look at it morally or spiritually, we say a blessed N1,000 is far much higher than the unblessed or unethical N1m earned.
In other words, our motive is to promote fairness, it is your money that we have collected and collectively, we stand by each other to say we are protecting our loss exposure or ourselves against losses.
Participants come together to protect each other by contributing. That contribution, I would always say is more of an African concept; here our ancestors used to have something called Osusu. They go to gardens, they go to markets, they contribute certain amount of money weekly or monthly to that club with implied conditions; when you have a funeral, they give you that much, when you have a naming ceremony, they give that much, and at the end of certain period, they would give the contribution or policy to one person and start again. That is collectivity and pooling for mutual benefit, and that was the concept that was stolen from us, from Africa by the so-called civilised Countries.
It was re-designed in a contract, which by all means, from whatever angle you might look at it, seems to be unfair. Whereby you suffer a loss and they pay for the loss, they end up paying more than the contribution you paid them, where you do not suffer a loss, you stand to lose your contribution.
So, to sanitise or polish the same concept, we are saying we can have a situation where this same collection remains the same way it used to be in Africa.
The custodians are paid for their service and if they work hard and promote it well and they generate let’s say N200m, it is not enough; 30% of that will not actually defray their management expenses and they would be running at loss.
In that case, they would have no justification to close the participants account, but would rather go back on their shareholders fund and start eroding it. But by the time they are writing N500 billion, 30% of that is more than enough for the salaries they are looking for and profit to shareholders as decent money.
The 70% of N500 billion goes to the participants accounts and it is by far more than the losses they have to settle. And once they are settled, it is ethical to go back to those who are members and have not suffered losses to make them realise benefit for their membership, by giving them their share of profit.
Considering that conventional insurance has not been widely embraced, how do you intend to penetrate the market?
We have to look at all the pros and cons. Yes, professionally, the cry has always been that insurance penetration is low, not only in Nigeria, but in Africa. People don’t want to buy insurance, they don’t want to be recognised with insurance, but the fact is whatever you are doing now, people are more informed, you have to add value, you must learn to add value to whatever you are doing for people to recognise and accept to be associated with it.
In conventional insurance, when you suffer loss, you gain, when you do not suffer loss, you lose. This system has been in existence for too long but whatever product, new or old that is produced, we still have the same system where you gain or lose, so there is need to come in with value added system where you say if you lose, you are paid, if you do not lose, you stand to gain from the pooling of funds. Here again, we say because of that system of may or may not, it looked like a game of chance, and some people were discouraged by one religion or the other from participating.
But now with Takaful removing that element where it is buying and selling, but a pooling system for mutual benefit, you are now inviting everybody without giving them a reason to shy away from participating.
I also want to go ahead and say in most cases where they are saying there is low penetration, I personally do not believe it is as low as they put it, but rather there are cases of unethical practice, unhealthy competition. And recently the regulators confirmed this; they said they have realised that motor insurance vehicles which should have been attracting about 10% of the value of the vehicle for comprehensive cover, some companies are charging as low as 1% because they want to survive.
It is not ethical, if you are charging 1%, it means you are not going to settle your claims on time, and prompt settlement of claims is our priority as providers of insurance if you want to be appreciated by society. And if you do not find yourself professionally and adequately charging premium, then you are saying that you are ready to collect as low as possible to be able to pay salaries, without giving any care to professional and ethical practices .
From your explanations, Takaful is just another system of insurance founded on Islamic principles. In a complex society like Nigeria where almost everything is seem through religious prisms, how can you convince a sceptic that Takaful is just what you said it is?
Islam by itself did not produce Takaful. Islam did not produce any insurance product, but rather, it is shying away from anything that is not transparent, especially where it is ambiguous, where while you suffer a loss, you receive from the insurance company more than you have paid them, where you do not suffer a loss, you stand to lose your premium.
For instance, if you go to a cattle herder and say to the Fulani, I want you to sell to me the foetus of that cow in the womb, it is not acceptable because it is not yet born. You cannot buy something you cannot see. In other words, we are saying when you buy insurance in that context, you are paying for a potential loss, when will that loss happen? If it happens, what will be its size? You don’t know.
What we are saying is, look at issues objectively, do not take biased position because of religion. With Takaful, we want to make sure that what we insure is compliant, its ethical, it does not violate the principles of Islam.
Even if you are non-Moslem and you insure with Takaful, you are treated the same; you suffer a loss, you are paid, you do not suffer a loss you are given your share of the profit at the end of the year.
We are helping to provide an alternative vehicle to the growth of the economy, so that no side of the economy is sacrificed, one part that do not mind anything haram has the opportunist to insure the conventional way, another part that was shying away from conventional insurance is now given an alternative to still come on board so that a successful economy is backed up by successful insurance sector. We want all exposure of the risk of the economy to be fully covered.
We do not even see the conventional insurance companies as our competitors, we are not competitors. We are providing a service to compliment what they are serving. They were serving a particular sector, we are coming to serve the other, so that together we can carry the nation and economy in managing the risk exposure.
