KUALA LUMPUR (Feb 7): The Malaysian Takaful Association (MTA) is committed to addressing financial protection for uninsured and underinsured groups in Malaysia through takaful products, and to expanding the takaful industry's penetration rate to 40% by 2028.

MTA chief executive officer Mohd Radzuan Mohamed said about 46% of Malaysians do not have any personal financial protection, which is concerning.

The MTA wants to fill the unmet needs of this portion of the population, he said. “Most of them (underinsured groups) are either from B40 (the bottom 40% household income group) or M40 (middle 40%). We feel that takaful has a very good proposition for these [groups],” Mohd Radzuan told a press conference on Wednesday in conjunction with the launch of the MTA's interim report on the Takaful Financial Sector Blueprint (FSB) programme 2023.

Mohd Radzuan noted that the combined penetration rate of conventional insurance and takaful in Malaysia stood at 54% in 2022, with conventional insurance taking up 34% and the remaining 20% from the takaful segment.

With growing demand for takaful products as well as the MTA's Hijrah 2027 Strategic Plan, he projected that the takaful penetration rate could reach 40% within four years.

According to Mohd Radzuan, Bank Negara Malaysia (BNM) had targeted a combined penetration rate of at least 75% for conventional insurance and takaful by 2020, but both segments missed the target.

However, he believes that the takaful industry can reach the 40% penetration target within four years from now, supported by the MTA's Hijrah 2027 plan and the Takaful FSB programme.

The Takaful FSB programme, which addresses the long-standing challenges and enhances the takaful industry's growth, aims to “harmonise” BNM’s FSB 2022-2026 targets and the value-based intermediation for takaful (VBIT) road map.

“The interim report delves deep into the significant achievements of takaful operators, examining key project milestones and intended outcomes against the backdrop of VBIT and its maturity continuum,” the MTA said.

The VBIT framework was issued by the takaful industry in 2021, followed by the VBIT road map in 2022.

“The interim report goes beyond highlighting achievements, offering insights into the programme's future impact. It emphasises how the Takaful FSB programme, through VBIT principles, aims to create a sustainable, stable and inclusive takaful industry. This, in turn, benefits takaful operators, participants, and the Malaysian economy as a whole,” the MTA said.

The programme is currently in the implementation phase, and progress is being made in all strategic thrusts through the 11 working groups that oversee various aspects of financial inclusion, economic resilience, digitalisation, sustainability and climate resilience, and Islamic finance leadership.

"The Takaful FSB programme will continue to be instrumental in driving the takaful industry forward, and will continue to do so. By acknowledging these key metrics, the takaful industry can identify areas where it is making progress, and areas where improvement is needed,” added Mohd Radzuan.