Shariah-compliant life insurance – or takaful – products have been launched in the UAE by Salama Islamic Arab Insurance Company.
And the firm believes the scheme will tap into a strong underlying demand.
“Life insurance represents less than 15 per cent of the total insurance market in the UAE, while more than 85 per cent goes to other insurance products such as car and health policies,” said Vice-Chairman and CEO Saleh Malaikah.
“Global statistics show life insurance always represents more than 50 per cent of total insurance premiums and with the introduction of the Shariah-compliant products the life insurance business ill grow rapidly.
“The low penetration of life insurance in the UAE and most Arab countries has two main causes – the mechanism of conventional insurance which represent hedging against death and the lack of guarantees for premiums and funds invested in Shariah-compliant economic areas. “The principle of our life takaful is not hedging against death, it is investing for the future.”
The Islamic insurance business in the GCC is expected to reach $4 billion (Dh14.7bn) this year.
“This sector is growing by 28 per cent annually – far greater than conventional insurance,” added Malaikah. “The life market is less than five per cent of the regional takaful industry – but it is expected to grow by 50 per cent annually during the next few years. The main challenge was the lack of Shariah-complaint products and with the introduction of such products the market will grow very rapidly.”
Salama originally launched the scheme in Algeria and plans to offer them in Egypt and Saudi Arabia later this year.
Noel D’Mello, the company’s head of family takaful, said: “The products offer good value for money for investors. We expect they will spread very quickly in the local community – even the non-Muslim community – because of the high potential returns.”
The scheme, with an average monthly premium of about Dh200, has been designed to suit average-income workers.
“After studying the market we can introduce other products for low-income workers or high-net-worth investors,” said D’Mello.