In today’s environment, Takaful Companies face mounting challenges – stiff competition from the financial services industry; business innovation, regulations, and compliance; and process challenges such as cost containment to return better efficiency and value to stakeholders. In the midst of all these, insurers are increasingly challenged by commoditisation in personal line products, shifting customer requirements, sharp competition, mergers and acquisitions requiring companies’ consolidation, globalisation and economic uncertainties. At the company level, operators are facing increased pressure to minimise risk while maximising growth, improve profitability while reducing turnaround time, improving speed to market of new products, provide positive customer experience, and give good returns on their premiums paid. Rapid product development is a competitive advantage but now demands much customization to tailor make solutions for each policy owner requiring flexibility, multiple options, and innovations to push information and pull data for analysis or follow ups. These requirements demand business transformation and paradigm shifts. They are a great challenge when there are no structured change management processes, change management tools, automated straight through processes, and a central repository of customer information. Without these, insurers are unable to take the opportunity to capture the market, remain cost competitive, increase profits and retain service excellence. These challenges if not overcome, will be a very real and substantial setback to your plans to pull ahead of your competitors, differentiate yourself in the marketplace and your customers. By leveraging on our core capabilities and our unique business focus on the insurance industry, AETINS can help you meet these critical needs and unleash your full business potential. Find out more about our TSF Framework Architecture

1. AETINSMINDSHARE February 2012
Can System really help address
Takaful Operators challenges?
By: Ravindra Mohan

2. Can System really help address Takaful Operators challenges?
Feb 2013 Follow us on Facebook
By : Ravindra Mohan Vijalapuram
The market opportunity for Takaful is significant but penetrating the market effectively is a challenge for
Takaful Operators. As newcomers, they have to compete with more mature conventional peers, who clearly
have the advantage of scale. They also have to compete with fellow Takaful Operators, who aspire to secure
major share of the pie.
Below are the practical challenges faced by Takaful Operators in implementing and achieving sustainable
business growth:-
1. Market Penetration and Acquisition Costs: Lower market penetration and higher acquisition costs have been a major
problem daunting Takaful operators in MENA. In many markets, increased competition and aggressive pricing is resulting in
shrinking margins. Furthermore, industry reports show that Takaful operators have higher commission ratios compared to
conventional insurers. This is due to the advantage of scale the conventional insurers have.
2. High Operation Expenses : Most operators have expense ratios (Administrative Expenses /Net Earned Premium) of more
than 30%. This is substantially high compared to conventional companies who are around 10% lesser than the Takaful
operators.
3. Compliance towards Shariah : Takaful operators need to manage the clear segregation of Operators and Takaful funds
at all times to ensure Shariah compliance. With the complexity of Takaful business, this is a daunting task. Accurate calculation
of surplus from various Takaful funds (Death, Disability, CI, Motor, etc..) and distributing back to participants poses an added
challenge. This also adds onto the Operational costs and increases the Expense ratio.
4. Regulatory Evolution : Takaful industry is learning and evolving. Lack of standardization at this point of time is seen as
a major risk. There are different models of takaful with different flavours implemented in each company. We have seen
continuous regulatory changes in the last few years. Some are as sweeping as that of Saudi Arabia adoptingthe co-operative
model. New standards are evolving (AAOFI, IFRS 9). There is an imperative call to move towards Solvency II regime. All these
impact Takaful operators, unless they are prepared for change.
5. Shortage of Skilled Staff and High Staff Turnover : This is one of the key challenges faced by Takaful Operators. Shortage
of skilled staff and frequent turnover leads to problems of knowledge transfer and thus affects service. More time is spent
on service recovery when it should be on service delivery.
How PentaTAKAFUL aligns to Some of the strategic ways PentaTAKAFUL framework can help
address Takaful Operator Takaful operators:-
challenges
1. Market Penetration and Acquisition Costs: Understanding the market
needs, ability to launch new innovative products in a timely manner, providing
effective tools and service to agents at the point of action are the key
success factors for business growth.
a. Launch Innovative Products : PentaTAKAFUL has a robust Product
configuration framework, which has an extensive range of functional parameters
to enable or regulate with. With parameterization and standardization at
fundamental levels, it allows you to experiment freely to arrive at combinations
which best suits your market and customers.
b. Bancassurance – Sell Policy on the Spot : PentaBANCASSURE allows
bank staff to illustrate and sell policy on the spot without compromise on
risk assessment or compliance. Simplified proposal capture, pulling data
from bank systems, transfers of premium from customers’ accounts make
the process seamless. With merely 30min to 1hour turnaround time, a bank
customer walks out of the bank as a Takaful participant. This portal can also
be extended to other distribution partners like Brokers or Agents.
c. Integrated Agency Management and KPI system : KPI’s and incentives
are stimulants for agents. An integrated KPI tracking system supplemented
with a flexible benefit compensation system allows you to understand and
use the hot buttons of your agency force, thus enhancing the business.

3. 2. Controlling Expense Ratios : It is important that
Takaful operators align costs to necessary areas and
have a framework which allows continuous optimization
of costs. With PentaTAKAFUL as the backbone, with
increase in scale, this expense ratio shall reduce considerably.
Below are some of the reasons:-
a. Automated Underwriting : With all the underwriting
rules and decision making configurable and automated,
you can experience from 70% to 90% of cases going Below picture illustrates the movement among the various funds for
without any underwriter intervention in retail some of the sample transactions. Managing these movements in a
business. This cuts down the need of large number of manual or semi-automated system is not practical and leads to
underwriters and allows the underwriters to focus errors and approximations. And any error means that the funds are
better on remaining cases, thus, improving the claims mixed and Shariah compliance is compromised.
ratio too.
In PentaTAKAFUL, these movements happen in real time with complete
b. Shared Expertise Services: Customer centric transparency. Status of each fund can be assessed on daily basis,
service approaches allows us to integrate Finance, thus enhancing management insight and assuring shariah compliance.
Agency, Claims and Reinsurance functions across
lines of business. Hence, these can be as part of
shared services for the overall organization. This
PARTICIPANT FUND INVESTMENT FUND TABARRU FUND OPERATORS FUND
enhances grouping of staff and cuts down staff costs.
Contribution Subscription Tabarru (MC)
c. Closed Loop Follow-ups : All the mundane work of
Acquisition Charge, Policy Fee, Other Charges
communication, follow-ups are automated, thus
reducing costs. Withdrawals Wakala Switch Free
Claims, ReTakaful Expenses
d. 100% accounting automation and compliance Participant/
to standards: All the financial movements of Agent/
Stakeholder Commission, Medical Fees
business and the Takaful funds are automated. And
with real time segregation of funds and daily posting ReTakaful Claims Recovery, Commission, Profit
allows for timely insights into business. Surplus
3. Facilitating Governance and Shariah Compliance :
Takaful business is more complex in management
than conventional. The reality of Takaful operations 4. Handling Regulatory Changes : A good core system should be
shows that it requires 4 different funds in principle to flexible to adapt to regulatory changes. PentaTAKAFUL with its
be managed as part of operations. They are: robust approaches, allows to incorporate changes quickly and
smoothly. Whether the change is with regards to switch in Takaful
a. Operators Fund (Shareholder’s Fund): Wakala model ( Eg : Shift from Mudharabah to Wakala model in Malaysia),
fees for commissions and administrative expenses or a demand to switch the fundamental funds (Eg : Shift to
collected and corresponding expenses from it. co-operative model in Saudi Arabia), PentaTAKAFUL handles it
smoothly with mere parameter changes. We can expect number of
b. Tabarru Fund : This is the risk fund from which changes in regulations and accounting approaches in the near
claims and reinsurance are handled. Underwriting future. With its sound architectural base, PentaTAKAFUL can be
surplus is calculated on this fund. align to changing needs with minimal impact.
c. Participants Fund (or Operations Fund) : These
are amounts belonging to the participants which has 5. Handling Staff Turnover : Key challenge for both Insurers and
not been allocated yet to respective funds. Takaful operators is knowledge management. Discontinued products
still needto be serviced over longer duration. People keep moving.
d. Participants Investment Funds : Applicable for With PentaTAKAFUL Plan wizard and rules base, all the business
Life products, wherein, the investment part is managed rules and product rules are centralized. This allows new people to
by Takaful operator. understand the business and products quickly and get inducted as
soon as possible. This substantially reduces the servicing risks.
PentaTAKAFUL is capable of addressing the challenges encountered
by Takaful operators. With all the Takaful funds and inter-fund
movements built in, it assures shariah compliance without incurring
additional compliance costs. It will enhance your reach through
different distribution channels with personalized products. With
effective use, PentaTAKAFUL shall act as a strong backbone to your
business.

4. INSURANCE & TAKAFUL SOFTWARE SOLUTIONS
AETINS is an Insurance & Takaful Software Solutions Provider.
We offer a single end-to-end Insurance & Takaful Solution that covers all lines of business: Individual and Group
Life, Investment Linked, General, Health, Takaful Family and General. It spans across functions like illustration,
quotation, new business, policy/contract servicing, claims, agency management, commission and benefits,
accounting and services.
AETINS’ solutions are customer-oriented, process-driven, and designed the way people work. It comes ready
with rich features, comprehensive functionalities, and off-the-shelf capabilities with most of the good practices
of the industry already incorporated. This allows you to deploy ISF/ TSF without the need for intensive customisation,
saving precious time and costs.
WHY US?
Trusted Insurance & Takaful Software Specialist
100% Success Rate
Proven Solutions
International Awards & Certifications
Insurance Products Takaful Products
ISF Life - ISF I-Life + ISF G-Life + ISF I-Linked Penta Takaful Family - Family Takaful and Group
ISF I-Life - Individual Life Insurance Solution Takaful Solutions
ISF G-Life - Group Life Insurance Solution Penta Takaful General - General Takaful Solution
ISF I-Linked - Investment Linked Solution (property & casualty)
ISF Agent - Web Portal for Insurance Agents Penta Banca Family - Selling Family Takaful
ISF Banca-Life - Selling Life Insurance through Banks through Banks
ISF Illustrate - Offline Illustration for Life Insurance Penta Agent - Web Portal for
Takaful Agents
ISF Gisa - Group Insurance Self Administration
System for Employers Penta Illustrate - Offline Illustration for family
takaful
ISF General-Life - General Insurance Solution
(Property & Casualty) Penta Gisa - Group Insurance Self
Administration System
ISF Banca-General - Selling General Insurance through Banks
for Employers
ISF Gensure - Web Portal for Selling & Servicing General
Insurance
Penta Gensure - web portal for selling and
servicing general
ISF Financials - Financial & Accounting Solution
ISF Health - Health Insurance Solution
Website: http://www.aetins.com Connect with us :
Email: enquiry@aetins.com
Tel: (603) 7620 3043 / 7955 3043
Fax: (603) 7957 1187
AETINS Sdn Bhd (457050-A)
Suites 3A02, Menara PJ, AMCORP Trade Centre, No.18, Jalan Persiaran Barat,
46050 Petaling Jaya, Selangor Darul Ehsan, Malaysia.
© Copyright AETINS, All rights reserved.
ITMS 532312