Parametric insurance using geospatial support and big data to validate legitimate claims by farmers have been rolled-out in many parts of the world. These are all examples of technology reinvigorating the “business-asusual” means of providing protection. From our own engagements with SMEs in particular, businesses often cited that complicated and lengthy procedures remain among the top reason for not purchasing takaful. This is not a new challenge and the solutions are available for takaful operators to deploy. More targeted investment into enhancing operational capabilities is paramount for takaful operators to stay competitive. Efforts should continue to be undertaken by the industry to provide seamless customer experience by digitising operational processes, expanding distribution outreach and also upskilling the intermediaries. We also continue to be open to new proposals and would encourage players to test innovative business models and solutions in Malaysia. To date, 80 applications have been submitted under the Financial Technology Regulatory Sandbox – of which, 12 relate to insurance and takaful services. As we facilitate viability testing of these propositions, we have been gathering data and experience that will allow us to make evidence-backed regulatory adjustments, for new and incumbent market players to operate under a regulatory framework that is more riskproportionate. This will cater for new designs of offerings and business modality, while remaining effective in promoting financial soundness and stability. Nonetheless, what we have seen thus far can only be characterised as digitisation of existing delivery channels and services. Going beyond this, we have yet to see true disruptions.

In the interim, we can think of social finance as a vehicle to bridge this gap. The integration of social finance instrument in takaful solutions in a more structured and scalable manner can have transformative impact in making financial protection more affordable for society. Waqf, sadaqah and zakat are examples of social finance instruments which can be embedded in the design structure of takaful products. Mainstreaming the integration of social finance can unlock commercially viable financial protection to be extended to those who are most vulnerable in our society. This is definitely a unique value-added feature that can drive innovation in the area of inclusive protection. In designing solutions to cater for the lower income segment, the takaful industry can capitalise and leverage on the principles of Perlindungan Tenang initiative, which promote protection solutions that are affordable, accessible, easy to understand, easy to buy and claim, as well as offering good protection value. Admittedly, the uptake by the industry to date has not been satisfactory. Many players cited business viability and distribution model to be among the critical challenges in advancing this initiative beyond corporate social responsibility. This is something that takaful operators, as an industry, would need to overcome. We will need to apply unconventional thinking and take bold steps to create an ecosystem that is more enabling for microtakaful solutions to be implemented in a sustainable manner. On the Bank’s part, we have initiated a review of the relevant regulatory framework to spur the development of inclusive protection.