Is Islamic insurance a viable alternative? evidence from Singapore

Abstract

With the increase in complexity and variety of products offered by Islamic banks, insurance is often included in retail banking as a value-added incentive. As such, Takaful or Islamic Insurance was first introduced in Singapore in late 1995 hoping to further promote Islamic financial activities in the city-state. However, unlike Islamic banking which has attracted much attention in recent year, research on Islamic insurance is still in its infancy. Therefore, many people, in Singapore or worldwide, are still unaware of its existence and availability. The primary goal of the current study is to assess the awareness of Takaful in Singapore and its viability as an alternative to conventional insurance. The paper begins with a brief introduction to the concept of Takaful, followed by reporting the current Islamic Insurance operations in Singapore. The study continues with a market analysis of Takaful in the country. A survey questionnaire was designed and distributed among market participants, and the results were tabulated and analyzed hoping to assess the awareness of the existence of Takaful among Singaporeans. The results show that (a) the majority of Singaporeans are indeed not quite familiar with Islamic Insurance, (b) strong support from the Muslim population is still lacking, and (c) Takaful operations are viable in Singapore.