Interview: Osman Jair

What impact will the launch of BITA have on insurance sector in the Sultanate?

OSMAN JAIR: BITA was formalised and launched in November 2013 as a new trade body that serves to unite all of the Sultanate’s insurance operators, both conventional insurers and takaful operators. The predecessor of BITA was the General Insurance Association of Brunei Darussalam, which consisted only of conventional insurers. Thus, takaful operators had not previously been members of this kind of association.

BITA represents the reality of Brunei Darussalam’s insurance sector today. The association consists of 13 members, including six conventional general insurers, three conventional life insurers, two family takaful operators and two general takaful operators. BITA will strengthen the Bruneian insurance sector by uniting all players in the industry. Although we all compete with one another, we also have common goals and need to employ harmonised standards. As the government already provides citizens with many aspects of welfare, the development of a local insurance sector is a common challenge and we must promote education and awareness about insurance in unison. BITA will thus serve to promote closer ties among various insurance operators in the country and to stimulate a dialogue that can meet shared interests and challenges.

In what ways will the implementation of new insurance guidelines affect the industry?

OSMAN: The new guidelines aim to standardise the management of agents in the industry, and to ensure that operators are centrally registered. Previously, agents were only registered with their takaful operators, while conventional general insurers were registered with their companies. In this regard, the regulation will have a positive effect, as it will ensure a consistently high level of product quality. The new guidelines further regulate the commission rates payable to insurance agents as well as their qualifications. This elevation of standards will bode well for Brunei Darussalam’s insurance sector. While takaful operators have been present in the local insurance industry for more than 20 years, the sector has often had difficulty attracting local Bruneian talent. This overhaul of standards is aimed at better regulating the industry. Of course, these new guidelines cannot be implemented overnight. While they were launched in June 2014, there is a grace period of six months to give the industry ample time to adjust. The major challenge will be enforcement, but BITA and the financial services regulator, Autoriti Monetari Brunei Darussalam, will be working together.

How can local conventional insurers remain competitive with fast-growing takaful operators?

OSMAN: Some conventional insurers find that the way takaful operators do business creates inherent disadvantages for them. Foremost is the profit-sharing model that takaful operators currently employ, which is missing from conventional insurers.

With regards to takaful, if a participant does not make any claims by the end of the participation period, takaful operators give back to their members in the form of profit sharing. There is a significant difference in the takaful industry between the company’s money and the participants’ risk fund. In the conventional insurance industry, the closest equivalents of this profit-sharing model are non-claim bonuses and rebates, and some operators find this disparity a disadvantage.

Takaful operators must comply with the profit-sharing mechanism, as it is an integral part of how we do business, so the only way for conventional insurers to compensate is by giving larger rebates. While it is true that takaful holds a large share of the general insurance sector, there is still room for growth among conventional insurers. BITA now serves as a forum for each member to make their concerns heard, and the success of each member is conducive to the development of the sector as a whole. Industry players must therefore cooperate in order to achieve shared objectives.