Publication: Liberalization of Commission Structure: How Minimum Allocation Rate (MAR) Affecting Takaful Operator’s Model
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Date
2020-11-10
Journal Title
Journal ISSN
Volume Title
Publisher
Universiti Sains Islam Malaysia
Abstract
Effective 1 October 2020, Bank Negara Malaysia (BNM) Life Framework required all Takaful Operator to comply with the new Minimum Allocation Rate (MAR) requirement together with the liberalization of commission structure. Due to the implementation of MAR, few Takaful Operators decided to withdraw their Investment Link plans from the shelves and launches more Family Takaful savings plans. The implementation of the new MAR primarily to establish a sustainable fund for the participant, but the operators look at it as a tight policy that could affect mostly on commission structure for agents. From the distribution side, reducing the commission structure could lead to the withdrawal and reduction of agents. For big players, they can still offer this product by reducing profit margins and an increase in the volume of sales. For small and mid-players, the innovation in Takaful Model is crucial to ensure they can offer a similar product without contradicting the new MAR. This paper will propose an innovation for Takaful Models that could help the Takaful industry remain relevant in the market.
Description
e-Proceedings of The 9th Islamic Banking, Accounting and Finance International Conference 2020 (iBAF2020)
“Navigating the New Normal in Islamic Finance and Wealth Management”
10th – 11th November 2020, Malaysia
Organized by: Faculty of Economics and Muamalat,USIM
Page: 145-153
Keywords
Islamic Finance, Takaful, Takaful Model