PolicyStreet, a Malaysian insurance technology startup, announced today (January 8, 2024) that it has received approval from the Labuan Financial Services Authority (LFSA), an approved Financial Adviser and Islamic Financial Adviser by Bank Negara Malaysia (BNM) to establish Takaful and Retakaful operations.
Established in 2017, PolicyStreet is a regional full-stack insurance technology (insurtech) group of companies providing digital insurance solutions to businesses and consumers in Southeast Asia and Australia.
The Kuala Lumpur-based startup works with over 40 life, general, and Takaful providers globally to offer a comprehensive range of products and services.
BNM is currently the regulating body for the local Takaful and Retakaful industry. Some approved Takaful and Retakaful operators you might know of are companies like Etiqa, Prudential, and Zurich.
For context, Takaful is a type of Islamic insurance where members contribute money into a pool system to guarantee each other against loss or damage. It’s based on shariah laws, and typically consists of policies that cover health, life, and general insurance needs.
Investopedia states that Takaful insurance companies were introduced as an alternative to commercial insurance, which is believed to go against certain Islamic restrictions. Namely, riba (interest), al-maisir (gambling), and al-gharar (uncertainty) principles, which are all outlawed in shariah.
Dictionary time: Just as reinsurance refers to the concept of “insurance for insurance companies,” Retakaful refers to “Takaful for Takaful companies.” Elements of shariah compliance are the main factors differentiating between a Retakaful and a conventional reinsurance operation.Source: World Bank Group
Through this approval, the insurtech company is granted the ability to reinsure and underwrite Takaful products. In other words, this allows PolicyStreet to capture a larger Muslim customer base that values shariah-compliant insurance coverage.
Based on the Malaysian Takaful Association’s report last year in April, the family Takaful sector recorded a notable RM10.06 billion in gross contributions. This marks an 18.3% increase from RM8.5 billion in 2021.
Expanding its audience segments in Malaysia and the region
In the middle of 2023, PolicyStreet bagged US$15.4 million (RM67 million) in its series B funding round.
Led by Khazanah Nasional, Yen Ming Lee, the co-founder and Group Chief Executive Officer of PolicyStreet stated that the funds raised would be used to strengthen its technology and underwriting capabilities.
Speaking on this new development, Lee said, “We are thrilled to receive the approval for the establishment of the Takaful and Retakaful window, which opens up new opportunities for us to contribute significantly to narrowing the protection gap in the region.”
He elaborated that the company’s entry into the Takaful market is a testament to their dedication to financial inclusivity. They believe this venture will contribute to the achievement of national insurance penetration targets and usher in a new era of insurance solutions tailored to the Takaful market.
Meanwhile, BNM’s Financial Sector Blueprint has also set an ambitious target of achieving a 4.8% to 5% insurance and Takaful penetration rate by 2026.
At the moment, RAM Rating Services Bhd estimates the current penetration rate to be at 4.6%, signalling considerable room for expansion within the market and a growing demand for shariah-compliant insurance products.
PolicyStreet stated that it is committed to introducing innovative and competitive Takaful solutions, particularly ones that align with the values and preferences of its diverse customer base.
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Featured Image Credit: (From left) Winnie Chua, PolicyStreet Group Chief Product Officer; Yen Ming Lee, PolicyStreet Group Chief Executive Officer; Wilson Beh, PolicyStreet Group Chief Operating Officer.