Introduction
Malaysia’s takaful industry has made tremendous progress over the past two decades, yet a significant challenge remains — the protection gap. Despite a rising awareness of Islamic insurance, a large segment of Malaysians, especially from the B40 and gig economy groups, still lacks adequate protection against life, health, and income risks.
The Value-Based Intermediation for Takaful (VBIT) framework offers a structured, ethical, and inclusive path to narrowing this gap. It redefines how takaful operators design, distribute, and deliver their products — ensuring that protection reaches everyone, not just those who can afford it.
This article explores how the principles of VBIT are helping Malaysia move closer to universal protection, financial resilience, and social inclusion.
Understanding the Protection Gap
The protection gap refers to the difference between the amount of financial protection people need and what they actually have. It is not just a statistic — it represents millions of families vulnerable to financial hardship when faced with illness, accidents, or the death of a breadwinner.
In Malaysia, the gap exists for several reasons:
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Limited awareness and understanding of takaful.
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Perceived complexity or inaccessibility of products.
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Affordability challenges, especially among lower-income households.
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Mistrust or misconceptions about the role of takaful operators.
This situation highlights the need for an industry transformation — not only in how takaful products are marketed, but in how they are designed, delivered, and experienced.
That is where VBIT comes in.
From Compliance to Inclusion
Traditional takaful has always adhered to Shariah principles, focusing on avoiding riba, gharar, and maysir. VBIT extends this by emphasizing purpose-driven outcomes. It asks not only “Is this product compliant?” but also “Is this product accessible, fair, and impactful?”
Through the lens of VBIT, closing the protection gap becomes a moral and economic priority. The framework calls on takaful operators to go beyond profit motives — to become genuine enablers of financial inclusion and community empowerment.
This marks a major cultural shift in the industry: from being product-driven to value-driven.
Designing Inclusive Takaful Products
At the heart of VBIT is product innovation for inclusivity. Operators are encouraged to create flexible, affordable, and relevant solutions that meet the needs of Malaysia’s diverse population.
Examples of how this principle is being put into action include:
1. Micro-Takaful for the Underserved
Micro-takaful products provide basic coverage at extremely low monthly contributions — sometimes less than RM10. These are designed for lower-income families, gig workers, and small traders who otherwise remain uninsured.
2. Pay-As-You-Go Models
Some operators are exploring flexible contribution models that allow participants to pay only when they can, using digital wallets or prepaid cards. This approach reduces financial barriers without compromising coverage continuity.
3. Simplified, Transparent Plans
VBIT encourages plain-language contracts and simplified terms so that participants understand exactly what they are paying for and what they are protected against. Transparency builds confidence — a critical ingredient for trust in takaful.
4. Health and Wellness Integration
Protection under VBIT is not limited to financial payouts. It extends to preventive health benefits — such as free screenings, telemedicine, or mental health consultations — helping communities live healthier, longer lives.
By aligning product development with real needs, VBIT ensures that takaful grows both in reach and relevance.
Making Distribution More Inclusive
Designing affordable products is only half the battle; making them accessible is equally important. VBIT reshapes how takaful reaches the people it serves through innovative, value-based distribution strategies:
Partnering with Communities
Operators can collaborate with mosques, cooperatives, universities, or NGOs to promote financial literacy and provide group takaful plans for specific communities — fishermen, teachers, small-business owners, or single parents.
Leveraging Digital Channels
Mobile-first solutions and app-based enrolments make it easier for individuals in rural or remote areas to sign up without paperwork. Automation also reduces operating costs, allowing operators to keep contributions low.
Empowering Ethical Agents
Agents and brokers play a central role in building trust. Under VBIT’s “Best Conduct” thrust, intermediaries are trained not just to sell, but to advise with integrity, ensuring customers buy the right protection for their needs, not the most expensive plan available.
Partnerships with Fintech and E-Wallets
Collaboration with digital platforms can integrate micro-takaful offerings into daily financial transactions, allowing participants to opt in with a few taps on their smartphones.
This shift toward inclusive distribution channels ensures that takaful can truly reach “the last mile.”
Strengthening Financial Literacy and Awareness
One of the biggest barriers to protection is misunderstanding. Many Malaysians still confuse takaful with conventional insurance or assume it’s only for Muslims.
VBIT tackles this through community education and transparency. Takaful operators are encouraged to invest in programs that teach:
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How takaful operates based on solidarity and mutual aid.
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Why early protection leads to long-term financial stability.
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How claims and surplus-sharing mechanisms work fairly and ethically.
Financial education helps participants make informed decisions — a key step in bridging the gap between awareness and action.
Enhancing Trust and Confidence
Trust is the foundation of all protection. For the underinsured population, skepticism about financial institutions often stems from past experiences with unclear policies or poor claims service.
Under the VBIT framework, operators must commit to ethical conduct, transparent pricing, and swift, fair claims handling. This means:
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Communicating product benefits and exclusions clearly.
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Using simple, visual summaries rather than technical jargon.
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Processing claims quickly and compassionately, especially during crises.
When customers see takaful as honest, caring, and responsive, confidence in the system grows — and so does participation.
Measuring Progress: Tracking Impact and Inclusion
VBIT emphasises measurable outcomes, not just intentions. To close the protection gap effectively, takaful operators must track and report indicators such as:
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The number of new participants from underserved segments.
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Percentage of affordable/micro-takaful products in their portfolio.
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Speed and efficiency of claims settlements.
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Level of customer satisfaction and retention.
Regular public reporting not only holds the industry accountable but also showcases how takaful contributes to Malaysia’s national financial inclusion and sustainability goals.
The Role of Collaboration
Closing the protection gap is not the responsibility of takaful operators alone. It requires coordinated effort between regulators, financial institutions, social enterprises, and communities.
The Malaysian Takaful Association, under the VBIT roadmap, plays a central role in facilitating knowledge sharing, setting standards, and encouraging innovation. Partnerships between public agencies and private operators are also essential in designing products that align with the needs of the rakyat — from flood protection to affordable healthcare.
When all stakeholders work together under the VBIT philosophy, the industry becomes greater than the sum of its parts.
Conclusion
The protection gap is not merely a financial problem — it is a social one. It reflects unequal access to safety, stability, and peace of mind. Through the Value-Based Intermediation for Takaful framework, Malaysia’s takaful industry is taking meaningful steps to close that gap — one affordable plan, one ethical agent, and one community at a time.
By combining innovation with compassion and aligning business success with social good, VBIT transforms takaful into a force for inclusion. The result is a more resilient Malaysia — where no one is left unprotected, and where the true essence of ta‘āwun (mutual help) becomes a reality in everyday life.
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