Why insurance matters

Insurance plays a crucial role in safeguarding individuals, businesses, and the economy against unforeseen risks. 

 

In Brunei, the industry has evolved steadily over the years, adapting to the country’s economic landscape, regulatory changes, and shifting consumer needs. However, while insurance is a critical financial tool, awareness and adoption remain a challenge in the Sultanate.

 

The industry comprises various providers, including conventional insurers and Takaful (Islamic insurance) operators. 

 

Takaful, in particular, has gained traction in Brunei due to its alignment with Islamic financial principles, which prohibit interest (riba) and uncertainty (gharar) in financial transactions. Leading players in the market include Takaful Brunei Darussalam Sdn Bhd, Insurans Islam TAIB, AIA Brunei, and Great Eastern, offering a mix of life, general, and medical insurance products.

 

 

 

Life insurance is designed to provide financial security to policyholders’ families in case of death or disability. 

 

In Brunei, conventional life insurance competes with Takaful products, which operate on a cooperative model where participants contribute to a mutual fund to support one another in times of need.

 

 

General insurance covers areas such as motor, property, travel, and liability insurance.

 

Motor insurance is one of the most common types in Brunei, as it is mandatory for all vehicle owners. Property insurance is also crucial, especially for businesses and homeowners seeking protection against fires, floods, or other damages.

 

 

While Brunei offers free or heavily subsidised healthcare to its citizens, private medical insurance is growing in demand, particularly for those seeking access to private hospitals, specialist care, and overseas medical treatment. 

 

Employers also provide medical coverage for expatriate workers as part of employment packages.

 

 

Despite its importance, the insurance sector in Brunei faces several challenges:

 

 

One of the biggest hurdles to higher insurance penetration is a lack of awareness. Many people in Brunei view insurance as an unnecessary expense rather than a financial safety net. There may also be a perception that since the government provides healthcare and social welfare assistance, private insurance is not essential.

 

 

Brunei’s relatively small population and economy limit the potential market size for insurers. 

 

Unlike larger economies, where diverse industries drive demand for various insurance products, Brunei’s limited commercial landscape means fewer opportunities for specialised insurance offerings.

 

 

For Takaful providers, ensuring compliance with Islamic finance principles adds an extra layer of complexity. 

 

The industry is regulated by the Brunei Darussalam Central Bank (BDCB), which oversees financial institutions, including insurers. Maintaining compliance while also staying competitive in pricing and product offerings is a balancing act for many companies.

 

 

In an era where digital services are becoming the norm, Brunei’s insurance sector is still catching up in terms of digital transformation. While some providers offer online services and mobile apps, many customers still rely on traditional, face-to-face interactions when purchasing policies or making claims. 

 

Enhancing digital accessibility could improve insurance penetration, especially among younger generations.

 

 

 

The increasing preference for Syariah-compliant financial services has driven the growth of Takaful products. As Islamic finance continues to expand in Brunei, the Takaful industry is expected to play a more significant role in insurance coverage.

 

 

Regulatory improvements have been made to protect consumers and ensure insurance providers operate responsibly. The BDCB has been actively promoting financial literacy programmes, including awareness campaigns on the importance of insurance.

 

 

To cater to lower-income groups, micro-insurance – affordable and simplified insurance products – has gained interest among policymakers and insurers. 

 

These products provide basic coverage at lower premiums, making insurance more accessible to the general population.

 

 

Brunei’s insurance sector is gradually embracing digital platforms to streamline operations, from policy issuance to claims processing. Future innovations could include AI-driven underwriting, blockchain for secure transactions, and chatbots for customer service.

 

 

For insurance to become a more integral part of Brunei’s financial ecosystem, several steps need to be taken:

 

Enhancing financial literacy: Continuous education campaigns can help the public understand the benefits of insurance and dispel misconceptions.

 

Developing affordable and customisable products: Offering flexible policies that cater to various income levels and needs can encourage more people to invest in coverage.

 

Leveraging digital technology: Improving online accessibility and simplifying the purchasing process can attract a younger, tech-savvy audience.

 

Strengthening regulatory support: Policies that incentivise insurance adoption, such as tax benefits or mandatory coverage for certain sectors, could drive growth.

 

While insurance in Brunei has yet to reach its full potential, the sector remains a crucial component of financial security. 

 

As awareness grows, and with the right mix of innovation, regulation, and education, insurance can become a more widely embraced financial tool for individuals and businesses alike. By addressing existing challenges and capitalising on emerging opportunities, Brunei’s insurance industry is well-positioned to evolve and thrive in the coming years. – Rizal Faisal