Takaful industry and Blockchain: challenges and opportunities for costs’ reduction in Islamic insurance companies

Abstract

Takaful insurance is increasing its consideration. Islamic insurance provides mutual aid and protection. However, the different model does not always make the business efficient. Several studies have shown the difficulty of Takaful companies in limiting their operating costs and having efficient borders. To reduce such operating costs and reach economies of scale, this paper assesses the adoption of Blockchain technology as a critical value for the Islamic insurance industry. Building upon a literature review and drawing on the SWOT framework, this paper outlines internal strengths and weaknesses as well as external opportunities and threats. Our analysis reveals that the Blockchain technology can help in the reduction of fraud, increase timeliness of actions for customers, allow for faster and more efficient management of claims and improve the risk management. Theoretical and practical implications are discussed.

Keywords

• takaful
• islamic finance
• blockchain
• distributed ledger technologies