Drive to sell halal car insurance

By Jeremy Grant, The Financial Times, October 19 2008

In the past few months, residents in some parts of London, Leeds, Birmingham and Cardiff in the UK will have noticed a glossy leaflet dropping through the letter box. It looks like any other promotional literature, except for the slogan on the front: “Halal car insurance that’s right for your faith.”

Appeals to a consumer’s religious beliefs are unusual in a sales pitch in the UK and probably unheard of in its car insurance industry. But Principle Insurance Holdings believes the time has come for car insurance aimed at Britain’s 2m Muslims.

Bradley Brandon-Cross, a former GE Capital executive – and non-Muslim – who was recruited to Principle as chief executive, says Islamic finance is growing globally. The UK government has encouraged its use in Britain and many Muslims living in poorer regions of the country have for too long had fewer insurance choices than consumers in better-off areas.

“For a long time, Muslims have not been able to buy insurance products compliant with their beliefs so they have had to make do with products that are not empathetic with those beliefs,” he says.

Bradley Brandon-CrossIn July, Principle became the first shariah- compliant insurance provider in the UK with the launch of products under the Salaam brand – taking its cue from the Arabic word for peace.

Salaam Insurance is a trading name owned by Principle, which has 54 shareholders – mostly from the Gulf region.

Salaam’s insurance cover is based on the principle of takaful, a form of mutual solidarity, which developed into the sharing of losses in a similar way to insurance. In takaful insurance, policyholders’ contributions – equivalent to premiums in conventional insurance – are pooled and invested in shariah-compliant investments, meaning they must not be interest- bearing nor be invested in businesses prohibited to Muslims such as casinos, pornography or alcohol.

If the amount in the fund from ongoing premium income and returns from those investments is greater than claims paid out, the surplus is redistributed to policyholders – in Salaam’s case as discounts on premium renewals.

Yet, suitable as such a concept may be for many Muslims, low awareness in Britain of takaful and other similar concepts means Islamic finance has not been taken up as fast as initially expected, presenting a challenge to Salaam’s founders.

Islamic consumer finance is relatively new to Britain. But, partly because of a push by the UK Treasury, services for Muslim consumers have sprung up, including the establishment of the Islamic Bank of Britain, a retail bank, in 2003. However, the sector has grown slowly. Mr Brandon-Cross says research before the launch showed many British Muslims understood the concept of halal but their knowledge of Islamic finance was “limited”.

In response, Salaam has embarked on some creative initiatives. To reach as many of the estimated 600,000 Muslim car owners in Britain as possible, it has undertaken extensive “outreach” to religious leaders. “Imam briefing packs” are being sent to religious leaders to provide background information about the religious aspects of Salaam’s car insurance product in case they are asked about it.

Salaam plans to hire a stand at this month’s annual Global Peace and Unity meeting, the UK’s largest Muslim community event. Earlier this year, Lord Patel of Blackburn, a prominent British Muslim, hosted an informal event at the House of Lords to introduce the company to people in the Muslim community.

Yet, to compete with the welter of conventional car insurance available, Mr Brandon-Cross admits that Salaam must balance the fact that potential customers are likely to remain attracted by the keen pricing offered by conventional products they have bought before. “We have worked hard to get our prices as competitive as possible,” he says.

One in five quote inquiries on the Salaam phone line – where sales agents speak Arabic, Urdu, Gujurati and Bengali as well as English – results in a sale, the company claims. This is comparable to industry norms, it says.

Now Salaam is about to promote to non-Muslims. Mr Brandon-Cross says: “We have always believed that certain elements of the product – its focus on ethical investments, transparency and ability to get something back – would appeal beyond the Muslim community.”

Copyright The Financial Times Limited 2008