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Friday, 29 February 2008

Capita to launch Sharia-compliant insurance

Sharia policies will comply with strict Islamic beliefs, which are in conflict with conventional insurance products

Outsourcing giant Capita, best known for running London's congestion charge, is to launch an insurance business in April tailored to comply with Islamic beliefs. The initiative will see Capita initially sell car and home insurance by working with British Islamic Insurance Holdings. Life insurance, investments, savings and ethical financial products are to be launched later this year.

Capita, also known for collecting the BBC licence fee, will sell the policies as well as process claims and run the company's back office. The deal should be worth £87 million to Capita over eight years.

Conventional UK insurance products are in conflict with Islamic beliefs as the Koran prohibits "riba", loosely translated as interest but interpreted by many progressive Muslims as usury or extortionate interest. Insurance also contains elements of uncertainty and gambling that make it unsuitable for devout Muslims.

Bradley Brandon-Cross, chief executive of British Islamic Insurance Holdings, said: "The Muslim faith states that, because of various product features, conventional UK insurance options are in conflict with Islam and this creates a dilemma for British Muslims. We are planning to create a British insurer that operates in a way that removes this dilemma and creates an exciting new sector in the British insurance market."

The insurance product will comply with "Takaful" principles. Takaful is an Islamic insurance concept which has been practised in various forms for more than 1400 years. It originates from the Arabic word Kafalah, which means guaranteeing each other or joint guarantee. The Takaful system is a form of mutual insurance based on co-operation and responsibility. The principles of Takaful are that policyholders co-operate among themselves for their common good; each pays a subscription, which eliminates uncertainty and losses are divided and liabilities spread across a community pool. No individual should derive advantage at the expense.

Capita has been operating in the financial services market since 2000, first in the general insurance market and latterly in the life and pensions arena. The insurance sector has provided some of its biggest contract wins in the past year, when it began a £722 million contract with Prudential to administer 7 million mature life and pensions policies. The contract win has seen 1,750 Prudential UK staff transfer to Capita and a further 1,250 staff in Bombay have also joined Capita.

Since the turn of the year it has been taken on to run back office in Norwich of Marsh, the US-based insurance broker, in deal which is expected to be worth £200 million over 10 years.

Capita said yesterday that pre-tax profits had risen in the year to December 31 by 19 per cent to £238.4 million on turnover up 19 per cent to £2.07 billion. The company has all of its 2008 revenue of £2.3 billion in the bag and said that it has very good visibility on 2009 and 2010 earnings.

Paul Pindar, chief executive, said that any economic downturn was likely to be good for Capita as other companies looked to outsource their back offices.

Increasingly, Capita is also running other companies' front office and sales operations. For instance, it runs customer contact centres for DSG, formerly Dixons, and eircom, the Irish telecoms operator.

Capita has said that it will increase its dividend by 33 per cent, in line with a five-year average of 32 per cent increases. It has also proposed to return 25p a share through a special dividend. --(TimesOnline)


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