Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
Conventional Insurance vs. Takaful

Conventional Insurance vs. Takaful

Ratings: (0)|Views: 16|Likes:
Published by tyrose88

More info:

Categories:Topics, Art & Design
Published by: tyrose88 on Nov 16, 2011
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

07/09/2014

pdf

text

original

 
UNDERWRITING MANAGEMENTTopic:Conventional Insurance Vs. TakafulSUBMITTED TO:SIR MUSAB BASHIR TARARSUBMITTED BY:NEELAM ANWARMI08MBA0074TH SEMESTER (IRM)HAILEY COLLEGE OF BANKING &FINANCEUNIVERSITY OF THE PUNJAB
 
 
DIFFERENCE BETWEEN CONVENTIONAL INSURANCE ANDTAKAFUL
Before discussing the difference between Conventional insurance and Takafulit is better to first understand the concept of insurance and the Takaful.
WHAT IS INSURANCE?
“An agreement whereby one party, the Insurer, in return for a consideration,
 the premium, undertakes to pay to the other party, the Insured, a sum of money or its equivalent in kind on the happening of a specified event, which is 
contrary to the Insured’s financial interest”.
 
Malaysian Insurance Institute (MII) Text Book - Risk and Insurance.
WHAT IS TAKAFUL?
Takaful is a system of Islamic insurance based on the principle of
Ta’awun
(mutualassistance) and
Tabarru
(voluntary contribution) where risk is shared collectively by agroup of participants paying contributions to a common fund against loss to any one ofthem.Takaful is operated on basis of shared responsibility, brotherhood, solidarity andmutual cooperation.
DIFFERENCE BETWEEN CONVENTIONAL INSURANCE & TAKAFUL
Conventional insurance Takaful
Law & regulation:
Sources of laws & regulation are setby stat and man-made.
Risk transfer:
It is a risk transfer mechanismwhereby risk is transferred from thepolicy holder to insurance company inconsideration of insurance premiumpaid by insured.
 
Sources of laws are based upondivine revelations (Holy Quran andHadith).
It is based on mutuality hence therisk is not transferred but shared byparticipants who form a commonpool. The company acts only asmanager of pool (Takaful Operator).
 
 
Uncertainty/gharrar:
It contains the element of uncertaintywhich is forbidden in Islam.There is anuncertainty as to when any loss wouldoccur and how much compensationwould be payable.
Gambling/maisir:
It contains an element of gambling inthat the insured pays an amount(premium) in expectations of gain(payments against claim).if anticipatedloss does not occur the insured losesthe amount paid as premium. if theloss does occur, the insurer loses afar larger amount than collected aspremium and insured gains by thesame.
Investment of Funds:
Funds are mostly invested in fixedinterest bearing instruments likebonds, TFCs, securities etc. Hence
these contain element of “riba” (usury)
which is forbidden in Islam.
SURPLUS:
Surplus or profit belongs toshareholders. The insured is covered
The element of uncertainty isbrought down to acceptable levelsunder Shariah by making
contributions as “ConditionalDonations”(tabarru) for a good
cause i.e. to mitigate the losssuffered by any one of theparticipants.
The participant pays thecontribution (tabarru) in spirit of
Ne’ea (purity) and brotherhoodhence it obviates the elements of ”maisir” while
at the same timewithout losing benefits of Takaful insame way as conventionalinsurance.
Funds are only invested in non-interest bearing, i.e. riba-freeinstruments.
Surplus belongs to participants and

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->