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It gives you some information on the types of insurance and takaful business, the basic principles of insurance and takaful, what to do in the event of loss and avenues for complaints. What is insurance Insurance is the transfer of risk by an individual or organisation, known as the policy owner, to the insurance company. In return, the insurance company receives payment in the form of premium. In the event of loss suffered by the policy owner, the insurance company will compensate for the loss or damage. Types of insurance There are two main types of insurance i.e. life and general insurance”
Basic principles of insurance The four main principles of insurance are
Insurable interest You would have an interest in the insured item or life such that, a loss or damage to the item or life insured, would result in a financial loss to you. For example, if you have sold your car, you should also stop insuring it because you no longer have any insurable interest. If you continue to insure it, the insurance company will not pay you in the event of loss or damage to the car. Utmost good faith An insurance contract is a contract of utmost good faith. You, as the policy owner, must disclose all material facts when buying a policy. If you fail to disclose any material fact, the policy may become invalid. Indemnity Only applies to the physical damage to a property (e.g. damage to a building or motor vehicle) where the loss can be quantified in monetary terms. You cannot ‘profit’ from an insurance policy. In the event that you suffer a loss, the insurance company will pay or ‘indemnity’ you to the position you were in before the loss. Contribution It is not necessary to buy more than one policy to protect a particular property. If you do buy more than one, in the event of loss or damage to the property, you can only make one claim. The amount payable will then be contributed by the insurance companies involved. However, if you wish to cover your life, you can buy more than one policy. What is takaful? Takaful is a protection plan based on Shariah principles. You contribute a sum of money to a common takaful fund in the form of participative contribution (tabarru’). You undertake a contract (aqad) to become one of the participants by agreeing to mutually help each other, should any of the participants suffer a defined loss. Sharing of surplus • One unique feature of a takaful plan is the sharing of surplus of the fund between you and the takaful operation based on a pre-agreed ratio. • The surplus is arrived at after deducting expenses such as claims, re-takaful, technical reserves and management expenses. • You are entitled to this surplus if you had not made a claim during the period of takaful. • For example, a takaful operator has total surplus (S) of RM4 million and total general contribution (GC) of RM10 million. Your contribution (C) for the year is RM1,000 and surplus will be shared between you and the takaful operator at a pre-agreed sharing ratio (PSR) of 50:50. The share of surplus that you will receive is calculated as follows:
Shariah Supervisory Council To ensure compliance with Shariah principles:
Takaful operators are required to set up Shariah Supervisory Councils, which advise management and ensure that their activities comply with Shariah principles. The National Shariah Advisory Council on Islamic Banking and Takaful has been set up at Bank Negara Malaysia (BNM) to advise BNM on the Shariah aspects of the operations of Islamic banking institutions and takaful operators, as well as of their products and services.
Takaful products and services There are two types of takaful business:
Basic principles of takaful
You must have a legitimate financial interest in the subject matter to participate in a takaful plan. A takaful contract is based on the principle of utmost good faith (trust), whereby you need to disclose all material information required
You can only recover your financial loss and not gain any profit as a result of a quantifiable loss. In determining the compensation, the takaful operator will identify the actual most important cause that brought about the loss. After you have been compensated for your loss, the takaful operator has the right to claim from any third party responsible for your loss.
If a loss is covered by more than one takaful plans or insurance policies, the takaful operator that has made payment to you may call upon other takaful operators or insurance companies to contribute proportionately to the payment.
Where can I get an insurance or takaful product? You can buy an insurance policy or participate in a takaful plan: • • • • Directly from insurance companies or takaful operators; Through registered agents or licensed brokers From banking institutions having bancassurance arrangement with insurance companies or takaful operators; and Via the Internet
Useful pointers when buying an insurance policy or participating in a takaful plan • • • • • • Understand the policy or plan including product features, conditions, benefits limitations and exclusions. Ensure that the premium or contribution payable is affordable.
Ensure that the amount of coverage taken is adequate and suits your needs. Ensure that all material facts are fully disclosed.
Deal only with registered agents/licensed brokers or directly with an insurance company or takaful operator. Monitor the period of coverage and time for payment of premium or contribution
How to make a claim?
Check your policy or certificate o Check whether the loss or damage is covered o Check on items excluded or any proportion of loss that you will have to bear (excess) o If you are in doubt about the proper procedures, you should seek advice from your insurance company or takaful operator, your agent or broker.
Notify your insurance company or takaful operator o Notify your insurance company or takaful operator about the accident as soon as possible o Request for a claim form and seek advice on the documents required to support your claim o In some cases, a policies report may be required. For motor accident, a police report must be made within 24 hours. Provide complete and correct information o Be cooperative and give all the information requested by your insurance company or takaful operator or its representatives (usually adjuster) o Incorrect incomplete information will cause delay in processing your claim Keep copies of all documents o Keep copies and records of all documents such as bills, reports and correspondences Communicate frequently o The insurance company or takaful operator should acknowledge receipt of your claim within seven days o Keep regular contact with your insurance company or takaful operator until the claim is resolved o If the offer made does not meet with your expectation, you may negotiate with your insurance company or takaful operator. Both parties should undertake negotiations in good faith.
How to make a complaint? If you are unhappy with your insurance company or takaful operator, or you feel that you have been unfairly treated, you have several avenues for redress before going to court. Avenues for resolving complaints Complaints Unit of the insurance company or takaful operator • • • • You should first submit your complaint to the Complaints Unit. If you are not satisfied with the outcome of the complaint, you can submit your complaint to the Financial Mediation Bureau (FMB) or Bank Negara Malaysia. The Complaints Unit should advise you on the next proper avenue to deal with your complaint. When forwarding your complaint to either FMB or Bank Negara Malaysia, attach a copy of the decision letter of the insurance company or takaful operator. To allow your complaint to be handled effectively you need to: o Make your complaint in writing o State essential information of your case clearly such as the name of the insurance company or takaful operator
o o o
Relay your complaint in a sensible order and include relevant dates and reference numbers; e,g, the policy or certificate number and vehicle registration number, if relevant Give your contact address and telephone numbers Attach copies of relevant documents and retain the original Retain a copy of your complaint letter for reference
Financial Mediation Bureau • • • • • FMB is an independent body that provides consumers with a fast, convenient and efficient avenue to refer their complaints or disputes for resolution as an alternative to the courts. The services offered by of FMB are free of charge. You must refer your complaint to FMB within 6 months from the final decision of your insurance company or takaful operator. If FMB makes a decision in your favour, the insurance company or takaful operator must abide by the decision. If you are not satisfied with the decision of FMB, you may refer your case to the court.
Types of complaint handled by FMB • FMB handles all life insurance/family takaful and general insurance/general takaful claims subject to the following limits: o o o RM200,000 for motor and fire insurance policies/takaful plans RM5,000 for third party property damage RM100,000 for other types of insurance policies /takaful plans
Types of complaints not handled by FMB • • • • • Complaints relating to pricing of insurance products Complaints relating to underwriting issues Fraud cases Complaints which are time barred or more than 6 years Complaints that have been referred to the court and/or for arbitration
Bank Negara Malaysia You may forward your complaint to Bank Negara Malaysia if it is not under the jurisdiction of FMB or the complaint cannot be resolved by the Complaints Unit of your insurance company or takaful operator. However, Bank Negara Malaysia does not handle the following complaints: • • • • • Complaints that have been referred to the FMB Complaints that have been mediated and decided by FMB Cases that have been referred to your solicitors or legal actions have been instituted Case relating to institutions not under Bank Negara Malaysia’s supervision, such as workshops and managed care organisations Complaints by agents against their principals or on employer/employee relationships or other matters not related to insurance or takaful
Insurance association For complaints relating to agency matters and workshops or repairers, you can write to the insurance associations.
Contact address for complaints BNMTELELINK Jabatan Komunikasi Kororat Bank Negara Malaysia P.O.Box 10922 50929 Kuala Lumpur. Tel: 1-300-88-5465 (LINK) Fax: 03 – 2174 1515 E-mail: email@example.com Financial Mediation Bureau Level 25, Dataran Kewangan Darul Takaful 4, Jalan Sulaiman 50000 Kuala Lumpur. Tel: 03 – 2272 2822 Fax: 03 – 2274 5752 Complaints Action Bureau Persatuan Insurans Am Malaysia Tingkat 3, Wisma PIAM 150, Jalan Tun Sambanthan 50470 Kuala Lumpur. Tel: 03 – 2272 7399 Fax: 03 - 2274 5910 Persatuan Insurans Hayat Malaysia 4, Lorong Medan Tuanku Satu Medan Tuanku 50300 Kuala Lumpur. Tel: 03 – 2691 6168 Fax: 03 – 2691 7978
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