TBE - Part A

AIA confidential and proprietary information. Not for distribution.
Part A
Basic Takaful and Medical &
Health Takaful

Part A 1
Introduction to Islamic
Muamalat

Ensure human life
is based on
Ma’ruf (good)
and to cleanse it
of Munkar (evils)
Ma’ruf: Qualities that have always been guided as ‘good’ by Shariah

Munkar: Qualities that have always been condemned by Shariah as ‘evil’

ISLAM
AQIDAH SHARIAH AKHLAK
IBADAT MUAMALAT MUNAKAHAT JINAYAT
POLITICS ECONOMICS SOCIAL

ISLAM

• Set of Beliefs • Known as Fiqh • Term referring to the
• Aqidah means a firm • Fiqh deals with the observance practice of virtue,
belief in Allah S.W.T, of ritual, morals and social morality, and manners
His Prophets and the legislation in Islam. in Islamic Theology and
Hereafter, also belief • Branches of Fiqh falsafah (philosophy).
in the Angels, the Holy - Fiqh Ibadat • Covers all aspect of
Books (Quran) and - Fiqh Muamalat Muslim behavior,
Predestination - Fiqh Munakahat/Usrah attitude and work ethics
- Fiqh Jinayat which influence his acts.

Primary Sources
Al-Quran
• Words of Allah S.W.T revealed to the Holy
Prophet s.a.w for the benefits of all mankind
• The main sources of Islamic Law
• The absolute authority in deciding the legality
and every legal obligation
• Comprehensive and indivisible guide
Al-Sunnah
• Literally means ‘method’, that includes all that is
from the Holy Prophet (s.a.w) comprises what
the Prophet (s.a.w) said (qawl), did/action (fi’l)
and agreed (Taqrir)

Secondary Sources
Ijma’ Qiyas
Juristic consensus of opinion of the To equate the legal position of a matter
Imams mujtahid among Muslim in a that has no ruling from the Quran and
particular time after the death of the Sunnah to one that has due to the
Prohphet s.a.w regarding the legal ‘illah (underlying cause or reason) of the
position of a matter or problem. ruling.
Maslahah (Consideration of Public Interest)

Is a concept in traditional Islamic Law,
invoked to prohibit or permit something
on the basis of whether or not it serves
the public’s benefits or welfare.

Secondary Sources
‘Urf Istishab
Refers to custom or knowledge of a Presumption of existence or non
given society, leading to change in the existence of facts. Istishab relates to the
fiqh. ‘Urf is a sources of Shariah ruling sense that the past accompanies the
where there are no explicit primary present without any interruption or
text of the Quran and Sunnah change.
specifying the ruling.
Istihsan
Means juristic ‘preference’. Muslim
scholars may use it to express their
preference for particular judgment in
Islamic Law over other possibilities. It is
one of the principles of legal thought
underlying personal interpretation or
Ijtihad.

Maqasid
• Maqasid is an Arabic word. It means goals or purposes
• Purpose of Islamic Faith
• In term of Shariah, there are 5 Maqasid (foundation goals). The 5 Maqasid that
need to preserve and protect under all circumstances are:
The preservation of Description/Remarks
E.g: Defending the Islamic faith particularly if it attacked by the
Religion
enemies of Islam.
E.g: In order to protect life is enacting a severe punishment for
Life
those who kill another.
E.g: Islam prohibit its followers in committing adultery or other
Lineage
immoral behaviors.
E.g: Consumption of liquor or similar substance that will upset
Intellect
the functions of the brain.
E.g: The pro-active initiative and planning in safe guarding one’s
Property/ Wealth
property against misfortunes or disasters.
Introduction to Muamalat
Muamalat is a social relationship which consists of various economic and non-
economic activities
Basic principles of Muamalat

• Freedom of contract : Muslims are free to act at will to put condition in their agreement
except that which prohibits something which is permissible or permits something which
is prohibited.
• Permissible as original status of matters: The status of all matters other than rituals is
permissible until evidence is given that a certain matter is prohibited.
• Custom is of force: In many Shariah commercial contracts, many things may become
permissible following customs.

General Principles:
• No contract should be made for selling or buying forbidden products
• No contract should be made for any financial deal on the basis of usury (riba).
• Contract involves in gambling (maysir) and major uncertainty (gharar) is
forbidden in Islam.
3 Prohibited Elements
RIBA’ MAYSIR GHARAR

RIBA’
Riba’ literally means ‘increase in’ or
‘addition to’.
Riba’
Riba’ Al Duyun Riba’ Al-Buyu’
Riba’ Riba’ Riba’ Riba’

Al-Qard Al- Jahilliyah An-Nasiah Al-Fadl

Maysir
Gharar
• Maysir can be concluded
as betting or charging
something that will be • Gharar means hazard, chance,
forfeited if one fails to stake or risk. Gharar can occurs
obtain the greater gain when there is element of
that one hopes for. uncertainty in a transaction whose
• It also defined as “zero- existence is not defined due to
sum game” risky nature which may make the
contract void or voidable.
• Major (Fahish) Gharar: Gharar can
cause a contract to be invalid
• Minor (Yasir) Gharar: Is forgiven as
it does not render a sale contract
defective

‘AQD
• ‘Aqd is ‘join’ or ‘tie’
• The English word for ‘aqd is contract.
• A contract must consist of:
MA’QUD
AQIDAIN SIGHAH ALAYH
(The parties to (Offer and (Subject
the contract) Acceptance) Matter &
Price)

KAFALAH Mudarabah
TABARRU’
A contract of guarantee It is a financial contract
whereby a person adds to Means gift or donation which
whereby one party Rabb al-mal
himself a responsibility or is given by one in favor of
provides fund to other party
liability on behalf of another someone without seeking any
Mudarib who undertakes to
people consideration
manage the fund
Wakalah Musharakah Ju’alah

A contract of agency, in It is an agreement between A contract of hiring for services,
which a person (Muwakkil) two or more parties to operate in which one party undertakes to
delegates his business to a particular business in which pay a specified amount of
another and substitutes the all parties contribute to capital money for services rendered in
other in his place. The person in view of profit. accordance with terms
delegated is called Wakil negotiated between them

Part A 2
Concept of Risk

Peril
Peril is referred to as the main
cause of a loss.
E.g: Fire, flood and accident. Hazard
Hazard to the condition that increase the
chance of loss.
There are two (2) types of hazard:
Physical Hazard : Physical condition of the subject

matter that increases the chance of loss
Moral Hazard: Attitude of an individual that

increase the chance of loss.

Pure
Refers to the possibilities that can
result in only a loss or breakeven.
E.g: Fire, lightning, flood and storm
Speculatives
Refers to the possibilities that can
result in loss, no loss or profit (gain).
E.g: Investment in the stock market,
foreign currency fluctuations, venturing
into a new business.

Fundamental
A fundamental risk will affect the
whole society or a large numbers of
people within the economy. It is not
within the control of individuals.
E.g: Damage to property due to
earthquake, war etc.
Particular
A particular risk will affect only individuals
and not the entire community and is
within the control of individuals.
E.g: Damage to property from accident,
theft, robbery.

Personal Liability Property

Risks that directly affect individual.
• Risk of Premature Death
• Risk of Insufficient Income during
Retirement
Personal • Risk of Poor Health
• Risk of Unemployment

Possibility of loss due to damaged property
caused by fire, flood, earthquake and other
natural disasters
• Direct Loss = Financial loss that results

from the physical damage, destruction or
Property •
theft
Indirect Loss or Consequential Loss =
Financial loss that results indirectly from the
occurrence of a direct physical damage or
theft

Risk of third party bodily injury or property
damage.
In this case the court may order
you to pay substantial damages
to the person you have injured.
Liability

Pecuniary • The risk must involve a loss that is capable of financial
measurement where monetary compensation is
Value capable following a loss
• There must be a large number of similar,

Homogeneous homogeneous risks before anyone of that number is
Exposure capable of being insured.
Pure Risks • Only pure risks (loss or break-even situation) are

insurable as insurance cannot be used to make a gain.

• Particular risk is insurable if they satisfy other criteria
Particular Risk of insurable risks.
• It is not possible to insure against an event that will

Fortuitous occur with certainty as in such a case there would be
no risk, or uncertainty of loss.
• Defined as the legal relationship between insured and

Permissible the subject matter of insurance. The risk to be insured
Interest must result in some form of financial loss recognized
by law.

Risk management is a concept that is not only accepted by Islam, but embraced as
one of the ways to ensure the fulfillment of goals and objectives, that ultimately
should arrive at sa’adah (happiness) in this world and the hereafter
Prophet Muhammad S.A.W once asked a Bedouin

who left his camel untied, “Why do you not tie
your camel? The Bedouin answered, “I leave it to
the will of God”. The Prophet then said, “Tie up
your camel first then put your trust in God”.
This conversation depicts not only how Muslims

should accept their fate but also indicates how
Muslims should make efforts to reduce the risk of
loss and calamities.
Risks that relate to the operation of Takaful
business include but are not limited to the
following:
• Operational Risks • Investment Risks
• Legal risks • Governance Risks
• Strategic Risks • Business Continuity Risks
• Reputational Risks • Shariah Compliance Risks
• Underwriting Risks

• Risk Avoidance
Avoid or eliminate the risk
• Risk Reduction • Risk Sharing

Share the risk with the others
Reduce the severity of the who have a similar nature of
loss or likelihood of the loss risk
from occurring
• Risk Retention
Accepting the loss when it
occurs. Available for small risk
where the cost of insuring the
risk would be greater over time
than the total losses sustained
• Risk Transfer
Transfer of risks to an
organization or individual

Development of a
Risk Risk Screening
Risk Management
Identification & Evaluation
Plan
Communication of Review & Implementation of

Risk Management Monitoring of Risk Risk Management
Objectives and Plan Management Plan Plan

Part A 3
Introduction to Takaful

The word Takaful is derived from the Arabic verb Kafala which
means to take care of one’s need.
The pact between at least two parties

agreeing to jointly guarantee one
another in the event of a loss, as a
consequent of being afflicted by a
calamity defines the term Takaful

Takaful concept is based on solidarity, shared responsibility and
brotherhood among members.
Takaful can be defined as the act

of a group of people who desires to
reciprocal guarantee each other
within the group against certain loss
or damage that might be inflicted
upon anyone of them.

The salient features of Takaful operations are as follow:
• The company is not the one assuming the risk, the participants who are
mutually covering each other.
• The company is acting as trustee on behalf of the participants to manage
the operation of the Takaful business.
• All contributions (Premium) paid by the participants will be accumulated
in the Takaful fund for payment of the Takaful benefits.
• The Takaful fund at the same time can be invested in areas approves by
Shariah Council.

Mudarabah can be defined as the commercial profit
Mudarabah sharing contract between the provider or providers of
fund and the entrepreneur for a business venture
Tabarru’ is where the participants shall agree to

relinquish as donation all or certain portion of his
Tabarru’ contribution thus enabling him to fulfill his obligation of
mutual help and joint guarantee
Wakalah in Arabic means agency. An agency relationship

Wakalah is agreed between two parties to conduct a certain
business undertaking

Ta’awun Ownership
Takaful is based on the concept of The benefits of the certificates are the
Ta’awun meaning mutual assistance. sole ownership (milkiyyah) of the
Participant mutually agree to assist participant. Upon demised of the
each other financially in case of certain participant the benefits are entrusted
defined needs (as defined in the to the nominee.
takaful contract) by contributing to a
common fund
Shared Responsibility and Shared Guarantee

Takaful is based on the concept of Ta’awun meaning mutual assistance.
Participant mutually agree to assist each other financially in case of certain
defined needs (as defined in the takaful contract) by contributing to a
common fund

Responsibility and Mutual Protection Mutual Compensation
The participant of the Takaful Scheme This is an early form of insurance by
all agreed to be mutually responsible way of mutual protection within a
or shared responsibility. group of people taking steps to cover
the losses incurred. The participants of
the Takaful scheme is to cooperate
and help one another.
Masalih al-Mursalah (Public Interest) Contract
Takaful is also amongst others on the A Takaful certificates binds the parties
doctrine of Masalih al-Mursalah or public by an offer and an acceptance in
interest. The primary purpose is to lessen reliance on the principles of contract.
the burden of members of the community The relationship between the Takaful
caused by the occurrence of certain loss or Operator and the participants has to
damage. be governed by a special contract.

Part A 4
Comparison Between
Takaful and Insurance

Definition of Insurance
A contract of Insurance is a contract between two
parties, the Insurer and the Insured, the former
promises to compensate the latter on the happening
of a definite event in return for his contribution.

History of Insurance
The Concept of insurance was developed to deal
with perils faced by merchants and traders at sea.
This varied from protection of the cargo and
goods carried by ships to the protection against
the loss of lives of sailors and officers

215 CE: Roman Government was required by
military supplies to accept all risks arising from
enemy attacks, storms, and other natural disaster
for supplies carried on their ships.
2,800 B.C: Babylonian legal code showed

regulations on insurance.

1600’s: British merchants and ship owners began
to meet at a coffeehouse near Lombard Street in
London where they made an agreement to
mutually share in the profits and losses of sea
voyages.
1583 : The first case of insurance dates back to
1583 in England where a term contract was issued
on the life of a certain William Gybbon.

1693: A significant development in the life
insurance industry was the development of the
mortality table by Edmund Halley
1960’s : Growth many life and general insurance
companies
1963 : Government subsequently intervened and
the Insurance Act 1963 was introduced.

• The concept behind insurance is that a group of people exposed to similar risk
come together and make contribution towards formation of a pool of funds
• In case a person actually suffers a loss on
account of such risk, he is compensated out of
the same pool of funds.
• Contribution to the pool is made by a group of

people sharing common risks and collected by
the insurance companies in the form of
premium
• Insurance is a contract of indemnity and this

principles is to put the insured in the same
financial position as he was in before the
misfortune occurs

Section 4 of the insurance Act 1996
provides that:
• For the purpose of this Act, insurance business
shall be divided into 2 classes:-
 Life Insurance
 General Insurance
• For the purpose of this Act, reinsurance of
liabilities under policy is treated as insurance
business of the class and description to which
policy would have belonged if it has been
issued by the insurer.

Fatwas on Prohibition of Insurance
 The National Fatwa Committee
 15 June 1972: Insurance contradicts the Islamic business principles in view
that the contract contain the elements of Gharar, Maysir
and Riba’.
 1982: Conventional insurance is fasid because of the existence of
certain weakness in the insurance contract
 The Islamic Fiqh Academy, OIC
 22-28 Dec 1985: The commercial Insurance Contract, with a fixed
periodical premium, which commonly used by commercial insurance
companies, is a contract which contains major element of risks, which
avoid the contract and therefore, is prohibited (haram) according to
Shariah

I. Gharar
- Means deficient clarity with regards to the subject matter
being contracted or as ‘uncertainty’ where the result are
hidden or not known
- Types of Gharar:
Al-Gharar al-Kathir (Fahish)
Al-Gharar al-Yasir
Al-Gharar al-Mutawassit
II. Riba’
- Means ‘increase in’ or ‘addition to’anything
- Types of Riba’
Riba’ al-Duyun
Riba’ al-Qard
Riba’ al-Jahilliyah
Riba’ al-Buyu’
Riba’ al-Fadl
Riba’ al-Nasiah

iii. Maysir
- Means getting something too easily or getting profit
without working for it.
- Islam forbid all forms of business in which the
monetary gain comes from mere chance or
speculation and not from work.

Differences in term of:
• Essence of Intention • Taxation
• Formalities • Benefits
• Account Treatment • Profits/Bonus
• Subject Matter • Liability of the Insurer/Operator
• Guarantee • Investment of Fund
• Fund
• Payment of Contribution/Premium
• Forbidden Elements
• Religious Supervisory
• Profits
• Contract
• Indemnity
• Operational Principles
• Risk Treatment
• Responsibility of Policyholder/Participants

Part A 5
Principles and Business
Models of Takaful

Basic Principles of Takaful
• Principles of Permissible • Contribution
Interest • Proximate Cause
• Utmost Good Faith • Warranty
• Indemnity • Tabarru ’
• Subrogation

I. Principles of Permissible Interest
Insurable interest refers to the legal right to participate in a Takaful arising out
of a financial relationship recognized at law between the participant and the
subject matter of Takaful, that is, the person covered.
II. Principles of Utmost Good Faith

Utmost good faith can be defined as a positive duty to voluntarily disclose,
accurately and fully all facts ,material to the risks being proposes, whether
requested or not.
III. Principles of Indemnity

Indemnity can be defined as a mechanism used by the Takaful Operator to
provide compensation in an attempt to place the participant in the same
pecuniary position after the loss as enjoyed immediately before the loss.

IV. Principles of Subrogation
Subrogation can be defined as the right of one person, having indemnifies
another under a legal obligation to do so, to stand in the place of that other
and avail himself of all right and remedies of that other, whether already
enforced or not.
V. Principles of Contribution
Contribution can be defined as the right of an insurer to call upon other
similarity but not necessarily equally liable to the same participant to share the
cost of an indemnity payment.
VI. Principles of Proximate Cause

It is defined as the active efficient cause that sets in motion a train of events
which brings about a result, without intervention of any force started and
working actively from a new and independent source.

VII. Principle of Warranty
A warranty is “a usually written guarantee of the integrity of a product and of
the maker’s responsibility for the repair or replacement of detective parts”.
VIII. Principles of Tabarru’

Tabarru’ is a shared responsibility and shared guarantee principle which
explicitly mentions that the money collected is to be used for the purpose of
assisting “fellow participants who require assistance according to the term
agreed as long as these term are not in conflict with the Shariah.

Takaful Operator are required to maintain
and segregate three types of funds
• General Takaful Fund
• Family Takaful Fund
• Shareholders’ Fund

Wakalah Mudarabah
Model Model
• In Arabic it means Agency • Defines as Profit Sharing

• An agency relationship is • This model applied
agreed between two parties normally to a business or
to conduct a certain business commercial contract
undertaking. between the party that
• The model describes an provides the fund or
agency agreement between capital and the party that
the operators, acting as the manages the business.
agent or wakil, to the
participant as the principal to
manage the operator.

Hybrid Waqf
Model Model
• Combination of the two • The contract of Takaful that

principles (Wakalah and underlines the agreement or
Mudarabah) consent of the participant
• A relationship between the that the Takaful contribution
operator which combines the paid in return for
role of entrepreneur or participating in the Takaful
Mudarib as well as the agent or product to be credited by the
wakil of the participant, whilst operator into the Takaful
the latter in the capacity as fund.
both provider of capital and
principal to the agent

Part A 6
Development and
Supervision of Takaful
Industry in Malaysia

• Phase I (1984-1992)
Started with the enactment of a dedicated regulatory i.e
the Takaful Act 1984 and the establishment of the first
Takaful Operator in 1984
• Phase II (1993-2000)
Marked the introduction of competition with the entry of
another Takaful Operator
• Phase III (2001-2010)
Began with the introduction of the Financial Sector Master
Plan (FSMP) in 2001, which among other objectives, is to
enhance the capacity of Takaful Operator and strengthen
the legal, Shariah and regulatory framework

• Companies Act 1965
In Malaysia a Takaful Operator has to be a corporate entity
with limited liability and prescribed paid up capital
• Inter - Takaful Operators Agreement (ITA)
The framework which came into effect in July 2007, is an
industry effort aimed at further improving the general
insurance premiums settlement practices by facilitating the
reconciliation of account as well as payment of premium
and commissions between brokers and insurer or Takaful
Operators.
• Insurance and Investment Regulation in Malaysia
The insurance and Investment Regulation in Malaysia are
facilitated and controlled by Bank Negara.

• The Takaful Act 1984 = The sources of Takaful legislation
in Malaysia
• The Insurance Act 1963 = Forms the basis of the Takaful
Act 1984
• Section 53A of the Takaful Act 1984 requires a Shariah
Committee be established by the operator.
• The general law governing Takaful would rest on the
general principles of contract which are:
• Ijab (offer) and Qabul (acceptance)
• Additionally the issuance of a cover note or
temporary cover note as Takaful certificates is a
binding contract
• The consideration exists in the contract that is
constitutes by the payment/servicing of periodic
contribution by the participant and indemnity by
the Takaful Operator for the insured
1. Shariah Advisory Council (SAC) – Bank Negara Malaysia
• Bank Negara Malaysia has amended the Central
Bank Negara Act 1958 to enhance the roles and
functions of its SAC for Islamic Banking and Takaful
• SAC will be referred to by the court or arbitrators in

dispute involving Shariah issues in Islamic Banking,
Finance and Takaful.
• SAC operate as an independent body and with high

level of integrity will command public confident and
thereby will spur the industry to greater heights.
• Shariah body in the industry known as the Shariah
Supervisory Council (SSC)

Bank Negara Malaysia
Came up with a regulatory framework as a
balancing act between the objectives of the:
REGULATOR
OPERATOR
CONSUMER
DOMESTIC & INTERNATIONAL
STAKEHOLDER

Bank Negara Malaysia
Objectives of Supervision
Preserve the stability of Takaful Industry
Instill public confidence in the Takaful Industry
Promote strong governance standards in the

management of Takaful Operators
Ensure that consumers are well informed for
decision making
Integrate supervision across border and

sectors

Takaful Act 1984
The main provision of the Takaful Act 1984 are:
• Setting up of subsidiary and branch offices
• Takaful fund and Shareholder Fund
• Minimum Paid-Up Capital
• Minimum Solvency Margin
• Direction and control of defaulting Takaful
Operator
• Examination and investigation powers of the
Central Bank, winding-up, transfer of business of
licensee
• Enforcement powers of the Central Bank relating
to offences
• Matters relating to the policies and other general
related provision
• To handle complaints and enquiries on Takaful
matters from the public
• Insurance Guarantee Scheme Fund
Customer Services Bureau
As a central point of reference for all complaint and enquiries
on insurance matters received from the public.
The complaint made against insurance

companies are related mainly to:
• Delay in settling claims • Repudiation to liability with

• Dispute in claims amount offered reference to policy condition
• Delay in reply to correspondence • Agency matters
• Cancellation of policies

Financial Mediation Bureau (FMB)
To serve as an alternative to the courts in settling disputes
between consumer and financial services providers.
To FMB jurisdiction has been expanded:
Claims
Complaints/Disputes
Expanded Jurisdiction Amount Previous Amount
Motor and fire
Max RM 200,000 Max RM 100,000
insurance/takaful
Third Party property damage Max RM 5,000 -nil-
Others Max RM 100,000 -nil-

1. Persatuan Insurans Am Malaysia
(PIAM)
2. Malaysian Insurance and Takaful
Brokers Association (MITBA)
3. Association of Malaysian Loss Adjusters
(AMLA)
4. Life Insurance Association of Malaysia
(LIAM)
5. National Association of Malaysian Life
Insurance and Financial Advisors
(NAMLIFA)
6. The Actuarial Society of Malaysia (ASM)
7. National Insurance Association of
Malaysia (NIAM)
8. Malaysian Takaful Association (MTA)

9. Motor Insurers’ Bureau (MIB)
10. The Malaysian Insurance Institute (MII)
11. IBFIM
12. INCEIF
13. ISRA
14. ARIL
15. Accounting and Auditing Organization
for Islamic Financial Institutions
(AAOIFI)
16. Global Takaful Group (GTG)
17. Islamic Financial Services Board (IFSB)

Part A 7
Retakaful

Retakaful can be
defined as an
Operator procures a
third party to cover
him against loss or
liability by reason of
such original Takaful
cover.

“Commercial insurance
contract commonly used by
commercial insurance
companies is a contract which
contains major elements of
risks which is prohibited
according to Shariah. The
alternatives for both
insurance & reinsurance
should be based on the
principles of cooperative
insurance”

• The original participant has no rights against the
Retakaful Company whatever the circumstances
• If the Retakaful Company becomes insolvent, the
preceding company still remain liable under the terms
of the contract
• If the ceding company becomes insolvent, the
Retakaful Company is still liable under the terms of his
the contract
• The Retakaful Company has no contractual rights
against any wrong doing of the original participant
Retakaful/
Reinsurance
Facultative Treaty
Proportional Non-Proportional
Excess of Loss
Surplus Quota Share Excess of Loss
Ratio (Stop Loss)

• Flexibility
Without Retakaful, Takaful Operator would only be able to accept risks
in an amount and type that they could handle from their own resources.
• Expansion
Retakaful can provide additional expertise to an Operator in areas where
the Operator has limited experiences, expertise or knowledge. By
providing this assistance and accepting part or all of the risk, the
company accepting the risk helps the Operator to grow in the number of
products it can offer.
• Accumulation
An operator could not incur losses on business written on a number of
different risks which result from a single event. Retakaful assists the
Operator to limit such losses to an amount which the ceding company
can afford.

Regulatory Framework for Retakaful
(BNM/RH/GL/004-12)
• Financial strength and financial flexibility

• Related experience in Takaful / Retakaful
• Ability to contribute towards national agenda
• Viability of the Malaysian operations

Retention Capacity
• Retention capacity can be defined as ‘the maximum amount that the
Takaful Operator is willing to pay for a loss affecting a certificate, risk
or group of risks’.
• Retention are usually fixed based on each class of business
separately (family, fire, accident, marine, aviation etc) and within
each class subject to further sub-division .
• The main objective of a Takaful Operator in fixing its retention level

is to control fluctuation in either : (a) its loss ratio, (b) its busines
result, or (c) its cash flow.

Part A 8
Takaful Intermediaries

A Takaful Intermediary is someone who solicits Takaful Business
or invites potential customers to enter Takaful contracts with
Takaful Operators. They are also known as Takaful agents and
Takaful Brokers.
Takaful Agents: Takaful Operator's representatives

by way of agent- principal legal
custom.
Takaful Brokers:A broker generally has no contractual

agreement with Takaful Operator
and relies on common or direct
methods of perfecting business
transaction with Takaful Operators.

Takaful Intermediaries’ professional such as an agent, broker or
financial adviser must be competent and posses the following
characteristics:
• Good knowledge of insurance and/or Takaful

products
• Understands your customer’s need and interest
• Ensures you understand what you are buying or
participating
• Does not over-promised or over-sell
• Factual, not pushing or intimidating
• Delivers quality and timely service

BNM is an apex of the monetary and financial structure of the
country. The principal objective of the bank is to promote
monetary stability and financial stability conducive to the
sustainable growth of Malaysian economy.
Its primary functions as set out in the newly enacted Central Bank
of Malaysia Act 2009 among others are to:
• Formulate and conduct monetary policy in Malaysia
• Regulate and supervise financial institutions which are subject
to the laws enforced by the bank
• Promote a sound, progressive and inclusive financial system
• Act as financial adviser, banker and financial agent of the
Government

All Takaful agents represent a Takaful Operator and
perform the following functions:
• Promotes Takaful products on behalf of the Takaful
Operators;
• Explain features of Takaful plans to potential
customers; and
• Provides services related to the issuance, renewal or
continuance of ay Takaful certificate
All Takaful broker is appointed by a customer and performs

the following:
• Assists the customer in obtaining and renewing a
Takaful cover from a Takaful Operator; and
• Recommends and advises the customer on the most
appropriate Takaful plan coverage and terms being
offered by Takaful Operators

• Section 36(1) Takaful Act 1984
All agent/intermediaries required to inform all his potential customer
that he/she is an agent and acting on behalf of a particular Takaful
Operator.
This section is in reference to Section 36(1) and if any agents is found to
be non-compliant with the provision of the Act and if found guilty the
agent can be fined not exceeding RM4,000 or imprisonment for a period
not exceeding six months or both.

No person shall market or promote Takaful products or business as an
agent or broker for a person or Operator other than a licensed Takaful
Operator

• Section 35(2) Subsection (3) Takaful Act 1984
All Takaful broker to transact Takaful Business only with a licensed and
authorizes Takaful Operator
• Section 35(3) Subsection (2) Takaful Act 1984

The contract as stipulated in the Act refers inly to direct Takaful Business
and does not refer to Retakaful business.

• Takaful Agent
Primarily promotes Takaful Plan issued by the Takaful
Operator it represents.
• Takaful Broker
Represent the customer and advises the customer on the
most suitable Takaful Plan.
• Financial Adviser
Is an independent party that provides financial planning
services to the customer based on the customers’
financial needs.

• Market conduct supervision and enforcement
BNM supervise the market conduct practices of financial service providers
and initiates remedial or enforcement actions for any breach of market
conduct requirement
• Minimum standards of service
Takaful intermediaries are required to comply with the specified minimum
standard of services set by BNM, the Malaysian Takaful Association (MTA)
and Malaysian Insurance and Takaful Brokers Association (MITBA)
• General Takaful agents
 Governed by the Code of Etrhics for Takaful Intermediaries drawn
up by MTA
 Required to pass Takaful Basic Examination and complete 20
hours training per year for Continuous Professional Development
(CPD)
 Required agents at the point of sale, to explain to potential
customers on the main features of the product being marketed,
details of commission paid, and procedure on claims and
complaints
• Family Takaful agents
 Governed by the Code of Ethics for Takaful Intermediaries drawn
up by MTA
 Required to pass Takaful Basic Examination and complete 30
hours training per year for Continuous Professional Development
(CPD)
 Required agents to obtain adequate information about potential
customer. This will enable as agent to analyze a potential
customer’s personal and financial circumstances and identify his
financial needs and priorities so that a suitable and affordable
Takaful product can be recommended.
• Takaful Brokers
 Governed by the Client’s Charter on Code of Good Business
Practice, and Code of Ethics and Conduct drawn up by MITBA;
and
 Must adhere to the rules and regulations specified in the Takaful
Act 1984

Basic conduct of Takaful Intermediaries
 Present Agent’s Authorization Card upon request
 The Authorization Card contain information such as the name of Takaful
Operator whom the agent represents and the validity period of the
agent’s registration.
 A General Takaful can represent a maximum of 2 General Takaful
Operators while a Family Takaful Agent can only represent 1 Takaful
Operator.
 A Takaful agents who promotes both family and General Takaful products
can represent 1 Family Takaful and maximum of 2 general Takaful
Operator.

Basic conduct of Takaful Intermediaries
 A Takaful broker must be a member of MITBA and be licensed by BNM

 The license is subject to annual review
 Understand customer’s need and assist them in the right choice of Takaful
Products and services
 Explain clearly the importance of understanding material facts
 Explain clearly the term and conditions of the proposed Takaful contract.
 Draw attention to any restriction and exclusion applicable under the
proposed Takaful contract
 Follow up and provide continuous service
 Provides assistance in making claims against the Takaful Operator

Classes of Agents
 Special agents
 General agents
 Universal Agents
Duties of an Agents
 To render accounts to the principal as required.
 Not to let his own interest conflict with his obligations to the principal.
 Not to disclose confidential information obtained during the principal
Operator Company.
 Not to take any secret profit or bribe from any party with whom he deals
on behalf of the principal.
 Not to delegate his duties to a sub-agent without authority, express or
implied.
 To comply with his principal’s instruction and to notify him when
compliance becomes impossible.

Rights of Agents
 Right to receive payment for his services.
 To reimbursement of moneys which he has expended with the express
authority of his principal within the acceptable limits.
 To perform his duties in the manner which he considers to be appropriate.
Obligations of the Principal
 To pay remuneration and expenses as agreed; or failing agreement, as is
customary; or failing a custom, to pay what is reasonable.
 Indemnify the agent against consequences of any act lawfully done, within
his authority, on behalf of his principal.
Termination of Agency
 By notice of revocation given by the principal to the agent
 By notice of renunciation given to the principal by the agent
 By the completion of the transaction where the authority was given for
that transaction only.
 By expiration of the period stipulated in the contract of agency
 By mutual agreement
 By death or bankruptcy of the principal or agent
 By operation of any law which renders the contract of an agent illegal
Characteristics of Takaful Agents
 Insurance agent is vested with legal power to establish contractual
relations between the Takaful Operator and participants.
 The fact that the majority of Takaful agents are recruited by field
supervisors or manager, the Takaful agents hold contracts for services
with the Takaful Operator and not with their recruiters.
Agents of Whom ?
 Legal maxim: ‘qui facit per alium facit per se’ means ‘ he who acts through
another is himself performing the act’
Contribution Collections
 Payment of contribution is made to an authorised Takaful agent, by the
participant such payment is deemed to be payment to the Operator.
 If an unauthorized agent receives money from the participant or general
public, he does not make the Operator liable for his misdeed.
The creation of the Relationship
 Payment of contribution is made to an authorised Takaful agent, by the
participant such payment is deemed to be payment to the Operator.
 If an unauthorized agent receives money from the participant or general
public, he does not make the Operator liable for his misdeed.
The Creation of the Relationship
 The relationship of insurer and insurance agent may be created in the
following ways;
 By express appointment
 By implication of the law
 By subsequent ratification of an unauthorized act.
 By statute (Section 151, Insurance Act, 1996)

‘After participation’ Services
Some of areas in which agent or broker or even Operator can
help with include;
• Legitimate claims disputes
• Loss of membership cards or paperwork
• Concerns over contribution costs
• Contribution collection problems
• Researching alternative policies
• Benefits queries
• Certificate amendments
• Change in circumstances
• The chance pf lapse or business flowing elsewhere could
be minimized
• The client's new needs for Takaful coverage could be
recognized and sale quickly made, thus enhancing the
agent’s business
• The reputation of the insurer as a service oriented
organization is enhanced.

 Accounting, Auditing of Islamic Financial Institutions
(AAOIFI) Shariah Standards
 AAOIFI Accounting, Auditing, and Governance
Standards
 Islamic Finanical Services Board (IFSB)
 IFSB 11- Standards on Solvency Requirement for
Takaful (Islamic Insurance) Undertakings

Part A 9
Introduction to Medical
and Health Takaful

The same principles of Takaful that apply to non-
medical and Health Takaful also applicable to
Medical and Health Takaful. They are:
• Permissible interest
• Utmost Good Faith
• Proximate Cause
• Indemnity
• Contribution
• Subrogation
• Tabarru’
• Warranty

Guideline on Medical and Health Takaful Business
 The scope of this guideline cover the terms of issue and underwriting of
Medical and Health Takaful certificates, benefits limitations that may be
applied, pricing, and reserving policies, disclosures to consumers and
requirement for the marketing of group certificates without permissible
Takaful interest
Minimum Standards on Product Disclosure and Transparency in the
Sale of Medical and Health Takaful Plan
 Takaful Operator have the obligation to disclose sufficient and essential
information to the prospective participants to ensure the plan meets
their needs and resources.
 The marketing material shall contain the following minimum
requirement:
 Information on the Takaful Operator
 Product description
 Benefits
 Exclusion and limitation of benefits , pre-existing conditions,
specified illnesses and qualifying period
 Contribution
JPI/GPI – Guideline on Unfair Practices in Takaful Business
 This guideline provides for the strengthening of the market conduct
regulations in order to promote fair treatment to consumer. Among the
measures implemented under this guideline include promoting higher
standards of transparency, professionalism and accountability in the
conduct of Takaful Business.

A Medical and Health Takaful Plan usually provides payment of
claims up to the limits stipulated in the Takaful certificate. Such
limits could be one or a combination of the following:
 Per disability Limit
 Overall annual Limit
 Lifetime Limit

Medical and Health Takaful involves morbidity (probability of a
disability resulting from an accident or illness). Generally, risks
increase with age. Other external factors such as occupation and
environmental factors can also affect the risk

Healthcare costs continue to rise making the Medical and Health
Takaful becoming less profitable. To contain costs and abuses
arising from inflated claims, various methods are used by Takaful
Operators, which include the following:
 Inner limits
 Schedule of surgical procedures
 Maximum period of compensation
 Timeframe during which expenses are payable
 Co-payment for upgraded rooms
 Deductible
 Panel of hospitals

• Admission to a panel hospital is by the issuance of a letter of
guarantee and the hospital deposit may be eliminated.
• Upon discharge, the participant does not have to settle the bill
with the hospital.
• All eligible benefits will be taken care of by the Takaful
Operator. The claimant only needs to pay for non-
reimbursement charges. :

Part A 10
Types of Medical and
Health Takaful

Medical and Health Takaful Plan comprise the following:
 Medical Expenses Takaful which include Hospitalization
and Surgical Takaful and Major Medical Expenses Takaful
 Hospitalization Cash Benefits Takaful
 Critical Illness Takaful
 Disability Income Takaful

• Medical Expenses
• Medical expenses is to cover the treatment cost of a sickness and
injury, subject to the limits and conditions stipulated in the certificate.
• Hospitalization and Surgical

• Hospitalization and Surgical covers the expenses regarding
hospitalization treatment cost. The plan is intended primarily to cover
expenses incurred by having surgery and hospital stays. Benefits
provided by a hospital and surgical Takaful plan include the followings:
• Hospital Room and Board • In - Hospital Physician’s Visit
• Intensive Care Unit • Pre - Hospitalization Diagnostic Test
• Hospital Supplies and Services • Pre - Hospitalization Specialist
• Anesthetist's Fees Consultation
• Surgeon’s Fees • Post - Hospitalization Treatment
• Operating Theatre Fees • Emergency Accident Outpatient
Treatment
• Ambulance Fees

• Major Medical Expenses
• Major medical expenses are a form of Medical and Health Plan that
provides benefits for most types of medical expenses that may be
incurred including those incurred both in and out of the hospital.
• The coverage for medical care charges is wider with few internal limits
and a high overall maximum benefit and may take the following forms:
• Supplemental Major Medical Expenses
• Comprehensive major Medical expenses
• Excess Major Medical Expenses

• Basis of Takaful Coverage
 Comprehensive Hospitalization and Surgical Takaful is also called “As
Charged” plan in Malaysia. The certificate normally covers the actual
amounts charged by the hospital, on top of the room and board.
• Group Medical and Health Takaful Plan

 It is normally employer-sponsored coverage for business owners,
employees and often for dependents.
 The contribution is calculated based on the characteristics of the
group as a whole, such as average age and degree of occupational
hazard.

• Hospitalization Cash Benefit Takaful Plan
 This plan provides participants with daily cash benefit, should the
participant be hospitalized due to all causes, subject to the term and
condition of the rider.
• Critical Illnesses Takaful Plan

 The plan provides protection against any of the specified critical
illnesses. It is also known as dread disease Takaful.
• Disability Income Takaful Plan

 Is a plan that covers the beneficiary’s earned income against the risk
that a disability will make working (and therefore earning), impossible.

Important Terms Used in Medical and Health Takaful
 Accident  Health Takaful
 Adverse Selection  Lifetime Limit
 Arbitration  Long-term Care
 Attending Physician’s Statement (APS)  Major Medical Expenses Takaful
 Benefit Level  Medical Expense Takaful
 Co-Takaful  Miscellaneous Expenses
 Comprehensive Major Medical Takaful  Non-contributory
 Conditionally Renewable  Outpatient
 Contributory  Pre-Existing Condition
 Covered Expenses  Waiting Period
 Deductible  Reasonable and Customary Charge
 Disability  Reimbursement

Part A 11
Underwriting Medical and
Health Takaful

Takaful underwriting is the process of
classification, rating, and selection of risks. In
simpler terms, it is a risk selection process.
The primary purpose of underwriting is to

analyze risks, evaluate
the type of exposures that each risk poses to the
Takaful Operator, and establish a contribution for those
risk and exposure.

• The proposal form is used by a Takaful Operator to determine
acceptance whether a risk can be accepted and if so how much
of contribution needs to be charged.
• A proposal form seeks basic information such as:
• Name
• Age
• Address
• Education
• Employment details
• Medical history
• Incomes
• Habits pertaining to consumption of
tobacco and alcohol

• The term adverse selection describes a situation where an
individual’s demand for Takaful is positively correlated with the
individual’s risk of loss and the Takaful Operator is unable to
allow for this correlation in its pricing.
• This may be because some private information is known only to
the individual , or because of regulations or social norm which
prevent the Takaful Operator from using certain categories of
known information set prices.
• Also referred as ‘regulatory adverse selection’.

In case of medical Takaful, underwriters
consider the following in risk selection:
• Current and Past Health Factors
• Financial Factors
• Occupational Factors
• Age and Gender

Medical underwriting is the process of reviewing a
Medical and Health Takaful proposer’s medical records
and determining the level of risk.
• Purpose: To prevent people from participating in
medical and health Takaful coverage only when they
are sick, pregnant, or need medical care.
• Effects: Medical underwriting ensures that
individual medical Takaful contribution are kept as
low as possible. Critics of medical underwriting
believe that it unfairly prevents people with
relatively minor and treatable pre-existing condition
from obtaining medical Takaful.

Current Physical Condition
• Takaful Operator will require the applicant to complete an application

form that details the full medical history and current physical condition
of each applicant.
• Applicants’ statement on an application form and medical examination

result are the first indicators of present physical condition.

Medical History
• The process of evaluation starts with the review of the proposer’s
statement in the proposal form. Takaful Operator will ask questions
about, and often request validation regarding, the proposer previous
medical history.
• Takaful Operator review histories of previous condition to determine
the:
• Possibility of recurrence. Some diseases have a tendency to
recur.
• Effect of a medical history on the applicant’s general health
• Complications that may develop at a later date.
• Normal progression of any impairment that can be considers
indicators of a higher future incidence of impairment i.e obesity
and hypertension

Family History
• A section of Takaful proposal form asks several questions about the

medical history of family members.
• Clear connections have been made between the presence of certain
life-threatening conditions and genetic development, and Takaful
operator will consider the proposer’s relatives issues as indicator of
the participant’s own risk.

Financial History
• The underwriter will also take into consideration the financial factors
and coverage need.
• This helps determine whether an applicant is applying for the
appropriate amount of coverage.
• This requirement tends to screen out those risks who may find
contribution payments unduly burdensome resulting in problems in
collection of contribution as well as a possibility of fraudulent claims

Occupational and Hobbies
• The proposer’s occupation plays an important role in determining

what kind of coverage will be required and how much contribution will
be applicable.
• Morbidity rate rates vary considerably according to the proposer’s
occupation.

Age and Gender
• The age is a key factor in determining the contribution and will often
determine how extensive the underwriting process will be.
• Contribution increase with age and many Takaful Operators will not
issue family Takaful after a certain age or will limit the amount of
coverage.

Family Takaful Application
• The proposer signs the application affirming that all information is true
and correct to the best of the propose knowledge, and the Takaful
Operator issues a certificate based in the information
• The submission of the following data:
• General information : Name, address, Date of birth,
Occupation, Social Security Number, Gender,
Marital Status
• Medical Information: Medical History, Pre-Existing
condition, Medications.

Agent Statement
• The statement is part of the application, and requires that the Takaful
agent provides certain information regarding the proposer
• This include information regarding the agent’s relationship to the
proposer, data about the proposer’s financial status, habits, general
characters and any other information that may be pertinent to the risk
being assumed by the Takaful Operator
Medical Report
• A medical examination includes questions about the proposal’s
medical history, height, weight, pulse and blood pressure.
• Additional requirement may be needed by the Takaful Operator in
addition to the medical exam and will include the following:
 An examination by a physician
 Resting ECG
 Treadmill stress test
 Chest x-ray
Attending Physician Statement (APS)
• Takaful Operator often require medical information and attending
physician’s statement in order to underwrite Takaful applications.
• The description provided in an APS is evidence of the proposer’s
mortality risk.
Hospital Medical Record

• By signing and submitting the application, the
proposer is giving the Takaful Operator the
right to obtain and review the medical records
both prior to and after become an accepted
medical and health plan member

• The underwriting process is the method of determining
that the operator continues to function within workable
boundaries.
• The underwriter basically has three options:
• Standard: Accept the Application

• Sub-Standard / Modified : Approve an
Application with condition attached
• Declined : Reject the application

• Takaful is based on mutual help and
solidarity thus a Takaful model
should strive to be fair.
• It has to ensure that contribution for
participant in Takaful is set at a
reasonable level to ensure
adequacy, equity and fairness
among participant

Exclusion Endorsement
 Exclusion endorsement is used by Takaful operators as a way
to issue coverage to persons who would otherwise have to be
declined.
Contribution Loadings
 Loading is the amount a Takaful Operator adds to the basic
contribution to cover the expenses of securing and
maintaining the business
Modified Benefits
 Takaful Operator may offer modified benefits to the applicants
such as lower annual limit, a larger deductible on a medical
expense or sometimes in conjunction with extra contribution
or exclusion riders.
 The Takaful Operator will take this decision when there are
some inconclusive factors in the overall desirability of the risk.
Renewal of Medical and Health Takaful
 There are 4 different renewability options that may be
practiced in medical and health Takaful:
 Non – Cancellable and Guaranteed Renewable

 Guaranteed Renewable
 Conditionally Renewable
 Optionally Renewable

• The payment of contribution will depend on the type of
the certificate. Some certificates are issued on ‘ cash-
before-cover’ basis, whereas other certificate may be
subjected to the 60 days contribution warranty
• A grace period maybe allowed in the case of guaranteed
renewable certificates, conditional renewal certificates
and non-cancellable certificates, to provide the
convenience to the certificate owner to make the
payment.

The following events will automatically terminate a
Medical and Health Takaful:
• Death of the participant
• Certificate anniversary immediately following the
participant’s maximum eligibility age
• Total benefits paid under the certificate exceed the
maximum limit specified in the benefits schedule

Part A 12
Medical and Health Takaful
Certificate Administration

Certificate administration involves the exchange and issuance of
document as evidence of the existence of a valid contract of
Takaful. Such document include the following :
• Proposal form
• Certificate
• Endorsement
• Renewal Notice
• Proof of Medical and Health Takaful
contribution payment for tax relief

The proposer signs the proposal affirming that all information is
true and corrects to the best of his/her knowledge, and the
Takaful operator issues a certificate based on the information
The Purpose of Proposal Form
 To assist the Takaful Operator to gather the information required for
the underwriting. The information will then enable the underwriter
to assess the proposal in a speedy and accurate manner.
The Structure of a Proposal Form
 The proposal is usually divided into sections, with each section
designed to obtain specific information.
 The form sections provide for submission of the following
data:
• Part 1 (General Information)
• Part 2 (Medical Information)

The Content of a Proposal Form
 Takaful Operator shall ensure that its proposal forms:
• 11 (a): Include specific question that are designed
to solicit information that is relevant to the
decision of the Takaful Operator as to whether or
not to accept the risk, and the contribution rates
and terms to be applied
• 11 (b): Expressly request the proposer to disclose
any other relevant exceptional circumstance that
is not matter that the Takaful Operator could
reasonably make the subject of a specific question
under paragraph 11(a) above

Takaful Operator drafts the Takaful certificate which represent the written
evidence of the Takaful Contract.
The structure of a Medical and Health Takaful Certificate Form
 Heading
 The Preamble or Recital Clause
 Operative Clause
 Exclusions
 The Schedule of Benefits
 Attestation or Signature Clause
 Conditions
 Certificate Register

The alterations to be made may relate to any of the following:
 Variation in amount of benefits

 Change in any maximum benefit period
 Extension of Takaful coverage to cover additional
members of the family
 Change in occupational risk
 Cancellation of Takaful
 Change in name and address

• The Takaful Operator usually issue a renewal notice one or two
months in advance of the date of expiry, reminding the
participant that the certificate expires on a certain date.
• The renewal notice will include all relevant particulars of the
certificate including:
 Participant’s name
 Certificate number
 Certificate expiry date
 Annual contribution
 Revised certificate terms (if any)

Tax regulation currently allow an individual tax resident of Malaysia
deduction on taxable income as follows:
• Deduction from taxable income of up to a maximum of Rm 3,000

for the contribution for education and or medical Takaful
• Deduction form taxable income of up to a maximum of Rm 6,000
allowed for contribution in respect of Takaful certificate and
contribution to approved retirement schemes.

Part A 13
Medical Health Takaful
Claims

• The notification of a claim is
fundamental to the Takaful contract
• The two main reasons why the claim

notification is important:
 The Takaful Operator must
be given the opportunity to
investigate the claim
 The Takaful Operator needs
to raise a provision for the
cost of the claim

The documents that are needed
for making claims are as follow:
 Proof of identification
 The copy of the certificate
document
 The original bills of the hospital in
which the insure was admitted
 The discharge certificate from the
hospital
 The original investigation reports

• The Medical and Health Takaful is
designed to elicit the information
needed to determine the Takaful
Operator’s liability under the
certificate.
• The claimant expect to provide not
only the dates of any medical
treatments or doctor visit, but also
the date of the injury or illness and
exact nature.
• Need to provide the authorization
permitting any medical provider,
physician or employer to release
records or information concerning
the insured’s medical history or
employment status.

When a Takaful operator received the claim notification,
the claim department will make a preliminary check to see
if the claim is valid
I. The process begins with a determination of whether or not the
claim in valid. The claims department may check the following:
• Is the certificate in force?
• Has contribution been paid?
• Is the loss caused by an insured peril?
• Is the subject matter affected by the loss the
same as that insured under the certificate?
• Has notice of loss been given without undue
delay?

II. Claim Form
• Once the claims department completed the
preliminary check and found the claim is valid, a
claim form will be given to the claimant.
III. Claims Register

• All claims must be registered into the claim
register once it is notified to Takaful Operator.
• Takaful Operator must maintain an up-to date
register of all Takaful claims as it serve as an
official record of claims.

The claim investigation process involves the following:
I. The claim department will investigate to determine the
following:
• The loss exists
• The loss is caused by a peril insured under the
certificate
• The loss does not fall within the scope of an
exclusion of the certificate
• The person making the claims the rightful
claimant.

The claim investigation process involves the following:
II. Claims Documentation
• Claim forms are designed to assist the Takaful
operator to gather information relevant to
assessing claim.
• Some information needed are:
• Participant’s name
• Participant’s address
• Phone number
• Certificate number
• Reason for the claim

The Takaful claims process ends with
settlement. Once the Takaful Operator
completed the investigation and decided
to pay the claim, it will compute the
amount payable and issue claim payment
to the claimant.

Takaful operator may be able to repudiate liability
on several grounds. This include the following:
• Non existence of loss as reported
• The loss or damage was due to the peril that is
not covered under the certificate
• The loss or damage within the scope of an
exclusion of the certificate
• The certificate has been rendered void as a
result of a breach on condition.

When dispute arises, it may be resolved through the
following channels:
I. Negotiation and Compromise Settlement
• Normally the first step taken by a Takaful operator is

meeting the claimant to settle the dispute through
discussion.
• In the case of disputes on the quantum of loss, the
representative may try to negotiate for an amicable
compromise, which is acceptable to both parties.

II. Litigation
• A claimant may take the Takaful Operator to court if

he is unhappy with outcome of his discussion
/negotiation with the claims department
• Takaful Operator normally considers ligation as a last
resort.
• Takaful Operator will use other platform such as
arbitration or Financial Mediation Bureau unless it
involves a huge claim or an important point of
principle.

III. Arbitration
• An arbitration clause which provides that all disputes

or disputes relating to quantum only will have to be
referred for arbitration is normally included in most of
general Takaful certificate.


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Ma’ruf: Qualities that have always been guided as ‘good’ by Shariah

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AQIDAH SHARIAH AKHLAK

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Maslahah (Consideration of Public Interest)

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Basic principles of Muamalat

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Physical Hazard : Physical condition of the subject

Moral Hazard: Attitude of an individual that

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• Direct Loss = Financial loss that results

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• There must be a large number of similar,

Pure Risks • Only pure risks (loss or break-even situation) are

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• It is not possible to insure against an event that will

• Defined as the legal relationship between insured and

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Prophet Muhammad S.A.W once asked a Bedouin

This conversation depicts not only how Muslims

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• Risk Reduction • Risk Sharing

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Communication of Review & Implementation of

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The pact between at least two parties

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Takaful can be defined as the act

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Tabarru’ is where the participants shall agree to

Wakalah in Arabic means agency. An agency relationship

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Shared Responsibility and Shared Guarantee

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