Group Assignment

A Comparison of Takaful Model and General

Takaful Products Offered by Syarikat Takaful
Malaysia Am Berhad and Takaful Ikhlas
General Berhad

A Report Research
to be submitted and prepared by

Ahmad Rusydi Bin Haji Mohd Salleh (1811865)

Muhammad Nurkhadzim Bin Ahmad Sharibi (1727203)

for the subject of

Islamic Law of Banking and Takaful

SHA 3358
Dr ​Safinar Salleh

Department of Islamic Law

Ahmad Ibrahim Kulliyyah of Laws
International Islamic University Malaysia
Semester 1 2020/2021
Table of Content

No Title Page

1. Introduction 3-4

2. Background and History of the Company 5-6

1) Syarikat Takaful Malaysia Am Berhad

2) Takaful Ikhlas General Berhad

3. Main Discussion and Analysis - Takaful Model 7 - 12

1) An Overview of Takaful Model

2) Conceptual and Structural differences in Takaful

Model used between Syarikat Takaful Malaysia Am
Bhd and Takaful Ikhlas General Bhd

4. Main Discussion and Analysis - General Takaful Products 13 - 16

1) An Overview of General Takaful Product

2) Distinguishing between Takaful Malaysia and

Takaful Ikhlas for Personal Accident Takaful

3) Distinguishing between Takaful Malaysia and

Takaful Ikhlas for Motor Takaful

4) Distinguishing between Takaful Malaysia and

Takaful Ikhlas for Fire Takaful

5. Conclusion 17

6. Bibliography 18

2
1. Introduction

1.1 Overview of Takaful

Takaful is an Islamic insurance plan. The Arabic term for insurance means to be reassured
or secured by coverage for damages or losses. Takaful pools risk and pools fund by the use
of contracts that follow the principles of Shariah. Takaful is not what it purports without
compliance with its religious norms and prohibitions. Although Takaful is seen as young or
rising, it has seen remarkable growth in Malaysia. As Takaful rises, it will eventually intersect
with insurance, aiming to substitute insurance as the chosen risk intermediation. However,
Takaful will have to answer some questions on the hard trek.

The word Takaful is derived from the Arabic verb 'Kalafa,' which literally means to take care
of one's needs.' The arrangement between at least two parties to mutually promise one
another in the event of a loss, as a result of a crisis, means Takaful. Section 2 of the Islamic
Financial Services Act 2013 (IFSA) describes Takaful (Islamic insurance) as an agreement
focused on mutual assistance in which takaful members intend to contribute to a shared fund
offering mutual financial benefits to be provided to takaful participants or their beneficiaries in
the event of pre-agreed occurrences or accidents.

The evidence in Al-Quran that explains about Takaful is stated in verse 2 of Al-Maidah(5:2),
“Help ​(ta'awun) one another in furthering virtue (birr) and Allah consciousness (taqwa)and do
not help one another in furthering evil and enmity”. Then, in Al-Imran (3:103) stated, “And
hold fast ​(cling)​ to the rope ​(habl)​ of Allah all together ​(jami’aa)​ and do not be divided…”​1​.

Adding to this, practices of companions should be looked into where Hazrat Umar(R.A)
instructed to a group of Mujaheddin in each district, to donate an equal amount of money to
aid lawful heirs of those victims, in case if any individual is murdered by another individual of
the same district.

In the 19th century, Ibn Abidin, a Hanafi lawyer, was the first individual who started having a
discussion about the idea of insurance and its legal body. Hence, a famous jurist,
Muhammad Abduh circulated two fatwas mentioned that insurance dealing is like the
transaction of al-Mudarabah financing. Then, life insurance is valid and lawful.

1.2 Objective of the Research Paper

The paper adopts a descriptive case study method to examine the operations of two
Malaysian takaful companies which are Syarikat Takaful Malaysia Am Berhad and Takaful
Ikhlas General Berhad. In order to achieve this objective, the business model and general
products offered in both companies were analysed. Research with each company’s website
and product disclosure sheet for each of the plans provided were undertaken for more
in-depth coverage. Similarities and differences between the two companies were identified,
Syarikat Takaful Malaysia Am Berhad and Takaful Ikhlas General Berhadand and it is
concluded that the differences the business model that implemented in both companies
seem sufficiently transparent to be Shariah-compliant, as fees are clearly linked to operator’s
operational costs.

Under the contract of agency, both the principal and the agent are equally bound to the rules
of the contract. Furthermore, the general products offered also vary based on many
situations and circumstances that give prospective clients to be confident in choosing

1
​Fauzi, P. N. F. N. M., Khairuddin Abd Rashid, Azila Ahmad Sharkawi, Sharina Farihah Hasan,
Srazali Aripin, and Muhammad Ariffuddin Arifin. "Takaful: A review on performance, issues and
challenges in Malaysia." ​Journal of Scientific Research and Development​ 3, no. 4 (2016): p71.

3
Takaful plans rather than conventional insurance. The issues highlighted in this paper will be
the interest of all the related parties, especially to the operators for the development of future
products of the company that can be offered.

1.3 Research Methodology

The research will employ internet-based research due to restriction because of the pandemic
COVID-19. For internet-based research, website of the Takaful operators and any kind of
journals and articles will be thoroughly examined and analysed. The comparative analysis
will be used when comparing the business Takaful model used by both companies as well
as the general products that are currently being offered by both Takaful Malaysia and
Takaful Ikhlas.

1.4 Research Outcomes

This research should be able to identify the business model of the current Takaful models
and examine the general products of takaful that are offered by both Takaful operators that
are able to be integrated into any kinds of situations and circumstances that will enable
Takaful operators to realise their full potential.

1.5 Outline of the Research Paper

To enlighten the structure of this study, the discussion will be divided into a few main
aspects. First, it will be introduced by the background and history of the both Takaful
operators. Next, there will be a study on conceptual and structural differences in the wakalah
model between Takaful Malaysia and Takaful Ikhlas. This will be followed by an analysis on
the distinguishing between Takaful Malaysia and Takaful Ikhlas for general products that are
being offered specifically for personal accident takaful, fire takaful and motor takaful.

4
2. Background and History of the Company

2.1 Background and history of Syarikat Takaful Malaysia Am Bhd

Syarikat Takaful Malaysia, also known as Takaful Malaysia began in 1981 when the
Government of Malaysia set up a task force to study the feasibility of establishing an Islamic
insurance company in Malaysia. The incorporation of Takaful Malaysia is on 29 November
1984 followed by the commencement of operation on 22 July 1985 which makes Takaful
Malaysia as the first islamic insurance or takaful operator in Malaysia. This event followed by
the conversion of the company to a public listed company on 19 october 1995 and listed on
the Main Board of Bursa Malaysia Securities Berhad on 30 July 1996.

As at 31 December 2019, Takaful Malaysia’s share capital stands at RM196.7 million which
consist of 830,433,122 ordinary shares and the total assets is RM10.3 billion. The major
shareholder of the company is BIMB Holdings Berhad (BHB) with a 59.19% shareholding in
Takaful Malaysia. Under the BHB Group, BHB also wholly owns Malaysia’s first Islamic
bank, Bank Islam Malaysia Berhad (Bank Islam). BHB’s parent company is Malaysia’s
Pilgrim Fund, Lembaga Tabung Haji with its current shareholding of 53.82%. BHB Group
has been an active player in developing the Islamic finance sector in Malaysia.​2

In pursuant with the Financial Services Act 2013 and the Islamic Financial Services Act
2013, Syarikat Takaful Malaysia had restructured the company as the new act requires the
conventional and islamic insurers to conduct their life and general insurance businesses
under separate units or subsidiaries. Thus, Syarikat Takaful Malaysia announced the
conversion of its composite takaful licence into two separate entities where now Syarikat
Takaful Malaysia Berhad is known as Syarikat Takaful Malaysia Keluarga Berhad which
operates the Family Takaful business. Syarikat Takaful Malaysia Am Berhad then
established which is a wholly-owned subsidiary of Syarikat Takaful Malaysia Keluarga
Berhad which operates the General Takaful business.

In this paper, Syarikat Takaful Malaysia Am Berhad will be the main focus of this discussion.

2.2 Background and history of Takaful Ikhlas General Bhd

Takaful Ikhlas Sdn Bhd or known as Takaful Ikhlas started to join the takaful industry on 18
September 2002 and later they converted their status to public listed company on 5 May
2014.

To comply with the Financial Services Act 2013 and Islamic Financial Services Act 2013
which requires the separation of life and general insurance business of both conventional
and islamic insurers, on 30 November 2018 Takaful Ikhlas announced the conversion of its
takaful licence into two separate entities to operate its family and general takaful business.
Following the separation, Takaful Ikhlas Berhad had a new name which is Takaful Ikhlas
Family Berhad which operates the Family Takaful business. Whereas, a new entity is formed
to operate the General Takaful business which is called Takaful Ikhlas General Bhd.

Both Takaful IKHLAS Family and Takaful IKHLAS General are wholly owned subsidiaries of
MNRB Holdings Berhad or formerly known as Malaysia National Reinsurance Berhad.

2
“About Takaful Malaysia,” Takaful Malaysia, accessed on 24 November 2020.
https://www.takaful-malaysia.com.my/corporate/aboutus/Pages/companybg.aspx

5
MNRB Holdings Berhad as the parent company has increased the paid up capital to RM195
million to comply with the requirements and growing the takaful business.​3

In this paper Takaful Ikhlas General Berhad will be the main focus of this discussion.

3
‘Corporate profile,’ Takaful Ikhlas, accessed on 25 November 2020.
https://saidnazulfiqar.files.wordpress.com/2008/04/takaful-ikhlas.pdf

6
3. Main Discussion and Analysis - Takaful Model

3.1 Overview on Takaful model

The main underlying concept in takaful is the contract of tabarru and ta’awun. The contact of
tabarru requires each participant to donate a sum of money to mutually assist and indemnify
each other in the event of misfortune and catastrophe. This contract covers the relationship
between the participants. The concept of tabarru in the context of takaful operation is not
considered fully tabarru or purely tabarru as the concept of tabarru here contains a condition
or consideration. Jurists have different views in defining the concept of tabarru in takaful
operations such as al-iltizam bi al-tabarru, hibah bi al-thawab, conditional tabarru, nihd and
waqf. Al-iltizam bi al-tabrru which is the view of the Maliki school, is the most accepted
internationally to define the concept of tabarru in the operation of takaful.​4

On the other hand, the fund that the participants had donated which is treated as collective
ownership is managed by the takaful operator in which another contract is required to govern
the relationship between the participant and the takaful operator. There are few models that
are used by takaful operators in their operations such as mudarabah, wakalah, hybrid of
mudarabah and wakalah and waqf. The major takaful models used in different countries now
are Wakalah, Mudarabah, Hybrid of Wakalah and Mudarabah and Waqf. Though Takaful is
based on the concept of mutual assistance and contribution, Takaful can be a profit oriented
as well as a non-profit oriented entity. It depends on which type of Takaful model is
implemented by the entities. For instance, the models such as Mudarabah, Wakalah and
Hybrid are intended for profit motive but the model like Waqf can be for the non-profit
oriented organisation.

Wakalah Model

The term wakalah describes a contract of agency or delegated authority where the muwakil
appoints a wakeel to carry out a specific performance on its behalf. In takaful operation, the
participants are the muwakil and the takaful operator serves as the wakeel in managing and
investing the contributions of the participants, in return the wakeel enjoys a fixed fee as the
consideration.

In the pure Wakalah model, the takaful operator will collect the contribution from the
participants and place the contributions into a takaful fund. The money in the takaful fund will
be invested and any profits from the investment will go back to the fund. The fund will be
used to cover the payment of compensation to the participants that are eligible to claim and
if there is any money left in the takaful fund after payment of claims, the surplus will be
distributed between the participants that have not made any claim. In the case of deficit that
may occur because the total cost of claims exceeded the total contribution made, the
company shareholder is required to give interest free loan to the takaful fund and it will be
paid in the future using the surplus when it occurs.

In the modified Wakalah Model, there is a slight difference from the pure model. The
difference is when there is a surplus the takaful operator will be entitled for an agreed share
of the surplus which is called performance fee. This is based on the contract of Jualah.

The above operation is applicable for General Takaful.

For Family Takaful there is a difference in managing the takaful fund in which after the
participants contributed, their contribution is divided into two funds which is investment fund

Ali, Mohammad Mahbubi. "Takaful models: their evolution and future direction." ​Islam and
4

Civilisational Renewal ICR Journal​ 7, no. 4 (2016). p461.

7
and risk fund. The investment from the risk fund will act like the takaful fund in the General
Takaful. On the other hand, the investment from the investment fund will be put back in the
fund and will be given back to the participant when the participants die or leave the scheme.

Mudarabah Model

Mudarabah model is based on partnership between a party that provides the capital which is
called rab ul maal and another party that runs the business which is called mudarib. When
there is profit from the business the profit will be shared between them according to the
agreed ratio and if loss incurred in the business the loss will be beared solely by the rab ul
mal and the mudarib will not get anything for their service. In takaful operation, the
participant that donated contribution to the takaful fund is the rab ul maal and the takaful
operator that manages the takaful fund is the mudarib.

In the pure Mudarabah model, the takaful operator will receive the contributions from the
participants and invest it in shariah compliance investment. The profit from this investment
will be divided between the participant and takaful operator according to the share ratio
agreed before. The participant’s profit share will be credited back to the takaful fund and the
takaful fund will be used to pay any claims made. If there is any surplus, then it will be given
back to the participants. In case of a deficit to pay the participants, the shareholder will be
required to give interest free loan and will be paid back using the future surplus of the takaful
fund.

In the modified Mudarabah model, the difference is the point that the profit is shared. Instead
of sharing the profit immediately after the investment, all of the profit will be credited to the
takaful fund and after all payments are made for the claims, only then the surplus will be
shared between the participant and the takaful operator according to the agreed ratio. This is
the operation for General Takaful using the mudarabah model.

For Family Takaful, the operation is the same as the General Takaful except for the
investment fund. The contribution will be credited to 2 funds which is risk fund and
investment fund. The investment from the risk fund will act like the takaful fund in the
General Takaful. On the other hand, the investment from the investment fund will be put
back in the fund and will be given back to the participant when the participants die or leave
the scheme. The point of profit sharing will be based on the type of Mudarabah used, either
pure or modified Mudarabah.

Hybrid Model

The hybrid model is a combination of Mudarabah and Wakalah contracts. The relationship
between the participant and the takaful operator will start under the Wakalah contract which
the takaful operator will charge agency fee. At the level on investments, the Mudarabah
contract will be used to produce profit share between the participant and takaful operator
and lastly if there are any surplus after payment made for the claims, the takaful operator as
the agent will charge a performance fee in addition to the agency fee (wakalah fee) in
consideration for managing the takaful business as a whole.

8
3.2 Conceptual and Structural differences in Takaful Model used between Syarikat
Takaful Malaysia Am Bhd and Takaful Ikhlas General Bhd

In this point, we will be discussing the Takaful model that is used by the two Takaful
companies, compare and contrast between the model used and point out the similarities or
differences if any.

3.2.1 Takaful model in Syarikat Takaful Malaysia Am Bhd

As stated above, Syarikat Takaful Malaysia Am Bhd operates the General Takaful for
Takaful Malaysia. According to Takaful Malaysia’s website, Takaful Malaysia currently
applies the Wakalah contract as its business model. After studying the model, we will found
out that Syarikat Takaful Malaysia Am Berhad also include the contract of Tabarru, Jualah
and Qard in their Wakalah model.

By joining the scheme, the participant will start paying a sum of money as a contribution
(tabarru) or donation to the Participant Risk Fund. Takaful Malaysia will take a certain
percentage from the contribution as a wakalah fee before crediting it into the Participant Risk
Fund. It will be managed and invested by the company but the profit will not be shared
between the participant and the fund manager. Instead, it will be credited back to the fund.
After the payment of claims, the surplus which is not guaranteed by the takaful operator, will
be distributed back to the participant however the takaful operator will take a certain amount
according to the ratio agreed in the contract as a performance fee based on the contract of
Jualah. Moreover, if the Participant Risk Fund is in a deficit, the Takaful operator will give an
interest-free loan (qard) to the fund and will be paid by using the surplus of the fund in the
future.

By studying this operation and the chart of the business or Takaful model used by Syarikat
Takaful Malaysia Am Berhad, we can say that they are applying the ​Modified Wakalah
model as there is a second layer of fee which is the performance fee if there is any surplus
from the Participant Risk Fund.

9
For example, we look in the certificate for Takaful ​my​Houseowners & HouseHolders below.
The certificate which acts as the terms and condition of the contract that is agreed between
the participant and the Takaful operator, clearly stated the operation of their Wakalah model.

3.2.2 Takaful Model in Takaful Ikhlas General Bhd

Takaful Ikhlas General Bhd offers General Takaful products based on the contract of
Wakalah which also includes the contract of Tabarru , Qard and Jualah.

Note: For General Takaful, all contributions, net of Expense Fund (EF), in the GRIA is dripped for Tabarru' at the
onset into the Risk Fund (RF) and Special Fund (SF). Any investment income in the Risk Fund (RF) and Special
Fund (SF) shall be allocated back into the Risk Fund (RF) and Special Fund (SF), respectively. In this instance,
IKHLAS will not charge an investment Performance Fee (%). Net surplus distribution will be allocated and
administered on an annual basis5​

5
“Islamic Insuran Model” Knowledge Model Update, 18 February 2011. Accessed on 27 November
2020. http://modelupdate.blogspot.com/2011/02/islamic-insuran-model.html

10
The participant will start paying a contribution to the Risk fund while the Takaful operator will
charge a certain percentage of the contribution as the Wakalah fee. The net contribution of
the participant will be invested. For General Takaful, the account used in Takaful Ikhlas is
Personal Risk Investment Account (PRIA) and General Risk Investment Account (GRIA)​6​.
For GRIA, all of the contributions will be credited for tabarru and the profit from the
investment will be credited fully to the tabarru fund. Unlike PRIA, the Takaful operator will
charge Fund Management Fee from the profit of the investment as seen in the chart above.
The contribution then is put in the risk fund and will be used to play claims. If there is any
surplus from the risk fund, Takaful operator will charge Surplus Administration that is agreed
in the contract. If the risk fund is in deficit, the risk fund will receive an interest-free loan
which will be paid back using the surplus in the future.

Therefore, we can say that the takaful model that is used by Takaful Ikhlas is Modified
Wakalah model as there is a fee at the level of investment and at the level of surplus.

The practicality of the operation of the takaful model can also be seen in the certificate. We
take the Certificate of Private Car Takaful as an example. Here, we can see that Takaful
Ikhlas will charge 30% of the contribution as the Wakalah fee and at the surplus level,
Takaful Ikhlas will charge 50% of the gross distributable surplus.

6
“FAQ About Takaful” Takaful Ikhlas. Accessed on 26 November 2020.
https://www.takaful-ikhlas.com.my/ikhlas-contact/faq/faq-about-takaful

11
3.2.3 Comparison of the Takaful Model used By Syarikat Takaful Malaysia Am Berhad
and Takaful Ikhlas General Berhad

After studying both of the Takaful model used by the two companies, we can conclude that
basically, the Takaful model used is based on the same model which is the Modified
Wakalah model which also include the contract of Tabarru (to govern the relationship
between the participants), Qard (to give interest-free loan when the risk fund is in deficit) and
Jualah (to charge the participant for performance fee).

However there is a slight difference between the model used which is Takaful Ikhlas has an
extra layer of fee for the General Takaful products that used Personal Risk Investment
Account where they will charge Fund Management Fee if there is any profit from the
investment. For the General Takaful products that use General Risk Investment Account, the
model will be the same as Takaful Malaysia’s Model as there is no extra Fund Management
Fee.

In conclusion, it can be said that the model used by the two companies are the same except
for the Fund Management Fee that is charged for Personal Risk Investment Account in
Takaful Ikhlas.

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4. Main Discussion and Analysis - General Takaful Products

4.1 An Overview of General Takaful

The concept of General Takaful is to incorporate a form of Shariah-compliant risk

management that relies on the principle of risk sharing to safeguard participants from
financial loss, liability or injury related to or after an accident or event involving their assets,
properties or individuals. General Takaful is a means of protecting financial losses arising
from or caused by incidents or events that inflict damage to property, civil liability or cause
death or harm to the body as a result of an accident.

In General Takaful, specifically the relationship among participants is governed by the

contracts of takaful and tabarru’. The concept of Tabarru in general takaful is usually
contractual on the participant to relinquish, as a donation that the amount of the contribution
that he agrees to give to the fund​7​. Furthermore, it is also to satisfy his duty of mutual
assistance and joint assurance in the event that any of his fellow participants suffers a loss.
The principle of tabarru is a cornerstone in a takaful system structure that makes the Gharar
(uncertainty) element permissible under the takaful contract​8​.

In addition, General Takaful is also regulated either by the contract of mudarabah (profit
sharing) or wakalah (agency) by which the takaful operator is assigned to administer the
scheme. Other Islamic contracts can also be used as a mixture of mudharabah or wakalah,
waqf or trust. Under the underlying agreement, the takaful operator will earn a commission
or share the operating profit as a benefit for operating the takaful scheme.

Finally, General Takaful contracts normally last one year or less and can be extended at the
end of that term by mutual consent of the takaful operator and the participant. Broadly
speaking, the settlement of the claim would not cancel the agreement until the total demands
for damages have been compensated. Further arguments can be made in respect of the
surplus of the quantities covered by the contract within the time period to maturity.

The discussion below will be focusing on three types of schemes in General Takaful
products which are Personal Accident Takaful, Motor Takaful and Fire Takaful.

4.2 Distinguishing between Takaful Malaysia and Takaful Ikhlas for Personal Accident
Takaful

Personal Accident (PA) Takaful is an annual plan that allows for reimbursement of
compensation in the event of death, disability or injury as a result of solely unintentional
accident. Participation in the PA Takaful can be for an individual or group of individuals who
intend for a family, business or other registered group. PA Takaful is often accessible for
limited periods of time, such as travelling abroad to cover any injury that occurs during travel.

Personal Accident Takaful coverage is typically given for accidents occurring anywhere in
the country, 24 hours a day according to the terms and conditions of the certificate.
Companies who protect their employees can wish to save the contribution by limiting the
coverage to working hours with business trips and events only.

There are several different types of personal accident takaful, and it is important to know the
differences when selecting the best type based on the individual preference. In terms of
7
Ismail, Muhaizam. "Determinants of financial performance: The case of general takaful and
insurance companies in Malaysia." ​International Review of Business Research Papers​ 9, no. 6
(2013): 111-130.
8
​Iqbal, Muhaimin. ​General Takaful Practice: Technical Approach to Eliminate Gharar (uncertainty),
Maisir (gambling), and Riba'(usury).​ Gema Insani, 2005. p23.

13
scale of benefits in which refers to the amount of compensation payable by the Takaful
Operator in the event of death, disablement or injury.

In the context of Takaful Malaysia, the product would cover for bodily injury incurred by
accidental means by which the injury is caused solely and regardless of any other cause
resulting in any impairment or disability or medical or surgical treatment or in the event of
death, to any nominated beneficiary or legitimate personal representative. Same with
Takaful Ikhlas, the scope of cover includes the basic coverage of the PA takaful requires
death and injury resulting from accidents. In addition to the basic cover, it also covers
medical costs, hospital expenses, reconstructive surgery and funeral expenses.

Next, in the scope of what Shariah principle applicable in the personal accident takaful, both
Takaful Malaysia and Takaful Ikhlas apply the concept of Tabarru’ and Wakalah. Tabarru'
means a donation for the purpose of cooperation and collaboration between the Takaful
Participants and to be used to support Takaful Participants in times of misfortune and
difficulty. In the context of the Company, Tabarru would be transferred to the Risk Fund​9​.

Based on the Takaful certificate for both Takaful operators, both have different benefits
provided and sum covered according to those benefits. As for example, in the event of death
and permanent disables, Takaful Malaysia for the PA Takaful under Siddiq plan provides
sum covered for RM 50,000 while for Takaful Ikhlas provides for the same benefit in which
RM 10,000. Next, for funeral expenses, Takaful Malaysia provides for RM 3,000 whereas
Takaful Ikhlas provides only RM 1,000 for funeral expenses.

It can be seen that Takaful Malaysia provides more sum covered rather than Takaful Ikhlas
but this product is very subjective and based on the individual preferences as Takaful
Malaysia is subject to a minimum contribution of RM 60 but for Takafuk Ikhlas the minimum
contribution is RM 50.

Next, in regard to what is included in the Takaful Contribution amount for Wakalah fees,
Takaful Malaysia includes 45% of contribution in which 15% for commission and another
30% for other expenses such as management expenses. On the other hand, for Takaful
Ikhlas, the charges for Wakalah fees include commission up to 25% and management
expenses up to 35% from Takaful Contribution. Besides, for Personal Accident Takaful in
Takaful Malaysia, it includes 6% service tax of the contribution paid yet Takaful Ikhlas just
mentioned that applicable taxes are chargeable at the prevailing rates.

Finally, concerning the major exclusion in which does not cover death or permanent
disablement based on Takaful certificate, both Takaful Malaysia and Takaful Ikhlas have
similar circumstances in which PA Takaful will usually not cover accidents caused by the
following events:
1. War Risks
2. Suicide And Insanity
3. Self -inflicted Injury
4. Influenced By Liquor, Drugs Or Narcotics
5. AIDS/HIV Or Any Other Venereal Diseases
6. Provoked Murder Or Assault
7. Childbirth, Pregnancy Or Miscarriage
8. Involvement In Unlawful Activities
9. Hazardous Sports
To sum up, Takaful Malaysia and Takaful Ikhlas in regard to Personal Accident Takaful
policy, both have major similarities in the policy system but for the sum covered based on

9
Takafuleexam.com. 2020. [online] Available at:
<http://takafuleexam.com/e-content/TBE-B/content/18140857PartBEnglsih.pdf> [Accessed 26
November 2020].

14
the benefits, it can be concluded that Takaful Malaysia give more assuring product in PA
Takaful rather than Takaful Ikhlas, But, it is always as matter of preference according to the
needs of an individual by taking into account on financial capabilities to pay the policy either
by weekly, monthly or annually.

4.3 Distinguishing between Takaful Malaysia and Takaful Ikhlas for Motor Takaful

Motor Takaful provides the participants with protection from loss or damage to their vehicles
due to unintended crash, theft, robbery or crash and physical accidents incurred by an
accident while driving or operating a motor vehicle. Under the Road Transport Act 1987, it is
compulsory for all motor vehicles to be subject to at least a third party collision and injury risk
before they can be used on public roads and highways. It is also a crime for any person to
use a motor vehicle without this minimum coverage.​10​.

This type of Motor Takaful coverage is tarifratedf, which is equivalent to conventional Motor
Insurance. The Motor Tariff lays out the Cash-Before-Cover, where participants are required
to pay their payments before the liability is assumed, and service providers are given 7 days
to pay their expenses to their principals.

Primarily, in regard to Motor Takaful, both Takaful operators, Takaful Malaysia and Takaful
Ikhlas, both classify the Motor Tariff vehicles as follows which is motorcycle, private cars and
commercial vehicles. As for the current discussion, the comparison for the products will be
focused on private cars. As far as private cars are concerned, these include three-wheeled
cars and station waggons used for social, domestic and leisure purposes and for the
company or technical purposes of the participant or the insured only.

Next, both takaful operators cover four types of benefits provided namely third party bodily
injury and death, third party property loss or damage, loss or damage to your own vehicle
due to accidental fire or theft and loss or damage to your own vehicle due to accident. Both
takaful operators provide a 24/7 roadside assistance program with complimentary up to
breakdown towing, roadside assistance and battery delivery service.

As far as third party cover is concerned, both Takaful operators have identical details in
terms of this protection. In addition to the third party protection alluded to above, the
Comprehensive Plan usually covers the loss or injury to the individual by way of the vehicles,
spare parts or accessories arising from the following incidents or occurrences, such as
accidental collision or overturning, impact damage incurred by falling objects, provided that
they are not caused by convulsions of the type of the fire explosion or lightning.

Lastly, in relation to the differences, it can be seen in what are the major exclusions under
the Certificate for both Takaful operators in providing policy under Motor Takaful for Private
Cars. For Takaful Malaysia, it mentioned three circumstances for major exclusions. First,
liability against claims from passengers in your vehicle. Second, loss, damage or liability
arising from an act of nature i.e. flood, storm or landslide. Third, Loss of use of the vehicle
due to mechanical or electrical breakdown. In contrast, for Takaful Ikhlas, it mentioned other
major exclusions in which the own death or bodily injury due to a motor accident. This is the
difference that can be seen between Takaful Malaysia and Takaful Ikhlas in listing the major
exclusion in their own Takaful certificate.

10
​Azhar, N. N. Z. A., P. L. Ghazali, M. Mamat, Y. Abdullah, S. Mahmud, S. Lambak, Z. Sulong, N. H.
M. Foziah, and A. Z. A. Latif. "Acceptance of integrated modification model of auto takaful insurance
in Malaysia." ​Far East J. Math. Sci​ 101, no. 8 (2017): 1771-84. p1772

15
4.4 Distinguishing between Takaful Malaysia and Takaful Ikhlas for Fire Takaful

This form of Takaful provides for protection against loss of or damage to property caused by
fire and other specified hazards.

As far as basic Fire Takaful is concerned, all Takaful operators cover coverage against
destruction or damage to property due to fire and lightning. These include buildings for
warehouses, restaurants, offices, private residences, etc. and also, for instance, furniture,
fixtures & fittings, plants & machines, office equipment, stores, personal belongings and
household goods.​11​.

In addition, in consideration of additional Takaful Contribution, both Takaful operators

coverage extend to include loss or damage to the property covered directly caused by for
example aircraft damage, earthquake, volcanic eruption, flood, hurricane, riot, strike,impact
by any road vehicles, animals and so forth.

Next, as for the property or asset that can be recovered under Fire takaful, both Takaful
operators provide with the same list in which:

1. Buildings, to include out buildings such as walls, fences, garages, etc.

2. Plant and Machinery
3. Stock and stock in trade
4. Loss of Rent
5. Furniture, Fixtures and Fittings
6. Goods Held in Trust or Commission
7. Professional Fees
8. Removal of Debris

Last but not least, as for the Wakalah fees made by the Takaful operators, Takaful Malaysia
charges 55% from the Takaful contribution in which 15% commission and 40$ for other
expenses such as management expenses. As for Takaful Ikhlas, the commission that will be
charged is up to maximum 15% of Takaful contribution. As for the management expenses,
20% from the Takaful contribution will be taken​12​.

11
Billah, Mohd Ma’Sum. "Experience in Fire Takaful." In ​Islamic Insurance Products​, pp. 113-121.
Palgrave Macmillan, Cham, 2019.
12
Takaful-malaysia.com.my. 2020. ​Takaful​. [online] Available at:
<https://www.takaful-malaysia.com.my/products/general/Pages/genmyFire.aspx> [Accessed 26
November 2020].

16
5. Conclusion

Over the coming years, the general takaful industry is set to get a significant boost, with the
entry of new operators or innovation to improve the competitiveness of the industry and
bolstered by the continued rise in public perception of Islamic financial services. The rapid
speed of growth of the general takaful product business would improve the conducive
conditions for further expansion of the general takaful product especially in commercial lines.

The study is specifically focusing on the comparative research between Takaful Malaysia
and Takaful Ikhlas in regard to the takaful model that has been implemented and the general
takaful products that are currently being offered by both Takaful operators.

Generally, the basis of the both companies are the same which is the Modified Wakalah
Model, however there is a slight difference when the company charges an extra layer of fee.
Other differences will be on the amount of charges charged by the company.

As far as general takaful products are concerned, there are a variety of issues facing
including in raising public awareness and offering insurance education in general specifically
for general takaful insurance in particular. The development of new insurance products that
conform with Islamic Sharia is still a major challenge for Islamic finance in general as well as
for takaful operators in inventing innovative product policy and distribution channels.

17
 Bibliography

Ali, Mohammad Mahbubi. "Takaful models: their evolution and future direction."​ Islam and
Civilisational Renewal ICR Journal​ 7, no. 4 (2016).

Annuar, Hairul Azlan. "Al-Wakalah and customers’ preferences toward it: a case study of two
takaful companies in Malaysia." ​The American Journal of Islamic Social Sciences​ 22,
no. 1 (2004)

Azhar, N. N. Z. A., P. L. Ghazali, M. Mamat, Y. Abdullah, S. Mahmud, S. Lambak, Z. Sulong,

N. H. M. Foziah, and A. Z. A. Latif. "Acceptance of integrated modification model of
auto takaful insurance in Malaysia." ​Far East J. Math. Sci​ 101, no. 8 (2017): 1771-84

Billah, Mohd Ma’Sum. "Experience in Fire Takaful." In ​Islamic Insurance Products​, pp.
113-121. Palgrave Macmillan, Cham, 2019.

Fauzi, P. N. F. N. M., Khairuddin Abd Rashid, Azila Ahmad Sharkawi, Sharina Farihah
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Development​ 3, no. 4 (2016)

Ismail, Muhaizam. "Determinants of financial performance: The case of general takaful and
insurance companies in Malaysia." ​International Review of Business Research
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(uncertainty), Maisir (gambling), and Riba'(usury).​ Gema Insani, 2005

Websites

“About Takaful Malaysia,” Takaful Malaysia, accessed on 24 November 2020.

https://www.takaful-malaysia.com.my/corporate/aboutus/Pages/companybg.aspx

“FAQ About Takaful” Takaful Ikhlas. Accessed on 26 November 2020.

https://www.takaful-ikhlas.com.my/ikhlas-contact/faq/faq-about-takaful

“Islamic Insuran Model” Knowledge Model Update, 18 February 2011. Accessed on 27

November 2020.
http://modelupdate.blogspot.com/2011/02/islamic-insuran-model.html

Takafuleexam.com. 2020. [online] Available at:

<http://takafuleexam.com/e-content/TBE-B/content/18140857PartBEnglsih.pdf>
[Accessed 26 November 2020]

Takaful-malaysia.com.my. 2020. ​Takaful​. [online] Available at:

<https://www.takaful-malaysia.com.my/products/general/Pages/genmyFire.aspx>
[Accessed 26 November 2020].

18