Takaful vs insurance

DIBF 06202
PRESENTED BY
MR. THABITI MOHAMEDI ALLY
FACULTY OF BUSINESS ADMINISTRATION
MUSLIM UNIVERSITY OF MOROGORO
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❑In this very short presentation, we will be

Module’s discussing some issues concerning to similarities

Overview and differences that exists between conventional

insurance and Islamic insurance (Takaful)

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❑ Literally, insurance as practiced in

conventional financial system refers to a
financial protection system which involves the
Definition Of execution of contracts (insurance contracts)
Insurance between the insurer and the insured in which
the insurer agrees to underwrite the subject risk
of such contracts.

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❑Insurance can be defined as a legal contract

between the insurer (insurance company) and

Definition Of the insured (individual or institution) in which

Insurance the insurer agree to compensate the insured in

the event of loss or damage upon the payment
of certain amount of premium

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1. Protection: Both takaful and insurance provide

protection in the events of unforeseen.

Similarities 2. Contributions: In both systems, contributions

Between Takaful must be made to start the coverage.
And Insurance
3. Insurable interest: This means that the participant
must suffer a financial loss when the insured event
occurs.

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 Differences Between Takaful & Conv.
Insurance

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i. Sources of laws & regulations are man-made and

set by state

ii. Profit motive: maximizing returns to shareholders

Conventional
Insurance iii. Initial capital supplied by shareholders

iv. Separation of policyholder and insurer with

differing interests

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v. There is no restriction in investment of funds

vi. There is a clear insurer-insured relationship.

Conventional
vii. Insurer invests premiums consistent with
Insurance
profit motive with no moral guidelines; hence
coexistence of riba and maysir

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i. Sources of laws are based upon Qur’an and

Hadith

ii. Community well-being, optimizing operations

for affordable risk protection
Islamic
Insurance iii. Initial capital supplied by Rabb al-mal (agent) or
paid in via premiums from participants

iv. Coincidence of interests between policyholder

and operator as appointed by participants

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v. Takaful invests premiums in accordance with

Islamic values and sharia guidelines

vi. Takaful funds must be invested in shariah-

Islamic compliant instruments.
Insurance
vii. There is no insurer-insured relationship between
takaful operator and participants. Participants act
as both the insured and the insurer simultaneously

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THE END Wabillah Tawfiiq

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BY MR. THABITI