Professional Documents
Culture Documents
Understanding Takaful Bytarmidzi Bin Ahmad
Understanding Takaful Bytarmidzi Bin Ahmad
1
Contents
Part 1: Understanding takaful:
• One Scholar’s view on conventional insurance
• Modifying insurance to be Shariah compliant
• Definition of takaful
• Takaful as a concept
• Takaful in practice
• Operating Models
2
One Scholar’s view on
conventional insurance
Definition of “takaful”:
• “a scheme based on brotherhood, solidarity and
mutual assistance which provides for mutual
financial aid and assistance to the participants in
case of need whereby the participants mutually
agree to contribute for that purpose.”
7
Takaful as a Concept (2)
as envisaged by some Scholars
Participant
Takaful Operator
Participant
9 Takaful Operators
2 Operating Models
MUDHARABAH WAKALAH
Profit Sharing Contract Fee Based Contract
Additional Difference
•Payment of operating fees
•Surplus sharing structures 12
Definition of Mudharabah
Less
Payment of Underwriting cost & reserves
Contribution •Retakaful
by Participant •Claims (paid & outstanding + IBNR) Gross Profit
(based on •Reserves (UPR) (if any)
tabarru’ and
Mudharabah Provisions
contract) •doubtful debt
•diminution in investment value Qard Hassan
to cover deficit
60 % of Profit
14
Mudharabah Model Declaration (STMB)
• I/We hereby agree that on the basis of Al-Mudharabah and other related
principles of the Syarak the Takaful Contribution which I/we hereby
undertake to pay to STMB (Company) be credited into the Takaful Fund of
the Company for the Company to manage the various schemes of takaful
under its General Takaful Business including the investment of the said fund
in the manner deemed fit by the Company, and in the consideration thereof
I/We be entitled to share the net profit of the fund if any, in a proportion
40% to Me/Us and 60% to the Company provided always that I/We not
incurred any claims and/or received any benefits under the Takaful contract
whilst the same is in force, and in relation therefrom I/We also agree that
any part of the said Takaful Contribution including its profit be made as
tabarru’ for the Company to pay Takaful benefits to any Takaful Participant
who shall be entitled to such benefits in accordance with the Takaful
15
contract.
Definition of Wakalah
• Wakalah is a contract
whereby one party
acts on behalf of
another for a fee.
• In the context of
takaful, the takaful
operator manages the
Takaful Fund on behalf
of the participant for
a fixed fee called a
‘wakalah fee’.
16
Transparent & Clear
Contributions • The participant as a
party to the wakalah
contract agrees that the
takaful operator may
take a portion of the
contribution as
remuneration for
Wakalah Fee: services provided:
•Mgmt Exp – Wakalah Fee;
•Comm (OCC)
– Performance Fee (if
any);
Takaful Fund:
•tabarru’ to • The fee scale must be
Family or transparent and agreed
Performance General Takaful to at the time of
Fee: Fund participation.
•From surplus
share if any. 17
Wakalah Model - General
Investment Income Participants
• I further agree that my contribution be credited into the General Takaful Fund
(Fund) and to elect Takaful Nasional Sdn. Bhd. (TNSB) to invest and manage the
Fund according to the principles of the Shariah. I also permit TNSB to make
payment of claims/takaful benefits, provisions and reserves based on the
guidelines and policies laid down by the authorities and TNSB to be paid a
wakalah fee based on the rate of Y% of the contribution.
• If at the end of each financial year, there is a surplus of income over liabilities
in the Fund, I agree that TNSB receive 50% of it as incentive while the balance
50% will be reserved for distribution amongst participants subject to the terms
of this contract and fixed by the authorities. 19
Sharing of Surplus
& Qard Hassan clause
in the Takaful Certificate (TNSB)
• If at the end of each financial year, there is a surplus of
income over liabilities in the Fund as set out in condition 10 of
this Certificate, We will receive 50% of the surplus as
incentive for operating and being responsible for the
management of the Fund. The balance of 50% will be reserved
for distribution amongst participants. But if the Fund is not
sufficient to meet its takaful obligations, We will provide an
interest free loan from Our standby capital as required by the
authorities. This loan will be repaid by the Fund from future
surpluses.
20
Challenge of growing the Contribution
1400
1200 5.6% from 5.1% (2004)
1000 › Combined contribution
800 increase by 21.4% to RM1.7
billion
600
400
200 › The increase in the market
0 penetration is a
98 99 00 01 02 03 04 05 06
Year manifestation of growing
General Family awareness of the public on
the benefit of the takaful
scheme
Market
Market 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005
Penetration
Share (%) 4.8 5.6 5.4 5.1 5.4 6.1 2.5 3.2 3.8 4.5 5.1 5.6
(%)
21
Note: 2006 figures are based on forecast only
Challenge of growing the Assets
Assets
8000
7000
0 assets of insurance
sector.
96 97 98 99 00 01 02 03 04 05 06 Year
General Family
Takaful
Operators Life
5+4 7
2010
Increase takaful market share to 20%
Strong and highly capitalised operators offering broad range of
products
Comprehensive & conducive Shariah & regulatory framework
Pool of high-calibre management teams with required expertise
Malaysia as regional Islamic financial centre
Direct
Business
Agents 44.3%
17.3% Agents
19.3%
Direct
Bancatakaful Business
6.5% 61.0%
Bancatakaful
20.4%
Shariah compliance
Competitive pricing Surplus sharing
Well trained personnel Good Deeds
Attractive product features
Prompt delivery
Trusted Brand
Easy Access
Extra Benefits
Different strokes for different folks
27
Value proposition (additional)
1. Shariah Compliance
• Takaful was introduced to meet the demands of Muslims to
conduct their economic activities in line with Shariah. They
would value an alternative solution that:
2. Sharing of Surplus
• People are generally happy (to know) that their contribution would go into a
pool to help others in need.
• Takaful benefits not just the living but also for the deceased.
• For example the deceased can also derive eternal benefits if the policy
proceeds used as follows:
– Settlement of outstanding debts.
– Payment of outstanding zakat (tithes);
– Performance of the Haaj;
– Purchase of useful property for purpose of waqaf;
– Do other good deeds such as helping orphans, poor etc.
• Crucial to have well trained employees and sales force who are
motivated not by just salaries or commissions alone but by a sense
of mission.
• The staff and sales force must believe that providing a Shariah
compliant alternative to insurance is more than just a job but a
religious obligation (fard kifayah).
31
Challenge of co-existence
e.g. Maybank Insurance & Takaful Sector
Mayban
Fortis
MNI TN
Insurance Takaful
32
33