TAKAFUL (ISLAMIC INSURANCE)

VS
CONVENTIONAL INSURANCE
1. INTRODUCTION
 WHY THE CONVENTIONAL INSURANCE IS PROHIBITED ?
 THE SHARIAH BASIS OF TAKAFUL

2. THE OPERATIONAL SYSTEM

 TAKAFUL COMPANY
 CONVENTIONAL INSURANCE

3. COMPARISON BETWEEN TAKAFUL AND CONVENTIONAL INSURANCE

 ANNUAL REPORT
 OTHERS
 1. INTRODUCTION

WHY THE CONVENTIONAL INSURANCE IS PROHIBITED

4 PROHIBITED ELEMENTS IN
CONVENTIONAL INSURANCE
 Gharar, Riba, and Maysir in
Conventional Accounting
 Commercial insurance is unlawful due to the
involvement of Riba, Maisir , Gharar and the invalid
transfer of risk from the insured and insurer.
 Gharar - Sale of policy / Protection plan
(uncertain events / perils)
 Riba – The investment of the premium payments in
riba – based activities
 Maysir – elements of gambling purchasing the policy
with the hope of getting more in the terms of
compensation / indemnity.
CON’T

 In conventional insurance, risk is transferred to one party. It constitutes

a one way economic relationship between insurer and the insured
 if no risk occurred then only insurer will get the economic benefits.
 The policyholders have to pay the premiums against unknown risk
THE SHARIAH BASIS OF
TAKAFUL
 Takaful Principles:
Al Quran and Hadith
 Basis of Co-operation
Help one another in al-Birr and in al-Taqwa (virtue, righteousness and piety): but do not help one
another in sin and transgression. (Surah Al-Maidah, Verse 2)
Allah will always help His servant for as long as he helps others. (Narrated by Imam Ahmad bin
Hanbal and Imam Abu Daud)
 Basis of Responsibility
The place of relationships and feelings of people with faith, between each other, is just like the
body; when one of its parts is afflicted with pain, then the rest of the body will be affected.
(Narrated by Imam al-Bukhari and Imam Muslim)
One true Muslim (Mu’min) and another true Muslim (Mu’min) is just like a building whereby
every part in it strengthens the other part. (Narrated by Imam al-Bukhari and Imam Muslim)
 Basis of Mutual Protection
By my life, which is in Allah’s power, nobody will enter Paradise if he does not protect his
neighbour who is in distress. (Narrated by Imam Ahmad bin Hanbal)
 TAKAFUL: BASIS OF ISLAMIC
INSURANCE
 Takaful means mutual guarantee among the group members (risk sharing).

 The Takaful system embodied the elements of mutual cooperation and shared
responsibility, common benefits and mutual solidarity in the face of difficulties and danger.
 CON’T
 It is an arrangement by a group of people with the same
interests to guarantee themselves against a certain
misfortune through a pool contributed from their
resources.

 Takaful operator serves as a trustee or a manager on the

basis of Wakalah or Mudharabah to operate the business.
Every policyholder contribute to the Takaful Fund in
order to assist those among them who need assistance
 OPERATIONAL FRAMEWORK

 In terms of the operational framework, the participants agree to devise a scheme whereby they
themselves are the insured as well as the insurers.
 Each participant is required to pay a premium as contribution to the common fund, known as
the ‘Takaful Fund’.
 The theory of Islamic finance does not accept Gharar in respect of right and liabilities of the
parties to commercial contract. In order to eliminate uncertainty, the concept of Tabarru’
(donation ) have been incorporated.
 Hence, the financial assistance paid to the participant resulted from the defined loss comes from
a fund contributed by all participants by way of donation
 By virtue of the above, the participants are entitled to any surplus from the fund (after claims
incurred, reinsurance, and other costs), subject to an agreed system of distribution.
Islamic Insurance

 At-takaful, at-tadhamun, at-ta’min

 The definition of Asuransi Syariah according to Fatwa
Dewan Syariah Nasional No. 21/DSN-MUI/X/2001:
Asuransi Syariah (Takmin, Takaful atau Tadhamun)
adalah usaha saling melindungi dan tolong menolong
diantara sejumlah orang/pihak melalui investasi dalam
bentuk aset dan atau tabarru’ yang memberikan pola
pengembalian untuk menghadapi resiko tertentu
melalui aqad (perikatan) yang sesuai syariah.
 The definition of insurance:
UU No. 2 tahun 1992 pasal 1
 Asuransi atau pertanggungan adalah perjanjian antara dua pihak
atau lebih, dengan mana pihak penanggung mengikatkan diri pada
tertanggung dengan menerima premi asuransi untuk memberikan
penggantian kepada tertanggung karena kerugian, kerusakan atau
kehilangan keuntungan yang diharapkan, atau tanggung jawab
hukum kepada pihak ketiga yang mungkin akan diderita
tertanggung, yang timbul dari suatu peristiwa yang tidak pasti, atau
untuk memberikan suatu pembayaran yang didasarkan atas
meninggal atau hidupnya seseorang yang dipertanggungkan.
 The contracts of Islamic insurance:

 Tabarru’ --- helping each other

Wakalah
Kafalah
Wadiah
 Tijarah --- commerce
Mudharabah
Ijarah
 2. DIFFERENT OPERATIONAL
SYSTEMS

 Conventional Insurance
 Takaful (Wakalah and Mudharabah)
OPERATIONAL SYSTEM OF CONVENTIONAL
INSURANCE
 CONVENTIONAL INSURANCE

PROFIT

100%

PREMIUM
PARTICIPANT’S COSTS
PREMIUM
+ SURPLUS
PROFIT

100%

COMPANY
CON’T

 Premiums paid are treated as insurer’s income which signifies the shift
of rights of such premiums from insured to insurer.
 As the legal owner of insurance funds, the insurer has full control over
it, there is no obligation on their part to distribute any underwriting
surplus generated.
TAKAFUL OPERATIONAL SYSTEM
 TAKAFUL -Wakalah-
CONTRIBUTIONS
Contribution
Specified as: INVESTMENT
Tabar’ru (Managed by PROFIT
PARTICIPANTS (Donation) insurance
Saving 100%
as an agent)

Fees CONTRIBUTION
+
PROFIT

COSTS

100%
PARTICIPANTS SURPLUS
TAKAFUL -Mudharabah-

COMPANY

100-X%
CONTRIBUTIONS INVESTMENT
Contribution (Managed by PROFIT
PARTICIPANTS Specified as: Mudharib)
(Shahibul Maal) Tabar’ru
(Donation) X%
Saving
CONTRIBUTION
(Ra’sul Maal) +
PROFIT

COSTS

100%
PARTICIPANTS SURPLUS
3. COMPARISON OF TAKAFUL AND
CONVENTIONAL INSURANCE

 ANNUAL REPORT
 OTHERS
DIFFERENCES IN ANNUAL REPORT
 ISSUES TAKAFUL INSURANCE

Extra disclosures: No such report

CONTENT Report of Shariah Advisory
Body

Several methods used

ACCOUNTING Cash basis is preferred (cash, accrual, deferred)

Funds belong to Funds belong to the

participants on collective
FUNDS basis and managed by the
operator for the legitimate
consideration
company , though
separation of assets is
maintained between
shareholders and policy
holders.
 ISSUES TAKAFUL INSURANCE

INVESTMENTS The funds were invested in The funds were invested

any interest-free shariah in any interest –based
justified scheme. scheme.

The entire procedure The investment can be in

complied the Shariah any scheme which may
guidelines. not be supported by
shariah.

ACCOUNTS Tabarru’ which means For general insurance,

donation and participants’ the paid-premium is
account credited into the account.

In life insurance policy,

similar treatment ;
credited into insurance
accounts or fund
OTHER DIFFERENCES
 ISSUES TAKAFUL INSURANCE

COMPANY Better known as a operator, Relationship between the

which acts as a trustee, company and the policy
manager, and also entrepreneur holder is on one to one basis

COMISSIONS The commission is paid out of The commission is paid out of

the shareholders’ fund collected premium

REGULATION Based on the Divine sanction Based on Human Thoughts

(Quran and Hadith) and Cultures

Source : Billah,M.Masum (2007)

Guidelines for Islamic Insurance

 Fatwa DSN
No. 21/DSN-MUI/IX/2001 tentang Pedoman Pelaksanaan
Operasional Asuransi Syariah
No. 51/DSN-MUI/III/2006 tentang akad mudharabah pada
asuransi dan Reasuransi Syariah
No. 52/DSN-MUI/III/2006 tentang akad wakalah bil ujrah pada
asuransi dan Reasuransi Syariah
No. 53/DSN-MUI/III/2006 tentang akad tabarru’ pada asuransi
dan Reasuransi Syariah.
 AAOIFI (Accounting and Auditing Organization for Islamic Financial
Institution)
Financial accounting standard No. 12 General Presentation and Disclosure in the
Financial Statements of Islamic Insurance Companies
Financial accounting standard No. 13 Disclosure of Bases for Determining and
Allocating Surplus or Deficit in Islamic Insurance Companies
Financial accounting standard No. 15 Provisions and Reserves in Islamic
Insurance Companies
Financial accounting standard No. 19 Contribution in Islamic Insurance
Companies.
 PSAK (Pernyataan Standar Akuntansi Keuangan) per 1 Juli 2009 No. 108 tentang
Akuntansi Transaksi Asuransi Syariah.
Financial Statements:

 Operator’s financial statements (Balance

Sheet, Income Statement, Statement of Cash
Flows, Statement of Shareholders’ Equity)
 Statement of Tabarru’ Fund
 Statement of Participants’ account (Balance
Sheet, Income Statement, Statement of Cash
Flows, Statement of Surplus or Deficit)
PT Syarikat Takaful Indonesia, PT Asuransi Syariah Mubarakah, PT MAA Life Assurance,
PT MAA General Assurance, PT Asuransi Great Eastern Life Indonesia, PT Asuransi Tri
Pakarta, PT AJB Bumiputera 1912, PT Asuransi Jiwa BRIngin Life Sejahtera, PT Asuransi
BRIngin Sejahtera Artamakmur, PT Asuransi Brinagriya Upakara, PT Asuransi Jasindo
Takaful, PT Asuransi Central Asia (ACA), PT Asuransi Umum BumiputeraMuda, PT
Asuransi Astra Buana, PT BNI Life Indonesia, PT Asuransi Adira Dinamika, PT Staco
Jasapratama, PT Asuransi Sinar Mas, PT Prudential Life Assurance, PT Asuransi Jiwa
Sinarmas,PT Tugu Pratama Indonesia, PT Asuransi Allianz Utama Indonesia< PT Asuransi
Ramayana Tbk, PT Asuransi Jiwa Mega Life, PT AJ Central Asia raya, PT Asuransi Umum
Mega, PT Asuransi Parolamas, PT Asuransi Jiwa Askrida, PT Asuransi Jiwasraya, PT
Equity Financial Solution, PT Asuransi kredit Indonesia, PT Asuransi Bintang, PT Asuransi
Bangun Askrida, PT Asuransi Tokio Marine Indonesia
Retakaful:

 Reinsurance (retakaful) is a form of

insurance whereby insurance operators
pay an agreed upon premium from the
takaful fund to the reinsurance company
and, in return, the reinsurance company
provides security for the risk insured.
Contractual Relationship Between
Takaful Company and Retakaful
 Collection of premium from takaful
operators, investment of funds,
maintenance and reimbursement of
reserves when they are not needed,
handling the risk and settlement of
claims of the takaful operators
Basic concept of Retakaful:

 Essentially about handling risk (takaful

operators) by sharing the risk with the
retakaful company.
 In principle, its operation is similar to that
of takaful.
 Therefore, all Shari’a principles applying to
takaful must apply to retakaful operations
 The Importance of Retakaful in Takaful
Business
Generally, to assist takaful operators
by:
 Protecting the solvency of the takaful operator and its
participants.
 Providing underwriting flexibility and the capacity to accept
risk.
 Stabilizing claims cost and therefore giving greater stability to
takaful contribution pricing
 Allowing takaful operator to effectively utilize the assets of the
retakaful provider to give coverage to its clients
Reinsurance in Indonesia

 PT Reasuransi International Indonesia

 PT Reasuransi Nasional Indonesia
 PT Reasuransi Maskapai Indonesia
 PT Reasuransi Tugu Indonesia