communicating takaful
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Communicating Takaful
Loke Chang Yueh, FIA, FASM Nicholas Yeo Chee Lek, FIA, FASM
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Session Number: MBR9
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Communicating Takaful
AGENDA 1. BACKGROUND
2. TAKAFUL AND INSURANCE
3. TAKAFUL AND DONATION
4. TAKAFUL AND ISLAM
5. TAKAFUL TO PROVIDE GOODS
AND SERVICES
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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Communicating Takaful
BACKGROUND
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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GENERAL PUBLIC
Communicating Takaful
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
RISK MANAGEMENT
SOLUTION
RELIGION
HIGH PROPENSITY TO CONSUME
TAKAFUL
LOW PROPENSITY TO CONSUME
NON ADHERENTS
ADHERENTS
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Communicating Takaful
TAKAFUL AND INSURANCE
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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Communicating Takaful Insurance and Risk Transfer
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
FACED WITH RISK WILLING TO ACCEPT
RISK FOR PROFIT
INSURED INSURER
CLAIMS
PREMIUMS
BUY & SELL
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Communicating Takaful Takaful and Risk Sharing
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
COME TOGETHER TO SHARE RISK
FACED WITH RISK FACED WITH RISK FACED WITH RISK
PARTICIPANT
PARTICIPANT
PARTICIPANT
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Communicating Takaful Insurance and Risk Transfer
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
HUNGRY SERVES FOOD FOR A PROFIT
SATIATED RESTAURANT
PAY
FOOD
BUY & SELL
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COME TOGETHER TO SHARE FOOD
Communicating Takaful Takaful and Risk Sharing
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
SATIATED
SATIATED
SATIATED
HUNGRY HUNGRY HUNGRY
10 Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
INDIFFERENT DIFFERENT
HAVING A MEAL IN A RESTAURANT OR IN A POTLUCK
GATHERING
ACQUIRING AN ASSET VIA HIRE PURCHASE OR LOAN
USING INSURANCE OR TAKAFUL TO MANAGE RISK
MANAGING A RESTAURANT AND ORGANISING A POTLUCK
GATHERING ARE VERY DIFFERENT TASKS
FINANCIAL ACCOUNTING IMPLICATONS BETWEEN HIRE PURCHASE AND LOANS E.G.
BALANCE SHEET, TAX
ROLE OF AN ACTUARY IN INSURANCE AND IN TAKAFUL
Communicating Takaful Form VS Substance
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Communicating Takaful Insurance and Risk Transfer
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
PAYS PREMIUM OF 1
IF CLAIM HAPPENS
RECEIVES 100
IF NO CLAIM HAPPENS,
RECEIVES 0
1000 INSUREDS
TOTAL PREMIUMS 1000
INSURER INSURED
DEFINITE FINANCIAL OUTCOME
IF 5 CLAIM EVENTS,
PAY 500, SURPLUS 500
IF 20 CLAIM EVENTS,
PAYS 2000, DEFICIT 1000
12 Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
CONTRIBUTES 1
IF CLAIM HAPPENS
RECEIVES 100
IF NO CLAIM HAPPENS,
RECEIVES 0
IF SURPLUS, RECEIVES REFUND
IF DEFICIT, CONTRIBUTES MORE
1000 PARTICIPANTS
TOTAL CONTRIBUTION 1000
PARTICIPANT
COME TOGETHER TO SHARE RISK
PARTICIPANT
PARTICIPANT
PARTICIPANT
Communicating Takaful Takaful and Risk Sharing
VARIABLE FINANCIAL OUTCOME
IF 5 CLAIM EVENTS,
PAY 500, SURPLUS 500
IF 20 CLAIM EVENTS,
PAY 2000, DEFICIT 1000
13 Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
BUT:
• ARE CONSUMERS ALWAYS SEEKING TO HELP EACH OTHER?
• DO CONSUMERS FACE FINANCIAL CONSTRAINTS?
• DO CONSUMERS UNDERSTAND HOW TAKAFUL RELATES TO HELPING EACH OTHER?
Communicating Takaful Which is The Better Product?
NOT POSSIBLE TO DISTINGUISH AT OUTSET WHETHER TAKAFUL OR INSURANCE RESULTS IN HIGHER EVENTUAL FINANCIAL VALUE.
TAKAFUL AND INSURANCE ARE NOT DIRECT, PERFECT SUBSTITUTES.
IT CAN BE ARGUED THAT, CETERIS PARIBUS, TAKAFUL IS BETTER DUE TO UNDERLYING ELEMENTS OF MUTUAL HELP WHICH IS BENEVOLENT IN NATURE.
THE SUITABILITY OF A FINANCIAL PRODUCT ULTIMATELY DEPENDS ON SPECIFIC FINANCIAL CIRCUMSTANCES.
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Communicating Takaful Administration
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
PARTICIPANT
PARTICIPANT
PARTICIPANT
TAKAFUL COMPANY
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-500
-250
0
250
500
750
1 2 3 4 5
YEAR
SUR
PLU
SCommunicating Takaful
Financial Backing
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
-500
0
500
1000
1500
2000
2500
1 2 3 4 5
YEAR
SUR
PLU
S
ACTUARIAL TECHNIQUES
EXTERNAL SUPPORT
TAKAFUL COMPANY
STRONGER TAKAFUL POOL
PARTICIPANT
PARTICIPANT
PARTICIPANT
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Communicating Takaful Transparency and Fairness
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
INSURED
I AM A BENEFICIARY
PARTICIPANT
I AM A BENEFICIARY
OBJECTIVE OF TAKAFUL IS TO BENEFIT TOGETHER, NOT BENEFIT AT THE EXPENSE OF OTHERS
I AM A BENEFACTOR
CAN INSURER PAY MY
CLAIMS?
IS TAKAFUL POOL WELL MANAGED?
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COMPLETE PRODUCT
Communicating Takaful Takaful and Investments
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
RISK MANAGEMENT
PARTICIPANT
TAKAFUL WEALTH ACCUMULATION
INVESTMENTS
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MUTUAL FUNDS DO NOT PROVIDE INVESTMENT GUARANTEES.
Communicating Takaful Takaful and Investments
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
0 t Protection over a period of time
Period
X X * (1 + i)t Investment return over a period of time
CURRENT TAKAFUL OFFERINGS DO NOT OFFER INVESTMENT GUARANTEES
IS THIS A WEAKNESS?
SHOULD TAKAFUL SUPPLY INVESTMENT GUARANTEES?
CURRENT LIFE INSURANCE OFFERINGS RANGE FROM WITHOUT PROFITS (FULL INVESTMENT GUARANTEE),
WITH PROFITS (PARTIAL INVESTMENT GUARANTEE) TO UNIT LINKED (NO INVESTMENT GUARANTEE).
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Communicating Takaful
TAKAFUL AND DONATION
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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Communicating Takaful Takaful and Donation
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
TAKAFUL CHARITABLE DONATION
COME TOGETHER TO HELP EACH OTHER WHEN FACED
WITH RISK
QUID PRO QUO
PARTICIPATE IN MORTGAGE REDUCING TERM TAKAFUL
ONE PARTY GIVES TO ANOTHER PARTY IN NEED
UNCONDITIONAL
DONATION TO HOMELESS TO PROVIDE SHELTER
TAKAFUL IS DIFFERENT FROM CHARITABLE DONATION
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Communicating Takaful
TAKAFUL AND ISLAM
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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Communicating Takaful Takaful and Islam
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
EDUCATION
RELIGION DISMISS
APPRECIATE
MADRASAH
GENERAL PUBLIC
23 Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
BUT TAKAFUL PARTICIPANTS ARE ONLY BOUND BY FINANCIAL OBLIGATIONS AND NOT RELIGIOUS OBLIGATIONS.
Communicating Takaful Takaful and Islam
MALAYSIAN GOVERNMENT SET UP A TASK FORCE TO STUDY THE FEASIBILITY OF TAKAFUL IN 1981. SYARIKAT TAKAFUL MALAYSIA ESTABLISHED IN 1984, FOLLOWING THE INTRODUCTION OF TAKAFUL ACT.
ISLAMIC FIQH ACADEMY WITHIN OIC IN 1985 CONCLUDED THAT RISK TRANSFER IS NOT IN LINE IN ISLAMIC BUSINESS PRINCIPLES AND PRACTICES.
ELEMENTS OF TAKAFUL NOTICEABLE OUTSIDE THE ISLAMIC WORLD:
• FARMERS INSURANCE GROUP IN UNITED STATES WHERE MANAGEMENT COMPANY DOES NOT PARTICIPATE IN UNDERWRITING RISK
• NEIGHBOURHOOD WATCH IN UK OR RUKUN TETANGGA IN MALAYSIA WHERE A GROUP OF PEOPLE COME TOGETHER TO HELP EACH OTHER WHEN FACED WITH PERSONAL SECURITY RISK
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Communicating Takaful Takaful and Islam
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
TAKAFUL TZU CHI FOUNDATION
ISLAMIC ORIGIN
HELPING EACH OTHER WHEN FACED WITH RISK
REGARDLESS OF PERSONAL RELIGIOUS BELIEFS
BUDDHIST ORIGIN
HELPING PEOPLE IN NEED
REGARDLESS OF PERSONAL RELIGIOUS BELIEFS
CONCEPT ENCOURAGED IN ISLAM
CONCEPT ENCOURAGED IN BUDDHISM
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Communicating Takaful
TAKAFUL TO PROVIDE GOODS AND SERVICES
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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Communicating Takaful Takaful to Provide Goods and Services
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
FACED WITH RISK FACED WITH RISK FACED WITH RISK
PARTICIPANT
PARTICIPANT
PARTICIPANT
TAKAFUL COMPANY
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Communicating Takaful Conclusion
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Takaful is a effective risk management and not all about religion
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