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TAKAFUL

The Islamic alternativeof Insurance ?

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Contents Conventional Insurance

Takaful Takaful Vs. Conventional Insurance

Types Of Takaful

Takaful How it works? Family Takaful

General Takaful

Modes of Takaful

Socio Economic benefits

Challenges in Takaful

Conclusion

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Conventional InsuranceInsurance:

Insurance is the transfer of risk byan individual,

such as yourself, or an organization,such as your

business, to the insurance company.

The insurance company receivespayment in the

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Model:

Success Guaranteed ? WhoseSuccess ? Predictability -likely to happen

Casuality -accident rather than

intention Un-connectedness -occur

randomly

Verifiable -how accident occurred?

Probability of mishap less than 4

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Example

Car insurance @ about 5% of car

value Approximate car cost Rps 10 lakhs

1 million cars insured

Revenue collected = Rps 50 billion

1,000,000 x 1,000,000 x .05 =

50,000,000,000 Not more than 1% chance of 100%

accident or car theft. Expense not

more than Rps 10 billion 5

Highlyprofitablescam!

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Conventional Insurance:Example

Expert Gambling . . . & uncertainty (gharar)?

Pay 50,000 (premium) & you maysave/gain 10 lakhs

If you are unfortunate!

Will you be unfortunate ?

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Free Insurance does itexist ?

A poor taxi driver crashes his taxi, & isseriously injured!

Edhi Trust pays for repairing the taxi, &the hospital expenses

The concept of zakah & sadaqah!

This is 100% allowed (HALAL) & 7

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Why conventional insurance isunacceptable?

The Council of Islamic FiqhScholars (1975) ruled that

traditional insurance is haram dueto the presence of three mainelements.

- Gharar (uncertainty)

- Maisir (gambling)

-

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Takaful:

It is an Arabic word which means

Guaranteeing each other

It is a system of Islamic Insurance basedon the principle of TAAWUN (mutualassistance) and TABARRU (Gift, Giveaway, donation) where the risk is sharedcollectively by the group VOLUNTARILY.

You undertake a contract (aqad) to

become one of the participants by

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Takaful Vs. ConventionalInsurance

Issue

ConventionalInsurance

Takaful

Org. Principle Profit for shareholders Mutual for participant

s?Basis Risk Transfer Co-operative risk sharing

Laws Secular/Regulations Shariah & Prudential regulati

ons

Ownership Shareholders Participants ?

Mgmt status Company Management Operator

Form of ContractContract of Sale Cooperative, Wakala or Mudarbahwith Tabarru (contributions)

Investments Interest based Sharia compliant, Riba free

Surplus Shareholders account Participants acco

unt

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The Takaful Model

The Islamic Takaful model is basically acommercial product, based onconventional insurance standards,

which has been modified in light ofIslamic teaching.

A profitable way to help the unfortunate ?

An profitable business in the guise ofIslam ?

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Types of Takaful

Physical Assets All risks associated with human life are &Properties covered like covered like

- house - death

- marine - disability and illness

- motor - including shortterm & Long termneeds

Takaful

General Takaful Family Takaful

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Takaful How it works?

Who benefits

the most ?

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How does Family Takaful function?

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Family Takaful:

Protection

InvestmentGrowth

Against financial loss from:

-Death

-Disability

-Medical Illness

In order to fulfill short-term & long-term needssuch as:

-Childrens education and marriage

-Purchasing a new house

-Affording Hajj/Umrah Expenses

-Retirement

Income etc

Participant Takaful

Fund (PTF)

Participant Investment

Fund (PIA)

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How does General Takaful Function?

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Wakalah Model:

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WAQF MODEL:

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Socio Economic benefits of Takaful:

Insurance Coverage/Protection Benefits

Mobilisation of Savings

Islamically approved (Halal) InvestmentOpportunity ?

Participate in the economy in a collective

way (Jamaah)

Opportunity to perform good deeds and todo charitable works

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Main problematic Issue inTakaful

Based on Tabarruaat Sadaquat(donations)

Seeking sadaquaat to distribute toshareholders?

Not based on Tabarruaat, then arent

shareholders profiteering ?

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Challenges in Takaful-Takafulcompany perspective

Lack of Education and Awareness aboutInsurance

Unavailability of Trained HR

Poor Market and Customer Segmentation

Lack of customer focused services standards

Is it really Islamic ?

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Analysis of Takaful Asimplemented

Following the conventional insurancecompanies, restructure in Islamic guise

Primary objective Profiteering !

All other benefits are basically bi-products

Basic argument of tying camel repeatedgiven

Did the prophet (s) & sahaba (r) tie the

camel ?24

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Basics of Islam

Answers all issues of life

Complete & comprehensive

Takaful is a twisted, recentlymanufacture solution in light of thelucrative billion dollar insuranceindustry

What is the natural Islamic solution toinsure ?

How do you get rid of randomly

occurrin misha s ?25

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The Islamic alternative toTakaful

The responsibility to help theunfortunate is of the government

The government entity dealing withthese issues was Bait-ul-Maal

Zakat, Sadaqat, tabaruat, & taxes

were used to help the unfortunate The best option is still Bait-ul-Maal,

but it does not exist because thereisnt an Islamic overnment! 26

I l i Alt ti f T k f l

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Islamic Alternative of Takaful Remove commercialism from Takaful

Create a Waqf fund, from zakat & sadaqatfor the unfortunate

Salaries of the Takaful Waqf Fund should be

minimized; so should the expenses If an excess fund exists, it may be invested

in a low risk halal opportunity

Beneficiaries of the waqf fund are all thosewho have a genuine need;

The genuine need of the unfortunate can be

launched in a short fund raising campaign27

I l i Alt ti f T k f l

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Islamic Alternative of TakafulTakaful companies will object to:

Concept of policy holder eliminated All unfortunate people benefit

Wakalah perks eliminated

No longer profit oriented, but benefitoriented

If insurances companies want to profiteer,they are requeste not to use the name &guise of Islam

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Conclusion:

Takaful is a rapidly growing industry in theMuslim world

Is it really Islamic ?

Real motive is highly questionable ? By adopting Takaful, are we ignoring the

naturally established principle of Zakat andSadaquaat ?

Rejecting/avoiding Farid/Nawafil has a price

Following the Jews & Christian into the lizardhole

Flood & droughts forecasted !