Takaful companies and products in Malaysia

Takaful companies and products in Malaysia picture for takafulOverviewInsuranceTakafulHistory and BackgroundCharacteristics of TakafulNeed of TakafulDifference between Takaful and Conventional InsuranceProducts of TakafulModels of TakafulRole of Takaful in Islamic Economic SystemIssues & ChallengesSuggested MeasuresConclusion

Islamic Insurance ConventionalINSURANCE

INSURANCEA contract in which an individual receives financial protection against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.

The Global Takaful IndustryFragmented landscapeUndercapitalisedLimited reTakaful capacityProblematic asset managementLocal solution offerings Local distribution channelsSupplyCompulsory protection Licensing and increased competitionBetter regulationGreater role for private sector participationIncreased market-led initiativesFacilitationEconomic growthIncrease in GDP per capitaYouthful demography Increasing awareness of TakafulGreater desire for Sharia compliant offeringsIncrease in asset based, Sharia compliant financingDemandThe Takaful industry is poised for significant growth as demand increases and industry enablers are further aligned ...What is Takaful?

Takaful (Islamic insurance) is a financial transaction of a mutual co-operation between two parties towards providing a financial security for one of them against an unexpected material risk.

Thakaful is

Social scheme Arabic word Legally binding agreement

Common goodContributionsLosses & liabilities Uncertainty removes Fair distribution of surplus

The Quran says Help ye one another in righteousness and piety, but help ye not one another in sin and rancour. (Surah Al-Maidah verse:2)

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The Prophet Muhammad (P.B.U.H) said:The believers, in their affection, mercy and sympathy to each other, are like the body, if one of its organs suffer and complains, the entire body responds with insomnia and fever (Muslim)

Reference Al Quran: Help (taawan) one another in furthering virtue (birr) and Allah consciousness (taqwa) and do not help one another in furthering evil and enmity. Al Maidah: verse 2 (5:2).

Takaful is a form of mutual help (taawun) in furthering good/virtue by helping others who are in need / in hardship .

Background &Historical Examples of TakafulTakaful has been practiced in various forms for over 1400 years.

Takaful originated within the ancient Arab tribes as a pooled liability that obliged those who committed offences against members of a different tribe to pay compensation to the victims or their heirs which is called Diyyah . This principle later extended to many walks of life, including sea trade, in which participants contributed to a fund to cover anyone in a group who suffered mishaps on sea voyages.

Dawania-Mutual indemnification amongst officers working in the same department during the rule of Umar Ibn Al Khattab (the 2nd Caliph)Takaful PioneersTakaful started some 30 years ago in the Middle East with the launching of two companies in 1979:The Islamic Arab Insurance Co. (IAIC) in the UAE andThe Islamic Insurance Co. of SudanBut it took some time for the movement to take shape.Later in 1984, Malaysia played a pioneering role in setting the first Legal framework specific to Takaful (Takaful Act Malaysia).This was instrumental in the successful launching of the Takaful movement in Malaysia and in other countries of South East Asia.

Other Islamic/ Takaful Legislations Other markets such as the Sudan and Iran have Islamic regulatory environments and became naturally Takaful markets.In Pakistan Takaful Act is enacted in 2005.In the Gulf countries specific Takaful legislations are coming through in Bahrain and in Saudi ArabiaTakaful Today From a handful of operators two decades ago the Takaful movement has blossomed into a fast growing phenomenon in many Muslim countries with very promising prospects in other countries with a large Muslim community. Why Conventional Insurance is unacceptable in Islam???Scholars view the insurance contract as an exchange contract money is being exchanged for money over time.Insurance is a buy and sell agreement.Elements of:Uncertainty Gharrar Gambling MaisirInterest RibaProfit distributionInvestment of fundsNature of capital

GHARAR-UncertanityGharar is forbidden in Islam because it is not showing the full knowledge , disclosure and transparency.Gharar describe RISK..

In insurance Gharar exist in three forms:Gharar in the outcomesGhaarr in the results of exchangeGharar in contract period

Maiser-Gambling Maisir resembled with Risk taking whereby insured get a huge amount without any equivalent input. Insurance include Maisir where insured makes a bet on the happening of loss and insurer also do it.

Riba-Interest: Allah has permitted trading and forbidden riba (Al Baqarah 2 : 275).Every profit must be based on liability and risk otherwise it is Riba according to Islam.Conventional insurance companies normally place the insurer fund in interest bearing instruments like loans and bonds.Investment Of FundsInsurance companies invest in such type of assets that are totally prohibited in Islam such as alcohol, gambeling, bonds etc. while the Takaful companies invest in interest free funds that are halal-o-haram.

Nature of Contract:In Takaful every policyholder has the right to know .???How their money is used? How the surrender value is calculated?& the Takaful policyholders must be careful that the funds are used for halal purposes.Insurance contract based on interest.

Profit DistributionIn Takaful every policy holder has the right to know about the distribution of profit among partners but in conventional insurance there is no hard and fast rule about that, its totally depend upon management of company

Type of personal Takaful Malaysia TAKAFUL myPA CARE.FIRE TAKAFUL.HOUSEOWNER'S & HOUSEHOLDER'S TAKAFUL.MOTOR TAKAFUL.PERSONAL ACCIDENT TAKAFUL.

Introducing the comprehensive Personal Accident Takaful plan that allows you to enjoy the magnificent feature of an additional 15% No Claim Rebate* from as low as RM0.16 per day.Enjoy Protection + 15% No Claim Rebate* or cash back.Comprehensive protection at an affordable contribution rate, with 24 hours worldwide coverage.New coverage benefits, e.g. Snatch Injury, Ambulance Fees, Repatriation Expenses & Purchase of Orthopaedic Equipment.Simple application process with no medical examination required.Wide Personal Accident coverage including Riot, Strike, Civil Commotion and Hijacking.Rebate is payable if no claim during the period of coverage and is dependent on the Companys performance.TAKAFUL myPA CARE

FIRE TAKAFULCovering the lost and damage due to fire, lightning or domestic gas explosion, one will never have to worry should the worst is to happen. Our Fire Takaful Plan will compensate your building, and household content to ensure a complete coverage for your assets.If that is not good enough for you, under this plan, we also offer additional coverage for losses caused by :riot, strike or malicious damage.explosion.impact damage.bursting or overflowing of water tanks or pipes.earthquake or volcanic eruption.flood.aircraft damage.windstorm.

Special plan to protect your home, belongings and assets from loss or damage. Scope of cover of this plan are :Fire, Lightning, Thunderbolt, Subterranean FireExplosionAircraft and other aerial device and/or articles dropped wherefromImpact with any of the buildings by any road vehicles, animals not belonging to or under the control of the participant or his family.Bursting or Overflowing of Domestic Water Tanks, Apparatus or PipesTheft by violent and forcible entry into building.Hurricane, cyclone, typhoon, windstormEarthquake, Volcanic Eruption FloodThird party liabilityLoss of rentalThis plan is eligible to all houseowners.

HOUSEOWNER'S & HOUSEHOLDER'S TAKAFUL

MOTOR TAKAFUL

For more extensive coverage, you might want to consider our COMPREHENSIVE type of cover. Not only you will get everything that we offer in the THIRD PARTY type of cover, you will also get indemnity for the loss or damage to your vehicle or its spare parts arising out of the following events:accidental collision or overturning.collision or overturning caused by mechanical breakdown.collision or overturning caused by wear and tear.impact damage caused by falling objects provided not resulted from convulsion of nature.fire explosion or lightning.burglary, housebreaking or theft.malicious act.while in transit.

Cont..

You can also apply for additional coverage which include :1.windscreen2.accessories3.additional authorized driver4.MPA (Motorist Personal Accident)A step to heighten the efficiency of service to our participants, the Tele Bantuan programed provides FREE TOWING SERVICE from the point of accident to the nearest Takaful Malaysia panel workshop, 24 hours daily, anywhere in MalaysiaPERSONAL ACCIDENT TAKAFUL

Accident is the worst nightmare for everyone. This plan may help you to prepare anything worst that could have happened in your life. This comprehensive personal accident plan :Covers individual for any incident happened upon death or permanent disability.Protect yourself from any tragedy 24 hours a day, domestically or internationally.Based on the Islamic profit sharing, Al-Mudharabah which is can be HALAL.Eligible for participants from age 18 to 60 years old.

TAKAFUL mySMEThe Takaful mySME plan offers your organization more than just comprehensive protection but peace of mind whilst you focus to grow your business. With Takaful mySME, you can now enjoy the best of savings while simultaneously, increase business productivity and gain better cash flow management.Protection + 15% No Claim Rebate Enjoy Protection + 15% No Claim Rebate or cash back (i.e. if no claims incurred during the coverage period and is dependent on the companys performance). Safeguard your business with the protection coverage that you truly need with the best rates in town. Experience a tailor made plan that addresses your business needs or sector and enjoy great savings to elevate your business to the next level, i.e. heightened productivity and improved cash flow. Main Sectors*Light Manufacturing*Retail*Food & Beverages*Office & ServicesCORPORATE/ORGANIZATION Ence the need to specifically define the items to be covered.

BURGLARY TAKAFULA plan that provides cover against loss of or damage to the subject matter due to theft whilst contained in the business or trade premises. This plan will also cover the damage to your premises due to forcible entry or exit accompanied the event of theft.However, you as the business owner should already have participated in our Fire Takaful Plan before applying for this plan.BUSINESS INTERRUPTION (LOSS OF PROFIT)TAKAFULThis plan is designed to complement our Fire Takaful's limitation. The plan provides indemnity in the event of loss of the following :Net profit.Standing charges i.e. expenses which continue to exist as usual level even though business had been interrupted due to the destruction or damage of premise, machinery or plant by fire e.g. Motor Vehicle expense, Depreciation etc.Increased cost of working e.g. overtime, rental of alternative premises or machinery etc.

EMPLOYER'S LIABILITY TAKAFULSimilar to the WORKMEN'S COMPENSATION TAKAFUL , liability may be attached to you as an employer should injury or disease caused by accident to your employee occurred during the course of employment.FIDELITY GUARANTEE TAKAFUL

In the normal course of business transaction, you as an employer invariably has to entrust money, securities, goods etc. to your employee or delegate monetary responsability to the employee. In the event that employee is dishonest, you would most certainly suffer financial loss. To protect this from happening, this is the plan for you. Minimum takaful contribution is RM100.

FOREIGN WORKER COMPENSATION TAKAFULThis plan is definitely for you if you are an employer with foreign workers working under your administration. Under the plan, foreign workers will be financially compensated in the events of accident resulting in death or bodily injury.In addition, the plan also provides coverage for Repatriation Expenses and Personal Accidents outside working hours.

GROUP PERSONAL ACCIDENT TAKAFULDerived from our PERSONAL ACCIDENT , we have come out with a product, GROUP PERSONAL ACCIDENT TAKAFUL , to cater for the different needs and demands of the market. This plan compensates a group of individuals including yourself should you suffer bodily injury caused by violent, accidental, external and visible means. If the injury results in death or disablement then we will compensate according to the Table of Benefits as outlined in the certificate, This plan is suitable for business or social organization and even for college students.

MONEY TAKAFULSuitable for business owner running high cash transaction, this plan covers against loss of money whilst in transit and also money kept in premises. In the event of the money is lost, destroyed or damaged as a result of theft, Takaful Malaysia will indemnify you in respect of such loss, destruction or damage.PROFFESSIONAL INDEMNITY TAKAFULA plan designed to suit lawyers, architects, engineers, surveyors in accountants etc. for coverage against liability caused by professional malpractice.

PUBLIC LIABILITY TAKAFULThis plan is designed to protect you as the owner of your business against your legal liability to pay compensation for accidental bodily injury to or accidental damage to the property of the public caused by or through your negligence or the negligence of your employees. The liability mentioned also includes legal charges and expenses.

OTHER TYPES OF TAKAFULSCHOOL CHILDREN PERSONAL ACCIDENT TAKAFULWORKMEN'S COMPENSATION TAKAFULBOILERS & PRESSURE VESSEL TAKAFULCONTRACTOR'S ALL RISKS TAKAFULELECTRONIC EQUIPMENT TAKAFULERECTION ALL RISKS TAKAFULLOSS OF PROFITS (MACHINERY) TAKAFULMACHINERY BREAKDOWN TAKAFULMARINE CARGO TAKAFULPLATE GLASS TAKAFULSTORAGE TANKS TAKAFULFIRE AND ALLIED PERILS TAKAFUL

MEDICAL MALPRACTICE TAKAFULMARINE HULL TAKAFULENERGY TAKAFULMOTOR TAKAFULDETERIORATION OF STOCK TAKAFULCIVIL ENGINEERING COMPLETED RISK TAKAFULDIRECTORS AND OFFICERS LIABILITY TAKAFULFOREIGN WORKERS TAKAFUL GUARANTEEHere we need to add another example for another company working under takaful system ex. Etiqa .*note you can used the power point that I send it I left some empty slides to use I expect that you can find products for one company and example and the elaborate Go to slide 20 and next

TAKAFUL MODELSThere are three main different Takaful Models use today. Takaful Models Mudharabah Wakalah Wakala -waqf model

Mudaraba Model The surplus is shared between the participants with a takaful operator. The sharing of such profit (surplus) may be in a ratio 5:5 , 6:4 etc. as mutually agreed between the contracting parties. Generally, these risk sharing arrangements allow the takaful operator to share in the underwriting results from operations as well as the favourable performance returns on invested premiums.

Wakala Model Cooperative risk sharing occurs among participants where a takaful operator earns a fee for services (as a Wakeel or Agent) and does not participate or share in any underwriting results as these belong to participants as surplus or deficit. Under the Al- Wakala model, the operator may also charge a fund management fee and performance incentive fee.

Wakala -Waqf ModelIt is a WAKALAH model with a separate legal entity of WAQF in-between.The relationship of the participants and the operator is directly with the WAQF fund. The operator is the Wakeel of the fund and the participants pay contribution to the WAQF fund by way of TabarruThe contributions received would also be a part of this fund and the combined amount will be used for investment and the profits earned would again be deposited into the same fund which also eliminates the issue of Gharar. Losses to the participant are paid by the company from the same fund. Operational expenses that are incurred for providing Takaful services are also met from the same fund.

Issues & challenges faced by Takaful

1. Development Of Human ResourceTakaful is obstacle by less human resources.

Lack of talented, skilled and experienced people.

It is good to teach people Takaful concept.

2. Lack of AwarenessIslamic financial institutions are not putting too much effort in developing Takaful. It is crucial for marketers to enhance the industry and the innovation of new products. Financial markets must understand the needs and wants of customer .Many consumers are still stick to conventional insurance.It is important to address educational issues and to develop consumer awareness.

3. Regulatory Framework Often, scholars are not agree each other to establish a framework for Takaful.

The issue of different regions i.e Malaysia and Middle East countries.

Model of Takaful is being practiced by specific region.

4. Cooperate Governance Quite self interest between Shariah Supervisory Board and the board of directors of the Takaful.There is no clear mission and responsibility of Shariah board.At present, there are no manual and standard terms of reference.

5. Shortage of Shariah-compliant assetsThe lack of appropriate investment vehicles, especially with the long term duration.

The limited range of shariah compliant asset could be the result of asset risk.

6. Distribution channel Micro insuranceLife

7. Lack of standardization Kind of model of Takaful Every nation has its own model of Takaful. Terms of standardization is mainly based on different regions.The lack of standardization will harm the development of Takaful.

ConclusionDespite the challenges facing this new industry, exciting times are ahead once the latent potential is unleashed.The success of Takaful largely depends on that of Islamic Financial institutions on a global basis.

Instead of being TAKAFOOL, we need to put our efforts to make it TAKAFULL, in which is full of attractions and justice to people.

Group MembersMohammad AL-shuaibi 815350Ibrahim Siam 816839Tia Latha ---------Valarmathi Subramaniam --------

UNIVERSITI UTARA MALAYSIA