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1. Introduction
Insurance is a risk transfer mechanism whereby the individual and businesses can transfer
some of uncertainties of life on the shoulders of others. All the people desire to live clean,
healthier, easy and comfortable life. For this purpose many enterprises offer different
services. They make innovations which causes great risk. This kind of risk highlights the
importance of insurance. Insurance provide protection to industry, trade which in turn
contribute in human progress. The purpose of our project is to take into account the
importance if insurance and make comparison between conventional and Islamic
insurance. For this purpose we take united insurance (conventional) and Pak Qatar
Takaful (Islamic) insurance companies. Apparently there is no major difference between
the operations of these two, both offer almost same product and services but by
comparing their financial statements we come to know that there is a huge difference in
their mechanisms. As Takaful operate according to the ahkam (orders) of Quran and
Sunnah whereas Conventional insurance operate according to the manmade principles.
Besides this major difference there are many contradictory points among them. For
pointing out these differences we make comparison between United insurance and
Pakqatar Takaful company. After comparison it is proved that conventional insurance
promote only worldly benefit whereas Takaful along insurance promote the feelings of
brotherhood and mutual burden sharing.
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2. IMPORTANCE OF INSURANCE
Insurance plays an important role in sharing the risks of people in an affordable form. It
helps the people to quickly recover from damages and losses. It is a legal contract that
protects a person from contingent risk of losses through financial means and provides a
means for individuals and societies to handle some of the risks faced in daily life.
3.TAKAFUL
Takaful comes from the Arabic rootword kafalaguarantee.
Takaful is not only a tool to mitigate loss or to make halal profits. It is an ideology which
promotes
1.Solidarity and joint guarantee
2.Self reliance and self sustainability for community well being
3.Assistance to those that need it
4.Community pooling system
4. Principles of Islamic Insurance
1.Policyholders cooperate among themselves for their common good.
2. Every policyholder pays his subscription to help those who need assistance.
3. Losses are divided and liabilities spread according to the community pooling system.
4. Uncertainty is eliminated concerning subscription and compensation.
5. It does not derive advantage at the cost of others.
5. FIRST TAKAFUL COMPANY IN PAKISTAN
Pak Kuwait Takaful Company Limited is the first Islamic insurance company in Pakistan
making it the most experienced and financially strong Takaful operator. It was
established in 1979.
5.1.OBJECTIVE OF TAKAFUL COMPANY
The principle foundation of insurance as an economic institution in Islam is the equitable
distribution of the financial losses of a few over many. In insurance, each policyholder
contributes an amount commensurate with the risk he introduces to a fund; established
and administered by the insurer and out of the fund the losses are paid to the insured
members. The main function of an insurance organization then becomes the management
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of the fund and the assessment of the equitable contributions to be made by the
policyholders. Technically speaking, insurance is a socio-economic device, which implies
sharing of losses sustained by some members of a group by all the members of that
group. It provides economic security against loss of life or property or pecuniary interest.
Insurance also provides insurance to the persons for legal liability. Therefore, insurance
as a system is acceptable to Islamic Society as it resembles the concept of Bait-ul-Maal.
5.2.OPERATIONS OF TAKAFUL COMPANY
An Islamic insurance company transacts business on a co-operative basis in accordance
with and subject to the principle of Islamic Shariah. All the functions of conventional
insurance companies, i.e. underwriting, claims, reinsurance, marketing, investment,
company management, etc. of Islamic Insurance Company should fully conform toIslamic Shariah Code. Islamic insurance companies have developed extensive facilities to
transact all classes of general insurance such as life, marine, fire, motor, accident,
aviation, engineering, etc.Takaful is based on some basic principles. A participant
(policyholder) of a general Takaful (insurance) scheme shall enter into contract with the
company on the basis of the principle of Mudaraba as per partnership clause of the
policy. This clause stipulates the rights and obligations of the participants as well as the
company. The Company, acting as an entrepreneur collects the Takaful contributions
(insurance premium) from the participants and manages the various classes of general
Takaful fund. The amount of the premium to be paid by the policyholder of an Islamic
insurance company depends upon the class of Takaful and the rate fixed on the basis of
sound principles of rate making. The participants shall pay the premium to an Islamic
insurance company as Tabarru. These Takaful contributions are credited into the
General Takaful Fund of the company. The company in accordance with the
requirements of the Shariah will invest the funds. All the profits from the investment
shall be pooled back to the fund. The company shall pay from the General Takaful Fund
compensation or indemnity to fellow participants, who have suffered a defined loss
caused by one or more than one of the insured perils during the policy period. From this
fund, operational costs of General Takaful Business, required reinsurance premiums are
to be borne. Further, a reserve for unusual losses is to be built up from this fund. The
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surplus (profit) if any after meeting all these expenses and required reserve, will be
shared between the participants and the company. However, the participants who had
suffered losses should not have any share of profit as they have been already
compensated out of this fund. This sharing of the surplus will be in a ratio agreed to in
accordance with the principle of Mudaraba.
5.3.TYPES OF TAKAFUL BUSINESS
There are two types of takaful business that are mainly offered by takaful operators
worldwide, namely general takaful business (short-term maturity) and family takaful
business (long-term maturity). Takaful operators have the flexibility to operate both
takaful businesses with different models, but both classes of takaful business are required
to be kept segregated. There are two types of models that are commonly used by takaful
operators, namely the Almudarabah model (profit sharing) and Al-wakalah (agent) mode.
1.Al-Mudarabah Model.
A takaful operator that uses the al-mudarabah model in their business has a variation in
terms of management fees, product design, and distribution channels. In the al-
mudarabah contract, the takaful operator acts as the mudharib (manager) and participants
act as the rabbul mal (capital provider) The profit from this transaction will be shared
according to the agreed ratio between the takaful operator and participants. However,
losses will be borne by Participants as the capital provider. Nevertheless, to protect theparticipant, the takaful operator needs to follow strict requirements and not to invest in
risky investments.
2.Al-Wakalah Model.
The al-Wakalah model is different from the al-mudarabah model because in the wakalah
model, the relationship between the takaful operator and participant is basically as agent
and capital provider. The takaful operator acts as the participants agent and will be paid
fees for the services provided. The fees are charged as a fixed amount or percentage, or
based on the agreed ratio from the investment profits.
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6. CONVENTIONAL INSURANCE
Conventional insurance can be defined as an agreement whereby an insurer undertakes
(in return for the agreed premium) to pay a policyholder an amount of money (or its
equivalent) on the occurrence of a specified event.
7. FIRST CONVENTIONAL INSURANCE COMPANY IN
PAKISTAN
The First Micro insurance Agency (FMIA) was inaugurated as Pakistans first dedicated
micro-insurance agency. FMIA provide innovative life and health micro insurance
products that are carefully tailored to the needs of poor families. FMIA is also the first
insurance agency in Pakistan to be established as a company rather than as an individual
enterprise.
7.1.Conventional Insurance Principles
Main principles of Insurance:
1.Utmost good faith
The insurance contract is founded on the basis of utmost good faith on the part of both
the parties. It is obligatory on the part of the proposer (one who wants to get an insurance
policy) to disclose all material facts about the subject to be insured. If some material facts
come to light later on then the contract can be avoided at the discretion of the insurer.
2. Indemnity
Indemnity means a promise to compensate in case of a loss. The insurer promise to help
the insured in restoring the position before loss. Whenever there is a loss of property, the
loss is compensated. The compensation payable and the loss suffered should be
measurable in term of money.The insured will be compensated only upto the amount of
loss suffered by him. He will not earn profit from the contractor. The maximum amount
of compensation will be upto the value of the policy.
3. Contribution
Sometimes a property is insured with more than one company. The insured cannot claim
more than total loss from all the companies put together. He cannot claim the same loss
from different companies. In this case he will be benefited by the insurance which runs
counter to the principle of indemnity. A person cannot be restored to a better position
than before the loss occurred. The total loss suffered by the insured will be contributed by
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different companies in the ratio of the value of policies issued by them. So companies
make a contribution to restore the previous position of the insured.
7.2. OBJECTIVE OF CONVENTIONAL INSURANCE:-
The main objective of the commercial Insurance Company is that they provide liability of
difficulties that are faced in business as well as in life. It provides enough needs
according to the customers expectation. The policy varies depending upon the income of
the person and the business. Aim of Insurance companies is to help by spreading the risk
of loss among a large number of their clients.
7.3. OPERATIONS OF CONVENTIONAL INSURANCE:-
The Insurance companies charge a regular amount from the customers, which is paid
back, either in part, or entirety, to the customers in case of a definite loss. This regular
amount charged from customers is called Insurance Premium. Conventional insurance
operates as a commercial business with individuals purchasing policies to insure against
risk. Premiums paid will vary between individuals dependent on the companys
assessment of their risk.A large amount of interest is paid on the preium amount to the
customer on the occurance of an event.
8. WHY IS CONVENTIONAL INSURANCE NOT PERMISSIBLE IN
ISLAM?
Conventional insurance contains elements contradictory to Islamic Shariah.
1. Gharar: Uncertainty
The insurance contract contains uncertainty due to
1.Uncertainty whether the payment will be accepted as promised
2.The amount to be paid is not known
3. The time it will occur is not known
2. Maisir: Gambling
The participant contributes a small amount of premium in hope to gain a large sum .The
participant loses the money paid for the premium when the insured event does not occur
The company will be in deficit if claims are higher than contributions
3. Riba: Interests
An element of interest exists in conventional life insurance products - as the insured, is
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entitled to get much more than he has paid .Insurance funds invested in financial
instruments such as bonds and stocks contain and element of Riba.
9.DIFFERENCE BETWEEN CONVENTIONAL INSURANCE ANDTAKAFUL1.Profit Maximization vs. Benefit Maximization
A conventional Company aims at making maximum profit for its shareholders. To attain
this objective, it often exposes its funds in risky investments to secure high returns. This
however, contains the elements of gambling (Masir) which is against the teaching of
Holy Quran..On the other hand, profit earning should not be the main goal of an Islamic
Insurance Company, rather, helping fellow participants through bad times, sharing the
misfortune while sharing the profits, if any, is the objective. The management of Takaful
funds, therefore, are to excise prudence when making investment decisions and must not
subject such funds to potentially high return / high risk situations.
2.In transparency vs. Transparency
In conventional Insurance Companies, the Policy holders have no legal rights to know
that how the insurance companies are making money or how they earn profit /
surplus.Whereas under the Islamic Insurance System, each and every policy holders
(participants) has the right to know how their money is utilized by the companys
management and how profits from various investments are earned and dividend.
3.Client Company Relationship vs Participatory Management
In conventional Insurance Companies, the relationship between the company and its
policy holders is nothing more than a client company relationship. Conventional
Insurance Policy holders have no legal right to be involved in the day to day activities
and investment policies of the company.On the other hand, Takaful Policyholders
(Participants) have the opportunity to participate in the management of the company and
thus help management the affairs of the company according to co-operative principles.4.Profit Sharing vs. No-Profit Sharing
In conventional Insurance, there is no provision to share the profit/ surplus with the
policy holders while in General Takaful company,if no claims are made and there is
surplus / profits after deducting all the operational cost of the fund, that surplus shall be
shared between the participants (insured) and the operator(insurer). The sharing of the
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surplus is made in ratio agreed to, in accordance with the principles of Al-Mudarabah.
5.Shariah Council vs. No-Shariah Council
There is no binding to comply with the shariah principles in conventional insurance. On
the other hand, in Islamic Insurance Company, there is a Shariah Supervisory Council /
Committee with the rules of Shariah.
6.Zakat / Sadaqa Fund vs. No Charitable Fund
In Islamic Insurance, for the welfare of the people, a sadaqa or zakat fund is to be created.
But there is no such provision in Conventional Insurance Company.
7.Investment
All proceeds must be invested only in Sharia compliant businesses in Takaful,
purification is necessary for minority investment allowed in limited non-compliant
businesses whereas no such kind of restrictions exist in conventional system.
8. Functional technique used(Mudarbah vs Riba based Transactions)
Any means of earning money that is allowed by local regulations can be used in
conventional insurance. Interest (riba) based financing technique is not restricted.But in
TakafulAl-mudaraba (profits and loss sharing) is the most acceptable model used.
Wakala (agency) model and the non-profit model are the other available techniques used.
9.Initial capital (Shareholders vs Rabb ul Mal)
Initial capital is supplied by shareholders in conventional system whereas in Islamic
insurance initial capital supplied by Rabb ul Mal (Agent) or paid in via premiums from
participants.
10.Definite vs Indefinite time period
All Takafulpolicies have a fixed and definite term or period of maturity, e.g. 10, 15, 20
years etc. The reason is to avoid uncertainty (Garar) in the contract period.But in
conventional system It is different since the term of the policy can be various. Some may
have a definite time period such as temporary and endowment assurance policies, while
others may have an indefinite period.
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10. ADVANTAGE OF TAKAFUL OVER CONVENTIONAL
INSURANCE
1. Full return if unwilling to continue premium
Islamic insurance contract binds the insurer to return the premium if the insured is notwilling or not in a position to continue paying the premium. The conventional insurance
contract binds the insured to pay certain number of premiums otherwise the paid
premiums are forfeited. The poor insured suffers double loss i.e. one due to the
circumstances, which make him unable to pay further, and secondly, the insurer takes
away his hard earned premiums which he has paid so far.
2.Investment without interest
Islamic insurance is free from interest. It is based on the profit sharing financing
technique called Al Mudarabah. The insurer invests the cumulated money on profit and
loss basis, and yields the profits whereas in the conventional insurance the insurer lends
money to the private sector as well as to the state in the form of security, loan, mortgage,
finance, etc. and collects a fixed interest. This interest added return is not legitimate to a
Muslim living in a Muslim state.
3.Insured gets profit not the bonus
Islamic insurance contract binds the insurer to share the profit. Since the insurer invests
the cumulated amount of premiums, so the yield deserves to be called profit whereas in
the conventional insurance contract, it is not called profit but bonus. This is very small
share of the actual profit (not more than 10% of the total profit).
4.Premium returned in General insurance
In general insurance of Takaful, in case nothing unexpected happens, the insured gets
back the premium in full or part of it with the addition of the profit. In the modern
insurance, once the policy matures, the insured gets nothing unless something unexpected
happens before the date of maturity.
5.Advertising costs
Due to the enormous competition, the insurers have to use every possible source of
advertisement through screen media and paper media. The cost of the advertisement,
which is in crores, is deducted from profits. Consequently, on one hand it increases the
premium rate and on the other hand the insured loses his margin of profit. In Takaful,
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insurer is obliged to bear the cost of advertisement. Except the administrative costs,
insurer is not authorised to spend as the profit is treated as Amana. The advertisements
are for the purpose of introducing the policies, attracting new customers and generating
more business. These steps are purely for development and expansion. Therefore, the
investors should involve their money instead of involving depositors profit.
6. Zakat
In Islamic based insurance, the company pays the Zakat of the insureds paid premiums
as well as on the profit made by the company. The company too pays the Zakat on its
own liable income. The Zakat paid on behalf of the insured is deducted from his account.
In principle, the amount of Zakat of all the insured is accumulated and used in a more
collective and constructive way. This serves the purpose of Baitul Maal, which was the
first ever social security system.
In the conventional system the insured has to pay his Zakat by himself separately. Since
the exact amount of premiums and the bonus is not known to the policy holders, they are
not able to pay proper Zakat. Since most of the insured buy the insurance as a saving for
the future, they do not remember even to pay Zakat on this amount. As a result, the sum
of money he gets at the time of maturity of a policy is that amount on which the Zakat
has not been paid all along the years. Thus the insured is committing sin if a proper
account of the Zakat is not maintained all along the years of his insurance policy.
7.Distribution of Zakat
Takaful accumulates the Zakat into a large sum and uses collectively to help to a large
number of people. In conventional insurance each person pays individually. The amount
distributed in bits and pieces does not benefit as many as in the Takaful.
11.COMPARISON OF PAK QATAR TAKAFUL COMPANY AND
UNITED INSURANCE COMPANY
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11.1.PAK QATAR GENERAL TAKAFUL LIMITED
History
Pak Qatar general takaful Ltd is one of the pioneer general takaful operators in
Pakistan.Pak Qatar general takaful limited, is regarded as a technology-driven shariah
complaint company providing need based and cost-effective takaful solution.
Incorporated in 2006,and began operation in 2007,the company is registered and
supervised by the securities exchange commission of Pakistan(SECP).An independent
shariah supervisory board chaired by Mufti Muhammad Taqi Usmani,certifies all
products and operations for shariah compliance.
Company's Offices:
Its head Office is in Karachi with branches all over Pakistan.
Rating of Company:
Pak Qatar general takaful has been registered as initial Insurer Financial Strength (IFS)
rating of BBB+ (triple b plus) by JCR-VIS Credit Rating Company Ltd with a positive
outlook. The rating report mentions that the management team of Pak Qatar general
takaful comprises of dedicated, experienced and qualified personnel with vast experience
in insurance sector with a mindsets aligned with the philosophy of takaful and the vision
of the company.
VISION AND MISSION OF COMPANY
Vision statement:
Pak Qatar general takaful company limited is committed to become a result oriented
Shariah complaint provider of risk mitigation through the principle of takaful based on
mutuality, team spirit and brotherhood.
Mission statement:
Participants
Committed to provide customized and innovative Shariah based takaful products and
services to the complete satisfaction of our customers.
Shareholders
Consistently delivering optimal return on capital.
Employees
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To create dynamic, progressive, positive culture of innovation and skill development
within employees.
Community
Ensure our support to the community and the environment with excellence.
PRODUCTS AND SERVICES:-
The company offers fire and property takaful, marine takaful, motor takaful,haj and
umrah takaful, travel takaful coverage, engineering takaful, liability takaful,
miscellaneous takaful.
11.2. UNITED INSURANCE COMPANY PAKISTAN LIMITED
History
Mr. Fakhruddin Valika, one of the Leading Industrialists of Pakistan founded the United
Insurance Company of Pakistan limited in the year 1959 with 20% equity from Pakistan
Insurance Corporation (now Pakistan Reinsurance Company). United Insurance is the
only and First Insurance Company of Pakistan doing Crop Insurance and Livestock
Insurance. Originally, United Insurance was authorized to do Life Assurance as well as
General Insurance. In General Insurance Business the Company was doing special
insurance Business such as Engineering (EAR, CAR, Machine Break-down and Bonds)
Marine Hull, Aviation Hull, Hail Storm and loss of Profits. Being a Composite Company
and with the cooperation from Pakistan Insurance Corporation, the Company took
respectable start and continued its progress until nationalization of its Life Sector in 70s.
Type of Company:
It is a public limited company listed in Karachi Stock Exchange (Guarantee) Limited. Its
directors hail from various vocations & professions. Company registered as approved
Insurance Company with fifty Schedule Banks, DFI's Leasing Companies and Large
Institutions.
Company's Offices:
Its Registered Office is situated in Karachi and Head Office at Lahore with branches and
representatives all over Pakistan.
Rating of Company:
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The Pakistan Credit Rating Agency (PACRA) has assigned an Insurer Financial Strength
rating ofA- (single A minus) to The United Insurance Company of Pakistan Limited
(UIC). The rating denotes strong capacity to meet policyholder and contract obligations.
At the same time, risk factors are moderate, and the impact of adverse and economic
factors is expected to be modest.
VISION AND MISSION OF COMPANY:-
Vision statement:
A first class Insurance Company to provide cost effective risk management solutions to
its policyholders through highest level of quality.
Mission statement:-
For Customers
To provide superior services through high quality business solutions and health
protection, based on expert advice and financial management and adding value to the all
corporate and non corporate customers.
For Members
To maximize the members' value by optimum utilization of resources.
For the Society
To ensure good governance by maintaining high ethical standards and risk coverage.
For the Government
Prompt and timely liquidation of liabilities and adherence to the policies established.
PRODUCTS AND SERVICES:-
Company offer fire,motor,mrine,engineering,crop insurance,live stock, travel guard,
health guard, education secure plan, home secure plan, shop secure plan, personal
accident, policy for students, miscellaneous.
12. COMPARISON OF FINANCIAL STATEMENTS OF PAK
QATAR TAKAFUL AND UNITED INSURANCE COMPANY
12.1. ANALYSIS OF BALANCE SHEET OF PAK QATAR TAKAFUL AND UNITED
INSURANCE COMPANY
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Pak Qatar takaful has two parallel funds that are participant takaful fund (PTF) and
shareholder fund (SHF) whereas in united insurance company no such funds exist. There
is segregation of assets and liabilities of the SHF and PTF in Takaful, signifying the
completely separate status of the Participants Takaful Fund whereas no such segregation
exists in united insurance company Balance Sheet. These PTF (initial donation by
participant) invested in waqf funds from which 30-35% is deducted as wakala fee. This
Segregation is necessary because it helps determine surplus or deficit which would
impact the distribution to participants. The PTF is also represented in the equity portion
of the Takaful as opposed to a liability which also includes reserves through estimation
for IBNR, Unearned Contributions and other similar ones which are comparable with
equivalent provisions recognized in united insurance company Balance Sheet. A notable
change is recognition of a contribution deficiency reserve in Takaful balance sheet
which is drawn from surplus to mitigate risks from deficiencies in the fund .An
equivalent capital reserve exists in united insurance balance sheet disclosed in equity
portion. Another portion of the PTF is cede money (initial contribution by participant).
There is no such disclosure in conventional insurance as there is no need to start a fund
for participants and disclose it separately, thus not requiring such injections to be
recognized in financial statements. This is a requirement however in Takaful due to status
of Waqf as separate legal entity. Further differences in the balance sheet include
recognition of unearned Wakala fee as a liability. Its equivalent in conventional
insurance is the premiums received in advance liability. The former is a fee charged for
being in trust of the Waqf fund. Risk mitigating measures relate to re-insurance for united
and re-takaful for Pak Qatar which essentially serve the same purpose but differ in the
modes utilized for performing the tasks.
12.2. ANALYSIS IN INVESTMENTS PORTION OF PAK QATAR TAKAFUL AND
UNITED INSURANCE COMPANY
Investment component of Takaful consists of Shareholders Fund (SHF) in addition to PTF. It is
essential that investment components of PTF and SHF are not pooled together to form a common
pool of investment. Otherwise, the Rab ul Maal - Mudarib relationship between participants and
Takaful operator would no longer hold and the Takaful operator would be liable for sharing of
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profits or losses arising out of investments rather than receiving proportion of profit only.
Investment strategies also differ between the two companies apart from segregation between the
funds. Takaful Rules in Pakistan require not more than 80% of the funds to be invested in
Shariah compliant Government securities. Hence, Pak Qatar Generals major investments from its
Share Holders Fund (SHF) are in Sukuks issued by WAPDA, Karachi Shipyard and Engineering
Works and Government of Pakistan Ijarah Sukuks. In addition, some investments in immovable
property, like sukuks of Century Papers and Boards Mills and Engro Chemicals Pakistan Limited
have also been made. Takaful Operators can also invest in joint stock companies excluding
companies that indulge in non-Shariah compliant activities.The Takaful operators can also invest
in redeemable capital e.g. mutual funds. However, investments in only those funds are allowed
that operate under Shariah principles and are approved by the Commission. Instruments available
in this category include Musharika Certificates, Term Finance Certificates (TFCs), Participation
Term Certificates (PTCs) and others. A Takaful operator can also strike arrangements with an
Islamic bank to provide it with capital to finance Musharika, Murabaha, Ijarah, Salam and Istisna.
Conventional Insurers have none of the above mentioned restrictions and invest in a wide range
of financial instruments. United insurance holds shares in sectors ranging from Investment Banks,
Investment Companies, Security Companies to Textile, Cement and Oil and Gas Exploration.
Other instruments include Term Finance Certificates, Mutual Fund Certificates and Fixed Income
Investments such as Defense Savings Certificates. All investments made by the Takaful fund are
subject to Shariah advisory board.
12.3.ANALYSIS IN INCOME STATEMENT OF PAK QATAR TAKAFUL AND
UNITED INSURANCE COMPANY
The difference between the statements of financial performance measuring profits and
losses of the two companies is that, a Takaful Company presents changes in the revenue
account of the Participants Takaful Fund (PTF) and the Shareholder Fund (SHF)
corresponding to the different pools in order to calculate the surplus/deficit accruing to
each. On the other hand, a conventional insurance company presents the entire amount of
premiums from underwriting and investment income as revenue and all the claims as
losses in a single Profit and Loss statement.
For Pak Qatar Takaful, inflows to the PTF include contributions by participants net of
Wakala fees, net commissions along with claims and rebates received from retakaful
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operators, investment income from PTF Funds along with any proceeds from salvages
and recoveries. This revenue is setoff against any reported claims and incurred but not
reported (IBNR) claims, expenses directly related to settlement of claims such as
surveyors fees, etc and the Mudaribs share of the investment income from the PTF. All
other management expenses directly related to the Takaful operations, other General and
administrative expenses are deducted against this revenue giving Takaful Operators
profit before taxation.
12.4.Flow chart 1:-
12.5.Flow Chart 2:-
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12.6.Flow chart 3:-
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13.CONCLUSION
A good way to evaluate and analyze the differences between two business models is to
evaluate the differences in accounting and disclosure requirements between the two
companies. Hence, analyzing the financial statements and relevant disclosures of Pak-
Qatar General Takaful limited and united Insurance Company Limited provide us
valuable insights into their business models. Differing accounting treatments,
classifications of line items and purpose of reserves and provisions emphasize the
difference between the Takaful Waqf-Wakala model of risk sharing and the conventional
insurance model of a risk taker.As Takaful businee emphasizes on risk sharing where on
the other hand Conventional insurance highlight the importance of risk taking.Along with
providing the insurance against risk Takaful promotes the emotions of mutual help in a
society but Conventional insurance is only concerned about profit and loss sharing.
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14.References
1.http://www.google.com.pk/#hl=en&rlz=1W1ADRA_enPK458&sa=X&ei=vuXUTtCa
MYquiAe1i4GRDw&sqi=2&ved=0CBUQvwUoAQ&q=major+differences+between+isl
amic+and+conventional+insurance&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=ecf10fd
658c98fd5&biw=837&bih=397
2. http://www.publishyourarticles.org/eng/articles/principles-of-insurance.html
3.http://www.takaful.coop/index.php?
option=com_content&view=article&id=7&Itemid=26
4.http://www.cheezypickle.com
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