es
DedicatedTo
Our LovingParents and Teacher’s
Group Member’sSana Suleman
Fatima-Tu-ZahraNimra IkhlaqJawad Ahmad
SidraGhazala Asghar
Outline of the PresentationInsuranceTakafulHistory and BackgroundCharacteristics of TakafulNeed of TakafulDifference between Takaful and Conventional InsuranceProducts of TakafulModels of TakafulRole of Takaful in Islamic Economic SystemMarket StatusIssues & ChallengesSuggested MeasuresConclusion
Islamic Insurance Conventional
INSURANCE
INSURANCE
A 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.
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)
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)
Background
&
Development of Islamic insurance in
five stages
Practices of the doctrine of al-Aqilah among the ancient Arab tribes as a tribal custom
Practices of the Holy Prophet (SAW)
The relevant legislations passed in the first constitution of Medina was in 622 B.C
Practices of the Companions
Hazrat Umar (R.A) ordered to a group of Mujaheedin in each district, to contribute an equal amount of money to help legal heirs of those victims, in case if any person is killed by any other person of the same district.
19th CenturyIbn Abidin a Hanafi lawyer was the first person to discuss about the idea of insurance and its legal entity.
A well-known Islamic jurist, Muhammad Abduh issued two ‘fatwa’s’ mentioned that 1:-Insurance transaction is like the transaction of al-”Mudarabah” financing and2:- Life insurance is legal.
Name: FATIMA Roll Num: 12139
Characteristics of Takaful
Establishment of two separate funds Solidarity principle and equal surplus
distribution Restricted investments Establishment of Shariha board
Why Conventional Insurance is unacceptable in Islam???
Objections to Conventional InsuranceScholars 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 – Maisir•Interest – Riba•Profit distribution•Investment of funds•Nature of capital
GHARAR-Uncertanity
Gharar 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
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.
Maiser-Gambling
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, it’s totally depend upon management of company
DIFRENCE BETWEEN TAKAFUL AND CONVENTIONAL INSURANCE
Issue insurance Tkaful
Risk Risk transfer Risk sharing
Gharar Gharar exist Gharar brought down by making conditional donations
Maisir Payment depends upon chance
Obviates the element of maisir
Investment Interest based
Interest free
Surplus Surplus in hands of shareholders
Distribution according to proportions
Name: Jawad AhmadRoll NO: MC12152
PRODUCTS OF
TAKAFUL
Products of takaful
Family takaful
Child education
plan
Child marriage
plan
Retirement plan
Savings + protection
plan
General takaful
Property takaful
Marine takaful
Motor takaful
General Takaful:
General takaful offer all kinds of non life risk coverage
It is normally divided into following classes
Property Takaful Marine Takaful Motor Takaful Miscellanea Takaful
Family Takaful
Children Education Plan:
Long term savingsProtection for child educationEducation will continue when you are not around
Children Marriage Plan:
Loan ProtectionEase in coming financial challengesPlan will continue Received good lump sum amount
Financial protection + Saings Plan:
"A companion of Prophet Muhammad (s.a.w.w.) asked: 'O Prophet of Allah!
Should I tie my camel and then entrust Allah or should I leave the
camel untied and then entrust Allah?' The Prophet (s.a.w.w.) replied: 'Don't leave your camel untied; instead first
tie the camel and then put your Tawakkal on Allah.'"
"It is narrated that Hazrat Muhammad Mustafa (s.a.w.w) said:
It is better to leave your heirs wealthy rather than poor and
asking others for their needs.“
RETIREMENT PLAN:
The period of plan and if he completes this plan successfully by a disciplined savings than he will have a handsome amount in his hands on the maturity for his remaining life’s financial needs.
Well planed lifestyle
Common Benefits of Plans:Financial protectionInvestment of amount in Halal businessAvailability of other financial ridersMaturity of amountLoan protectionPartial withdrawalsAvailability of planTax free plan
Retakaful
PRESENTED BY NAMRA
IKHLAQ
OUTLINE : Takaful Models. Takaful models
implemented in Pakistan. Reasons why other takaful
models not implemented in Pakistan.
Role of takaful in Islamic economy.
TAKAFUL MODELSThere are three main different Takaful Models use today.
Takaful Models
Mudharabah
Wakalah Wakala -waqf model
Takaful models implemented in Pakistan
WAKALA-WAQF MODEL
Wakala model with waqf fund
WAKALA IN ARABIC AGENCY
The wakala concept is essentially an agent-principal relationship, where the takaful operator acts as an agent on behalf of the participants.
Operator as wakil/Agent: Operator is an organization which manages Takaful Fund of participants.
Participant as principal: A contributor to Takaful Fund by participating in any protection scheme.
Tabarru / Donation: The contribution of participants in waqf fund.
Waqf fund
Initial donation by shareholders.
Wakala fee: The fee received by a Takaful Operator from the Participants to manage Takaful fund.
Participant contribution / Tabarru
Administrated by Opretor
Participants/policyholder contribution
Shareholders
/ Waqf fund
Overall takaful
contract as wakeel
Only investment portion as mudarib
WAQF FUND
Saved for payment of wakalah fee
claims or retakaful expenses.
1 2
This portion is invested, or
used for making
investment.
Waqf fund
Investment in 100% Islamic transactions or sharia complaint securities.
Profit for the shareholder
Profit for participants
Profit on investment
Profit sharing on MUDARBAHA basis
Profit for the company
MinusAdministration expenses like
employees salary etc.
MINUSManagement expenses of company.
Profit distribute between shareholders.
+ +
_Waqf fund
Waqf fund
Mudarabah model(partnership of
sharing profit and loss)
Policy holder
Takaful operator
Provide capital
Manage the whole takaful operation and make investments.
Rabb-ul-mal
Mudarib
Takaful models not implemented in Pakistan
Issues in Mudarabah model.
1. Nature of contract is undermine.2. Sharing in underwriting surplus.3. General takaful.4. Qard-al-hasan.
Issues in wakalah model.
1. Sharing in underwriting surplus.2. Not reduce operator fee for largest clients
reduce the risk premium rates.3. Initial expenses of takaful are not born by
shareholders.
Name: Ghazala AsgharRoll No: 12035
Status and Potential of Takaful industryProfile of Global Takaful IndustryThe first Takaful company was established in
1979 - the Islamic Insurance Company of Sudan. Malaysia started in 1984.
Presently 150 Takaful companies in 25+ countries worldwide offering General and Family Takaful with estimates of Takaful contributions at over $ 5 billions globally
Contd ……………… Australia Bahrain Bangladesh Brunei Egypt Ghana Indonesia Iran Jordan Kuwait Luxembourg Malaysia
PakistanQatarSaudi ArabiaSenegalSingaporeSri LankaSudanTrinidad & TobagoTunisiaTurkeyUnited Arab EmiratesYemen
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.
Role of takaful in Islamic economic system.
Takaful
service welfare
schemeFor Muslim ummah
1.Create exploitation free society.2.It is a safeguard against people faith, life, prosperity and property.3.Facilitate capital formation.4.Motivate individual for saving.5.Utilization or resources.6. Greater employment.