Takaful
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Transcript of Takaful
ByAnamta Shareef
RehanaOsama Qadri
Waqas Latif
Agenda
Islam and Insurance Insurance Industry in Pakistan Islamic Insurance Takaful In Pakistan Products Offered Conventional Insurance vs Takaful Research Findings Recommendations
Islam and Insurance
As a complete religion, the teaching of Islam encompasses the essence of peace, economic well-being and development of the Muslim.
Islamic insurance was first established in the early second century of the Islamic era.
This was the time when Muslim Arabs started to expand their trade to India and other countries in Asia.
Due to long journeys/voyages, they often had to incur huge losses.
Cont…
Based on the Islamic principle of mutual help and cooperation in good and virtuous acts, they got together and mutually agreed to contribute to a fund before they started their long journey.
The fund was used to compensate anyone in the group who suffered losses through any mishap.
The Europeans copied this, which was later known as marine insurance.
Insurance Industry in Pakistan
Pakistan's life insurance sector was nationalized in 1972.
Until 1992, when the government opened it to private sector participation.
The Government standardize and reduce premium rates and encouraged coverage among a wider segment of the population.
Terrorism has boosted the insurance sector in Pakistan.
Insurance Companies in PakistanConventional
East West Insurance Company Limited East West Life Assurance Company Limited New Jubilee Life Insurance Company
Limited Beema-Pakistan Company Century Insurance Company Premier Insurance Limited Eastern Federal Union State Life Insurance corporation of
Pakistan Habib Insurance Company Limited
Cont…
Takaful
Takaful Pakistan
Pak-Kuwait Takaful
Dawood Family Takaful
Pak-Qatar Takaful
Islamic Insurance
Ibn Abidin (1784-1836) was the first scholar in the Muslim world to discuss the meaning and legal character of insurance.
Recently, however, a consensus was emerging for adapting insurance in the name of takaful and solidarity.
Several Islamic takaful and solidarity companies have been established since 1979.
Cont…
A prime purpose of Takaful system and its products is to strike the right chord with Muslim customers who may find conventional products unacceptable and buy them reluctantly.
In 2002 there were an estimated 41 companies offering Islamic Insurance.
The number of takaful companies more than doubled to 87 companies in just four years (by mid 2006)
across 29 countries.
Cont…
There are approximately more than 108 Takaful and 6 Re-Takaful companies operating globally.
Out of these companies 60% are General Insurance Companies.
40% are working as Life and Family Insurance Companies.
Takaful In Pakistan
The takaful market is still in a formative stage.
Market projections estimate growth rates between 15% and 20% over the next 10 years.
Pakistan is among the top 10 most populous nations in the world. This makes it a very
fertile market for Takaful,
Cont…
Pakistan saw its first Takaful operator, in the General side, start in 2006.
Another two operators in General and two in Family have entered the picture. Dawood Family Takaful being the most recent entrant.
Takaful is not just another tool for risk mitigation and financial protection.
It is a system which works as a source of good for those that use it and the community at large.
Products Offered
Fire Takaful
Marine Takaful
Motor Takaful
Engineering Takaful
Misc Takaful
Fire Takaful
Riot and Strike Damage
Explosion
Atmospheric Disturbance
Earthquake and Fire shock
Aircraft Damage
Terrorism (Separate Policy)
Marine Takaful
The Marine Takaful Policy offers a wide range of coverage to all imports, exports.
Inland transits by sea, air and land from the point of dispatch to the point of
delivery.
Motor Takaful
Section 1: Undertakes to reimburse the expenses incurred for:
Repair/replacement of the parts of the vehicle.
Pays the market value of the vehicle in case of a total loss provided that the originating cost of such damage is an accident.
Cont…
Section 2: It covers the legal liability to third party personal injury and property damage arising out of an accident involving the insured vehicle.
Optional extensions
The extensions that are offered are as follows: Loss of accessories. Increased legal liability towards property damage of
third party.
Engineering Takaful
Electronic Equipments Policy
Machinery Breakdown Policy
Boiler and Pressure Vessel Policy
Erection All Risks Policy
Misc Takaful
Burglary
Impact Damage
Personal Accident
Conventional Vs Takaful
Cont… Takaful
Its free from interest (Riba),
gambling, (Maysir), and uncertainty (Gharar).
Conventional
Insurance includes elements of interest, gambling, and uncertainty.
All or part of the
contribution paid by the Participant is a donation to the Takaful Fund, which helps other Participants by providing protection against potential risks.
The premium is paid to
conventional insurance companies and is owned by them in exchange for bearing all expected risks.
Companies are subject to
the governing law as well as a Shari’a Supervisory Board.
Companies are only subject
to the governing laws.
Cont…
The guiding principle behind commercial insurance is that it is based largely on commercial factors.
Takaful on the other hand is guided by the principles of Islam, which aims to establish a social order based on universal brotherhood. In Islam
'A Muslim is the brother of another
Muslim; he neither wrongs him, nor leaves him without help, nor humiliates him'
Cont…
Conventional insurance is not transparent.
Insurance companies invest in ventures that may involve interest or some form of activity which goes against the teachings of the Shari'ah.
Conventional insurance is not mutually beneficial, as certain individuals (shareholders, for example) benefit at the expense of others.
Commercial insurance companies exist to serve the interest of shareholders first, not policyholders.
OUR RESEARCH
Abstract
The topic of our research was “Awareness about Takaful”. This research gave us an idea as to how many people are aware about the term takaful and know about its mechanism.
Sample Size
A sample size of 100 people was selected
for the quantative research and a group of 6 people were interviewed for the qualitative evaluation.
Term “Insurance” Awareness
term "insurance awareness"
99%
1%
% of people Awareabout Insurance
% of people not aware
Awareness Of Mechanism
Awareness Of Mechanism
64%
36%
% of people Aware
% of people Unaware
Assets Insured
Insurance Of any Assets
14%
86%
% of people insuredany assets
% of people who didnot
Awareness of term “Takaful”
Awareness Of term "Takaful"
34%
66%
% of people aware ofit
% of people Unaware
Awareness Of MechanismAwareness Of its Mechanism
4%
96%
% of people Aware
% of people Unaware
Why people don’t buy Takaful!
0%
47%
21%
32%
Why havent usedtakaful
Why havent usedtakaful Not aware by themechanism
Why havent usedtakaful Do not trusttakaful
Why havent usedtakaful treat takaful andinsurance as same
Findings
Findings
A mere 34% of the respondents actually knew the term “takaful” as compared to 99% of them who knew about term “insurance”. There is a day light between the two.
Much like Islamic banking the concept of Takaful has not yet been fully understood by the local people. Our small research is evident to this fact.
Cont…
According to our research almost all of the respondents are aware of the term insurance and can recall almost all of the insurance providers in Pakistan.
Only 14% of the people how ever have insured any assets that they have under the conventional insurance system, there are a number of reasons for that.
Cont…
Since few people know about Takaful, its mechanism and policies are again not understood, not being aware of or in extreme cases misinterpreted.
Because of the lack of promotional campaigns and marketing, Islamic system of takaful has yet to establish its prominence amongst the people of Pakistan.
Sample of 100 is very few to judge but even then the general mind set clearly indicated lack of awareness and knowledge about the system itself.
Recommendations
Recommendations
Takaful operators should follow best practices with great commitment.
Awareness amongst general public is required because of the following reasons.
1. Low literacy rate.2. Misconception about traditional
Insurance.3. Low insurance penetration.
Cont…
Organizing a national road show by conducting awareness interactive programs in Islamic Banking and Takaful.
Massive Advertising Campaign should be launched country wide to improve on recall of the term takaful its policies and procedures.
Conducting Seminars in educational Institutions to spread awareness from grass root.
Cont…
People generally tend to opt for insurance coverage only where it is mandatory by law.
Takaful likewise, can build up public confidence and once that is achieved, people will voluntarily opt for the various takaful options in their individual as well as collective interests.
The pioneers “Pak-Qatar Takaful” themselves know the importance of good marketing and
public awareness!
“Apart from providing high quality products in line with Shariah principles which meet the needs of the public, we need to work hard for creating awareness
for Takaful amongst the community”
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