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.