Transcript TAKAFUL THE ISLAMIC INSURANCE

TAKAFUL
COMPANIES
Conventional Insurance
It means a way to provide security and or
compensation of what is valuable in the
event of its loss, damage or destruction
based on the principle of risk taking and
speculation.
Problems with
Conventional Insurance
1.
2.
3.
4.
Gharar (uncertainty)
Khatar (Risk)
Maysir (gambling)
Riba
Gharar
• The participant loses the money paid for
premium when the insured event does
occur.
• The company will be in deficit if the claims
higher than the amount contributed by
participants.
the
not
are
the
• Uncertainty of one party’s profit. E.g. One
party’s (such as policy holder’s) profit in
Insurance
Khatar
• To specify ownership (of any amount) on a risk,
where both consideration is money or
commodity.
• The participant contributes a small amount of
premium in a hop/risk to gain a large sum
Maysir
• Maysir has two basic elements which cause to
prohibit Maysir namely gharar and khatar.
Riba
 The element of Riba (Interest) exists in lending
or borrowing funds/investments at fixed interest,
and other related practices in the investment
activities of the conventional insurance
companies.
 Most conventional insurers invest premiums in
bonds/loans (corporate and municipal) as well
as other interest generating investments
(involving Riba from Islamic perspective)
Definition for Takaful
 Takaful is an Arabic word that means
"guaranteeing each other".
 It is a system of Islamic insurance based on
the principle of TA-AWUN (mutual assistance)
and Tabarru (Voluntarily) where the risk is
shared collectively by the group Voluntarily.
 This is a pact (agreement) among a group of
members or participants who agree to jointly
guarantee among themselves against loss or
damage to any of them as defined in the pact.
Benefits of Takaful Ta'awuni
 Fulfills the social obligations towards community
and family.
 Avoidance of Al-Riba, Al Maysar and Al Ghirar
and similar prohibited elements.
 Promotes moral values, ethical dealing and full
disclosure.
 Through "Tabarru" donations allows participants
to achieve self-purification and peace of mind.
 Promotes Long term Saving
 Financial assistance in the event of Allah's Will.
Basic Principle behind Takaful
1. The principle of “fortunate many helping the
unfortunate few" is a concept recognized by
Islam.
2.
The Quran states in Surah Al-Maidah verse 2:
"Help ye one another in righteousness and piety,
but help ye not one another in sin and
rancor".
3. Principles of Muwalat, Maaqil (blood ties/family
ties), and Kafalah (gurantee) are examples
for its permissibility.
Features
 Firstly, the participation into a Takaful fund must
be performed with utmost/highest sincerity in
order to help those faced with difficulties.
 Every policy holder would pay his subscription in
order to assist those who need assistance
 Any member or participant suffering a
catastrophe or disaster would receive a certain
sum of money or financial benefit from a fund, as
also defined in the agreement, to help him meet
the loss or damage
Operation of Takaful Fund
 The transactional aspect of the commercial
activity of Takaful must be subject to the Islamic
contractual laws in order to ensure its
compliance with the Shariah .
 The Company involved in takaful business, as
the operator, will accept payment of the takaful
installments or takaful contributions (premium)
from the participants (clients) for the takaful plan
or takaful scheme they wish to participate.
Operation of Takaful Fund
 In order to eliminate the element of
“uncertainty” in the Takaful contract, the
concept of tabarru (to donate, to contribute, to
give away) is incorporated in it. In relation to
this a participant shall agree to surrender as
“gift” certain portion of his Takaful installments
.
 For the service rendered as manager of the
Takaful Operations the company will charge a
management fee.
Operation of Takaful Fund
 The Takaful Fund, consisting of the contributions
paid as Tabarru, will be further invested by the
Company based on the principle of Al –
Mudarabah, through which the element of
interest (riba) will be replaced.
 All premium holders will participate in profit and
loss.
 Profit will be shared on agreed ratio.
Uses of Takaful
Takaful can be used to cover
Property like house, factory, mosque,
offices
Vehicles (car, motorcycle etc.)
Goods (like during import or export )
Valuables
Health, accidents and Life
Islamic Scholars Perspectives
 The Majority viewpoint by contemporary Islamic scholars
is that Takaful (cooperative insurance) is fully consistent
with Shariah principles. This perspective is upheld by
numerous meetings and resolutions :
 Council of Saudi Ulama (1397 Ah/1977 CE) resolution
 Fiqh Council of Muslim World League (1398/1978) resolution
 Fiqh council of Organization of Islamic Conference (1405/1985)
 Islamic Fiqh Week Conference, Damascus 1961
 Second Conference of Muslim Scholars, Cairo 1965
 Symposium on Islamic Jurisprudence, Libya 1972
 First International Conference on Islamic Economics, Meccah
February 1976
 The Islamic Conference,Mekkah,October 1976