Takaful insurance, also known as ‘Islamic insurance’, is mainly based on unity and cooperation. It is a mutual agreement between a group of people who are willing to compensate for harm and loss from a fund where they will donate collectively. The major shareholder of Takaful insurance is BIMB Holdings Berhad (BHB) with 59.19% shareholding in the market.
The best thing about Takaful insurance is that they prohibit Ghara, Maysir & Riba and consider conventional insurance as haram. In case of conventional insurance, the risk is transferred either to the insured or the insurer whereas in case of Takaful insurance, a mutual risk is shared among the contributors. Here, the investment profits are distributed among the participants and the premium amount is returned, in case of no claims. For more than 1000 years, Takaful has been following ‘Kafalah’ which means guaranteeing each other through mutual collaboration and sharing responsibilities, common interest and solidarity.
Moreover, Amana Takaful Insurance Company has recently introduced ‘Total Drive Prestige’ which is an extension of the company’s motor insurance product range. This is a breakthrough motor insurance product that is entirely tailored for the owners of vehicles worth Rs10 million or above. In order to provide a high quality service to the clients, the total Drive Prestige ensures 100% claim payoff.
Principles of Takaful insurance:
- Takaful insurance operate in accordance with the Islamic cooperative principle.
- Each contribution to the Takaful fund is based on what is being covered and for how long.
- Members donate a sum of money and the committee approves their sharing ratio for each year.
- Also, the member’s contribution is based on their own business’s situation and risk profile.
- Any loss and surplus from the Takaful fund are shared among the policy holders and liabilities are distributed according to an agreed community pooling system.
- Uncertainty is abolished with respect to subscription and compensation.
Recently in Indonesia, Zurich General Takaful Indonesia, a subsidiary of Zurich Insurance Group Ltd., has acquired regulatory approval in order to operate the organization as an Islamic general insurance company. The main aim of this insurance system is not gaining profits but to uphold the principle of ‘bear one another’s burden’. According to a report published by Allied Market Research, the global Takaful insurance market size is projected to reach $97.17 billion with a considerable CAGR from 2021-2030.
How does Takaful work:-
Takaful insurance companies must manage two funds i.e. policy holder’s fund and stakeholder’s fund. Also, reinsurance commission must be paid to or received from only Islamic insurance and reinsurance companies. Instead of paying premiums, the policyholders contribute an amount to a mutual Takaful fund or pool. A Takaful operator supervise the Takaful fund on behalf of the participants. He charges an agreed amount to cover certain costs like the costs of sales and marketing, underwriting and claims management.
People in the Muslim majority countries usually prefer to invest in Takaful insurance. Since a large number of world’s population is Muslim, there is an untapped market opportunity for Takaful insurance companies. It’s worth mentioning that through proper planning and effective strategies, the Takaful insurance industry is going to expand extensively in the near future.
Author’s Bio – Suchita Gupta is an explorer, musician and content writer. While pursuing MBA, she found that nothing satisfies her more than writing on miscellaneous domains. She is a writer by day, and a reader by night. Besides, she can be found entertaining her audience on social media platforms. Find her on LinkedIn & Instagram.
