Takaful Companies and Products In

Malaysia (General)

Overview

Insurance

Takaful

History and Background

Characteristics of Takaful

Need of Takaful

Difference between Takaful and Conventional Insurance

Products of Takaful

Models of Takaful

Role of Takaful in Islamic Economic System

Issues & Challenges

Suggested Measures

Conclusion

 INSURANCE
Islamic Insurance

Conventional

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.

 Takaful
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.

 The Takaful industry is poised for significant growth as demand

increases and industry enablers are further aligned ...
Demand

Supply

Economic growth
Increase in GDP per capita
Youthful demography
Increasing awareness of Takaful
Greater desire for Sharia compliant
offerings
Increase in asset based, Sharia
compliant financing

The Global Takaful

Industry

Compulsory protection
Licensing and increased competition
Better regulation
Greater role for private sector participation
Increased market-led initiatives
Facilitation

Fragmented landscape
Undercapitalised
Limited reTakaful capacity
Problematic asset management
Local solution offerings
Local distribution channels

Takaful is

Social scheme

Arabic word

Legally binding agreement

Common good

Contributions

Losses & liabilities

Uncertainty removes

Fair distribution of surplus

n says
a
r
u
in
Q
The
other
n
a
e
n
ye o
y, but
t
p
e
l
i
e
p
H
d

n
ness a other in sin
s
u
e
o
t
an
righ
ot one
n
ah Alr
e
u
y
S
l
(
p
e
.
h
ncour
)
and ra dah verse:2
i
Ma

Reference Al Quran & Alsunnah:

Help (taawan) one another in

furthering virtue (birr) and Allah
consciousness (taqwa) and do not
help one another in furthering
evil and enmity. Al Maidah:
verse 2 (5:2).
Takaful is a form of mutual help
(taawun)
in
furthering
good/virtue by helping others
who are in need / in hardship .

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)
**(
()
)][[
God help the slave as long as the slave helps his brother
**( ( )
)

&
Background

Historical Examples of Takaful

Takaful has been practiced in various forms for over 1400 years.

Takaful originated within the ancient Arab tribes as a pooled liability that
obliged those who committed offences against members of a different tribe to
pay compensation to the victims or their heirs which is called Diyyah .

This principle later extended to many walks of life, including sea trade, in
which participants contributed to a fund to cover anyone in a group who
suffered mishaps on sea voyages.

Dawania-Mutual indemnification amongst officers working in the same

department during the rule of Umar Ibn Al Khattab (the 2nd Caliph)

Takaful Pioneers

Takaful started some 30 years ago in the Middle East with the launching
of two companies in 1979:
The Islamic Arab Insurance Co. (IAIC) in the UAE.
The Islamic Insurance Co. of Sudan

But it took some time for the movement to take shape.

Later in 1984, Malaysia played a pioneering role in setting the first Legal
framework specific to Takaful (Takaful Act Malaysia).
This was instrumental in the successful launching of the Takaful
movement in Malaysia and in other countries of South East Asia.

Other Islamic/ Takaful Legislations

Other markets such as the Sudan and Iran have Islamic

regulatory environments and became naturally Takaful
markets.
In Pakistan Takaful Act is enacted in 2005.
In the Gulf countries specific Takaful legislations are coming
through in Bahrain and in Saudi Arabia

Takaful Today
From a handful of operators two decades ago the Takaful
movement has blossomed into a fast growing phenomenon in
many Muslim countries with very promising prospects in other
countries with a large Muslim community.

 Characteristics of Takaful

Establishment of two separate funds

Solidarity principle and equal surplus distribution

Restricted investments

Establishment of Shariha board

 Need of Takaful.
Why Conventional Insurance is
unacceptable in Islam???
Scholars 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 outcomes
Gharar in the results of exchange
Gharar in contract period

Maiser-Gambling
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.

 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 Funds
Insurance 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 Distribution
In 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, its totally
depend upon management of company

 DIFRENCE BETWEEN TAKAFUL

AND CONVENTIONAL
Issue
Takaful
INSURANCE insurance
Risk

Risk transfer

Risk sharing

Gharar

Gharar exist

Gharar brought down by

making conditional
donations

Maisir

Payment depends upon Obviates the element of

chance
maisir

Investment

Interest based

Interest free

Surplus

Surplus in hands of
shareholders

Distribution according
to proportions

Type of personal Takaful Malaysia

TAKAFUL myPA CARE.

FIRE TAKAFUL.

HOUSEOWNER'S & HOUSEHOLDER'S TAKAFUL.

MOTOR TAKAFUL.

PERSONAL ACCIDENT TAKAFUL.

 TAKAFUL myPA CARE

Introducing the comprehensive Personal Accident Takaful plan that allows you to enjoy the
magnificent feature of an additional 15% No Claim Rebate* from as low as RM0.16 per
day.
1. Enjoy Protection + 15% No Claim Rebate* or cash back.
2. Comprehensive protection at an affordable contribution rate, with 24 hours worldwide
coverage.
3. New coverage benefits, e.g. Snatch Injury, Ambulance Fees, Repatriation Expenses &
Purchase of Orthopaedic Equipment.
4. Simple application process with no medical examination required.
5. Wide Personal Accident coverage including Riot, Strike, Civil Commotion and
Hijacking.
.Rebate is payable if no claim during the period of coverage and is dependent on the
Companys performance.

 FIRE TAKAFUL
Covering the lost and damage due to fire, lightning or domestic gas explosion, one will never have
to worry should the worst is to happen. Our Fire Takaful Plan will compensate your building, and
household content to ensure a complete coverage for your assets.
If that is not good enough for you, under this plan, we also offer additional coverage for losses
caused by :
1.

riot, strike or malicious damage.

2.

explosion.

3.

impact damage.

4.

bursting or overflowing of water tanks or pipes.

5.

earthquake or volcanic eruption.

6.

flood.

7.

aircraft damage.

8.

windstorm.

 HOUSEOWNER'S & HOUSEHOLDER'S TAKAFUL

Special plan to protect your home, belongings and assets from loss or damage. Scope of cover of this plan are :
1. Fire, Lightning, Thunderbolt, Subterranean Fire
2. Explosion
3. Aircraft and other aerial device and/or articles dropped wherefrom
4. Impact with any of the buildings by any road vehicles, animals not belonging to or under the control of the
participant or his family.
5. Bursting or Overflowing of Domestic Water Tanks, Apparatus or Pipes
6. Theft by violent and forcible entry into building.
7. Hurricane, cyclone, typhoon, windstorm
8. Earthquake, Volcanic Eruption
9. Flood
10. Third party liability
11. Loss of rental
This plan is eligible to all houseowners.

MOTOR TAKAFUL
For more extensive coverage, you might want to consider our COMPREHENSIVE type of cover.
Not only you will get everything that we offer in the THIRD PARTY type of cover, you will also
get indemnity for the loss or damage to your vehicle or its spare parts arising out of the following
events:
1.

accidental collision or overturning.

2.

collision or overturning caused by mechanical breakdown.

3.

collision or overturning caused by wear and tear.

4.

impact damage caused by falling objects provided not resulted from convulsion of nature.

5.

fire explosion or lightning.

6.

burglary, housebreaking or theft.

7.

malicious act.

8.

while in transit.

 Cont..
You can also apply for additional coverage which include :
1. windscreen
2. accessories
3. additional authorized driver
4. MPA (Motorist Personal Accident)
A step to heighten the efficiency of service to our participants, the
Tele Bantuan programed provides FREE TOWING SERVICE from the
point of accident to the nearest Takaful Malaysia panel workshop, 24
hours daily, anywhere in Malaysia

PERSONAL ACCIDENT TAKAFUL

Accident is the worst nightmare for everyone. This plan may help you to prepare
anything worst that could have happened in your life. This comprehensive personal
accident plan :
1.

Covers individual for any incident happened upon death or permanent disability.

2.

Protect yourself from any tragedy 24 hours a day, domestically or internationally.

3.

Based on the Islamic profit sharing, Al-Mudharabah which is can be HALAL.

4.

Eligible for participants from age 18 to 60 years old.

CORPORATE/ORGANIZATION
TAKAFUL mySME
The Takaful mySME plan offers your organization more than just comprehensive protection
but peace of mind whilst you focus to grow your business. With Takaful mySME, you can
now enjoy the best of savings while simultaneously, increase business productivity and gain
better cash flow management.
Protection + 15% No Claim Rebate
1. Enjoy Protection + 15% No Claim Rebate or cash back (i.e. if no claims incurred during the
coverage period and is dependent on the companys performance).
2. Safeguard your business with the protection coverage that you truly need with the best rates
in town.
3. Experience a tailor made plan that addresses your business needs or sector and enjoy great
savings to elevate your business to the next level, i.e. heightened productivity and improved
cash flow.
4. Main Sectors
*Light Manufacturing
*Retail

 Hence the need to specifically define the items to

be covered.
BURGLARY TAKAFUL

A plan that provides cover against loss of or damage to the subject matter due
to theft whilst contained in the business or trade premises. This plan will also
cover the damage to your premises due to forcible entry or exit accompanied
the event of theft.
However, you as the business owner should already have participated in our
Fire Takaful Plan before applying for this plan.

 BUSINESS INTERRUPTION (LOSS OF PROFIT)TAKAFUL

This plan is designed to complement our Fire Takaful's limitation. The plan provides indemnity in the event
of loss of the following :
Net profit.
Standing charges i.e. expenses which continue to exist as usual level even though business had been
interrupted due to the destruction or damage of premise, machinery or plant by fire e.g. Motor Vehicle
expense, Depreciation etc.
Increased cost of working e.g. overtime, rental of alternative premises or machinery etc.
EMPLOYER'S LIABILITY TAKAFUL

Similar to the WORKMEN'S COMPENSATION TAKAFUL , liability may be attached to you as an

employer should injury or disease caused by accident to your employee occurred during the course of
employment.

FIDELITY GUARANTEE TAKAFUL

In the normal course of business transaction, you as an employer invariably has to entrust
money, securities, goods etc. to your employee or delegate monetary responsibility to the
employee. In the event that employee is dishonest, you would most certainly suffer financial
loss. To protect this from happening, this is the plan for you. Minimum takaful contribution is
RM100.

FOREIGN WORKER COMPENSATION TAKAFUL

This plan is definitely for you if you are an employer with foreign workers working under your
administration. Under the plan, foreign workers will be financially compensated in the events
of accident resulting in death or bodily injury.
In addition, the plan also provides coverage for Repatriation Expenses and Personal Accidents
outside working hours.

GROUP PERSONAL ACCIDENT TAKAFUL

Derived from our PERSONAL ACCIDENT , we have come out with a product, GROUP
PERSONAL ACCIDENT TAKAFUL , to cater for the different needs and demands of the market.
This plan compensates a group of individuals including yourself should you suffer bodily injury
caused by violent, accidental, external and visible means. If the injury results in death or disablement
then we will compensate according to the Table of Benefits as outlined in the certificate, This plan is
suitable for business or social organization and even for college students.

MONEY TAKAFUL

Suitable for business owner running high cash transaction, this plan covers against loss of money
whilst in transit and also money kept in premises. In the event of the money is lost, destroyed or
damaged as a result of theft, Takaful Malaysia will indemnify you in respect of such loss, destruction
or damage.

PROFFESSIONAL INDEMNITY TAKAFUL

A plan designed to suit lawyers, architects, engineers, surveyors in

accountants etc. for coverage against liability caused by professional
malpractice.

PUBLIC LIABILITY TAKAFUL

This plan is designed to protect you as the owner of your business

against your legal liability to pay compensation for accidental bodily
injury to or accidental damage to the property of the public caused by
or through your negligence or the negligence of your employees. The
liability mentioned also includes legal charges and expenses.

 OTHER TYPES OF TAKAFUL

SCHOOL CHILDREN PERSONAL ACCIDENT TAKAFUL

WORKMEN'S COMPENSATION TAKAFUL
BOILERS & PRESSURE VESSEL TAKAFUL
CONTRACTOR'S ALL RISKS TAKAFUL
ELECTRONIC EQUIPMENT TAKAFUL
ERECTION ALL RISKS TAKAFUL
LOSS OF PROFITS (MACHINERY) TAKAFUL
MACHINERY BREAKDOWN TAKAFUL
MARINE CARGO TAKAFUL
PLATE GLASS TAKAFUL
STORAGE TANKS TAKAFUL
FIRE AND ALLIED PERILS TAKAFUL

MAA Takaful
MAA Takaful is a result of a strategic joint venture between MAA Group Berhad (MAAG) [Formerly
known as MAA Holdings Berhad] and Solidarity Company BSC (C) of Bahrain, one of the leading
companies in the Arab world.
On 21 February 2006, a Joint Venture (JV) Agreement was signed with Solidarity, to form a JV company
called MAA Takaful to carry on the Takaful business.
On 3 March 2006, Bank Negara Malaysia granted approval for a new Takaful license for the joint venture
of MAAG and Solidarity. On 2 May 2006, MAA Takaful was incorporated with a paid up capital of
RM100 million and licensed on 1 July 2007 as a composite Takaful Operator. Today, MAA Takaful has an
agency force of over 10,000.

 PRODUCTS

FAMILY

Takafulink

Takafulink Education

Takafulink Hajj

Takafulink Wanita

Takafulife Series

Takaful Term 80

SmartMedic 200

CancerCare

Takafulink Single Invest

Group Term Takaful

Mortgage Protection Plan

Group Decreasing Term Takaful

GENERAL

Property
Houseowner & Householder
Personal Accident
Motor
Burglary
Personal All Risks
Public Liability
Money
Marine Cargo
Plate Glass
Fidelity Guarantee
Equipment All Risk
Engineering

similarity
Both

takaful are broadly use general and family

products.

Both

takaful are using modified wakalah model for

family product for example My Medicare offered by
TM while Takaful medirider from TE.

DIFFRENTATION
MAA Takaful Term Takaful, member can opt to cancel their certificate.

Members have to inform the Company of the intention to cancel the certificate.
Company need to send Memo to Takaful Operator to inform the intention of member to cancel the
certificate

Takaful Operator will refund members unearned portion of the members contribution

IKHLAS Group Term Takaful cover

Death Benefit in the event of death of the participant within the term of the certificate, the Sum Covered
(SC) plus the balance in the participants Personal Risk Investment Account (PRIA) will be payable, in one
lump sum, to the Grantee.

TPD Benefit in the event of TPD of the participant within the term of the certificate, the SC plus the

TAKAFUL MODELS
There are three main different Takaful Models use today.

Takaful
Models

Mudharabah

Wakalah

Wakala -waqf
model

Mudaraba Model
THE SURPLUS IS SHARED
BETWEEN THE
PARTICIPANTS WITH A
TAKAFUL OPERATOR. THE
SHARING OF SUCH PROFIT
(SURPLUS) MAY BE IN A
RATIO 5:5 , 6:4 ETC. AS
MUTUALLY AGREED
BETWEEN THE
CONTRACTING PARTIES.
GENERALLY, THESE RISK
SHARING ARRANGEMENTS
ALLOW THE TAKAFUL
OPERATOR TO SHARE IN
THE UNDERWRITING
RESULTS FROM
OPERATIONS AS WELL AS
THE FAVORABLE
PERFORMANCE RETURNS
ON INVESTED PREMIUMS.

Wakala Model
COOPERATIVE RISK
SHARING OCCURS AMONG

PARTICIPANTS WHERE A
TAKAFUL OPERATOR EARNS
A FEE FOR SERVICES (AS A
WAKEEL OR AGENT) AND
DOES NOT PARTICIPATE OR

SHARE IN ANY
UNDERWRITING RESULTS AS
THESE BELONG TO
PARTICIPANTS AS SURPLUS
OR DEFICIT. UNDER THE ALWAKALA MODEL, THE
OPERATOR MAY ALSO

CHARGE A FUND
MANAGEMENT FEE AND

PERFORMANCE INCENTIVE
FEE.

Wakala -Waqf Model

It is a WAKALAH model with a separate
legal entity of WAQF in-between.
The relationship of the participants and the
operator is directly with the WAQF fund. The
operator is the Wakeel of the fund and the
participants pay contribution to the WAQF
fund by way of Tabarru
The contributions received would also be a
part of this fund and the combined amount
will be used for investment and the profits
earned would again be deposited into the
same fund which also eliminates the issue of
Gharar.
Losses to the participant are paid by the
company from the same fund.
Operational expenses that are incurred for
providing Takaful services are also met from
the same fund.

Role of takaful in Islamic economic system.

ul
f
ka
a
T

ce
i
v
er

welfare
scheme

Fo
rM
um u
ma slim
h

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.

Issues
&
challenges
faced by Takaful

1. Development Of Human
Resource
TAKAFUL IS OBSTACLE BY LESS HUMAN
RESOURCES.
LACK OF TALENTED, SKILLED AND
EXPERIENCED PEOPLE.
IT IS GOOD TO TEACH PEOPLE TAKAFUL
CONCEPT.

2. Lack of Awareness
ISLAMIC

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
IT

STILL STICK TO CONVENTIONAL INSURANCE.

IS IMPORTANT TO ADDRESS EDUCATIONAL ISSUES AND

CONSUMER AWARENESS.

TO DEVELOP

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

REGION.

OF TAKAFUL IS BEING PRACTICED BY SPECIFIC

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

OF REFERENCE.

NO MANUAL AND STANDARD TERMS

5. Shortage of Shariah-compliant
assets
THE

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
LIFE

INSURANCE

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.

Suggested measures

IN VIEW OF THE IMPORTANT OF CUSTOMER AWARENESS

TOWARDS PROMOTING THE SOUND TAKAFUL INDUSTRY, INFORMATION OF

NATIONAL AND INTERNATIONAL TAKAFUL ASSOCIATION.

MARKET

PENETRATION

TO

FURTHER

ENTRENCH

ITS

DEVELOPMENT

UNDERSCORE THE IMPORTANT OF ENHANCING THE PRODUCTIVITY AND

EFFICIENCY OF DISTRUBUTION CAPABILITIES.

Cont. suggested measures

EMBRANCING SMART COLLABORATION OR STRATEGIC ALLIANCE WITH

ISLAMIC

BANK

AND

FINANCIAL

INSTITUTIONS

AND

BUILDING

STRONGER CUSTOMER ALLEGINCE AND RETENTION WOULD REINFORCE

THE EFFORT TO ACHIEVE THE OBJECTIVE.

POLICY INITIATIVE OF THE REGULATORY AUTHORITY OUGHT TO BE

ESSENTIALLY DEVELOP TOWARDS ENHANCING THE EFFECTIVENESS OF
THE

INTERNAL

OPERATIONS.

CONTROL

STRUCTURE

WITHIN

THE

TAKAFUL

Conclusion

DESPITE THE CHALLENGES FACING THIS

NEW INDUSTRY, EXCITING TIMES ARE
AHEAD ONCE THE LATENT POTENTIAL IS
UNLEASHED.

THE SUCCESS OF TAKAFUL LARGELY

DEPENDS ON THAT OF ISLAMIC
FINANCIAL INSTITUTIONS ON A GLOBAL
BASIS.

INSTEAD OF BEING TAKAFOOL, WE NEED

TO PUT OUR EFFORTS TO MAKE IT
TAKAFULL, IN WHICH IS FULL OF
ATTRACTIONS AND JUSTICE TO PEOPLE.