Takaful for all

Unlike conventional insurance, this scheme is about the intention to help one another in financial protection.

BEFORE Prophet Muhammad and the coming of Islam, tribes in the Arab desert lived by a social code whereby a group would bind together, in good times and bad.

If an individual member of their unit suffered harm, loss of property or death, the unit would cover such loss by revenge, blood-letting, or payment of blood money.

“Bound by these principles of al-aqilah (societal responsibility) and diat (blood money), they believed that if you harm somebody, you have to recompense another person for the harm caused. But if you cannot pay, then the community will come together to pay,” says Datuk Syed Moheeb Syed Kamarulzaman, chairman of the Malaysian Takaful Association.

Syed Moheeb adds that the concept of a group sharing in one’s misfortune was also prevalent among Chinese traders of yore.

“For instance, if those in a caravan group were attacked by bandits, if something happened to their camels, or if they faced trouble on their ship, then the rest of the group would chip in to pay for any losses.”

These age-old practices form the basis of the Takaful insurance system, which became more clearly defined under the spiritual beliefs of Islam, guided by the rules and regulations of Syariah.

Driven by the value of mutual protection, a Takaful scheme is similar to conventional insurance in many ways.

“In Takaful, many pay into a pool and funds from the pool are used to help the unfortunate few,” says Syed Moheeb.

“The difference is that, in Takaful, people put their money into the pool with the specific intention of helping the unfortunate.”

As illustrated by the historical perspective above, Takaful is based on the simple community practice of coming together to help one another.

“In Takaful, there are many edicts that encourage us to take care of other people, to ensure the financial stability of our kin, as well as to ensure that there is responsibility and bond with the society as a whole. In conventional insurance, which is purely a commercial transaction, these values are absent.”

The belief is that if you join a Takaful scheme with the pure intention of protecting the unfortunate, such good will be recompensed to you in the form of divine blessings later on.

Although Syed Moheeb quotes theQuran – “Help ye one another in righteousness and piety but help ye not one another in sin and rancour” (Al Maidah: 2) – he also notes that the concept of divine blessing is shared by all religions and philosophical beliefs.

However, he is not out to make Takaful sound more noble than conventional insurance.

“Insurance companies provide a service. They take heavy risks, and aim to be compensated for that. It is simply that the altruistic nature of Takaful works to the advantage of participants because it promotes the spirit of cooperation and brotherhood. If there is a surplus, then the participants will get something back.

“In Takaful, everyone’s risk is shared. So, the pool of money does not belong to the Takaful operator, who is only managing it. It belongs to all those who participate in the scheme,” he explains.

On the other hand, when you buy conventional insurance, you are transferring your risk to the insurance company. Hence, your money belongs to the company, which will use the funds to pay the unfortunate and keep the balance.

In practice, there are also other differences between Takaful and conventional insurance policies.

Although the types of available Takaful products are similar to conventional insurance in terms of classes (life, family, motor, medical), they are based on Syariah-compliant principles that create differences in the way a person contributes to the fund and receives benefits.

Syed Moheeb explains: “In Islamic law, any exchange must be fair in value (fair exchange or equality), and it must take place within a stipulated time frame (certainty).

“Therefore, to make the concept of insurance applicable under Syariah law, the wording of the contract is changed, so that it is not a contract of exchange, but a contract of donation.

“In the proposal form, the policyholder declares that ‘I donate into this pool and appoint a Takaful operator as the managing agent to handle the funds according to the best practices’.”

Malaysia is the No.2 Takaful market in the world, second only to Saudi Arabia. With eight companies and four more to come, the Takaful industry here has been growing at an average rate of 40% per year, compared with 12% for the conventional insurance industry, he adds.

It is significant that Syed Moheeb uses the phrase “joining a Takaful scheme”, instead of “buying Takaful”. “We do not sell Takaful, but we invite people to participate in the scheme or the fund.”

He is also quick to refute the perception that Takaful is only for Muslims.

“This was never the case. Perhaps this perception came about because our target market was Muslims, due to the fact that only one in 20 Muslims had any life insurance, so it made more sense to sell family or life Takaful to them.

“But of course, non-Muslims can join the Takaful scheme as well. Anybody who wants to protect his financial risk can benefit from Takaful.”

In most Takaful companies in Malaysia, an average of three or four out of 10 policyholders are non-Muslims, demonstrating their increasing interest in Takaful products, of which there is a wide range of choices.

Syed Moheeb advises consumers to do their research well before choosing which fund to join.

Even if you have already purchased conventional insurance for life, family, medical, or motor coverage, you can still consider Takaful funds to plug any gaps in your existing coverage.

“One should compare the product features, ensure the pricing is commensurate with that and look for a company that is able to provide good service.

“Do check the claims-paying capabilities of the company, as well as its reputation.

“Make sure you have a good and responsible Takaful broker or agent who will help you determine if you have protected yourself to the optimum level. Our priority is helping you ensure that all your needs are addressed,” he assures.

Credit : The Star Online


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