The concept of takaful (Islamic
insurance) was first introduced in Malaysia in 1985 when the first takaful
operator was established to fulfill the need of the general public to be
protected based on the Islamic principles. The legal basis for the establishment
of takaful operators was the Takaful Act which came into effect in 1984.
Insurance as a concept does not
contradict the practices and requirements of Syariah. In essence, insurance is
synonymous to a system of mutual help. However, Muslim jurists are of the
opinion that the operation of conventional insurance does not conform to the
rules and requirements of Syariah as it involves the elements of uncertainty (Gharar)
in the contract of insurance, gambling (Maisir) as the consequences of the
presence of uncertainty and interest (riba) in its investment activities.
Takaful is an insurance concept
in Syariah whereby a group of participants mutually agree among themselves to
guarantee each other against defined loss or damage that may inflict upon any of
them by contributing as tabarru’ or donation in the takaful funds. It emphasizes
unity and co-operation among participants. Takaful is not a new concept as it
had been practised by the Muhajirin of Mecca and the Ansar of Medina following
the hijra of the Prophet over 1400 years ago.
Tabarru’ is the agreement by a
participant to relinquish as donation, a certain proportion of the takaful
contribution that he agrees or undertakes to pay, thus enabling him to fulfill
his obligation of mutual help and joint guarantee should any of his fellow
participants suffer a defined loss. The concept of tabarru’ eliminates the
element of uncertainty in the takaful contract. The sharing of profit or surplus
that may emerge from the operations of takaful is made only after the obligation
of assisting the fellow participants has been fulfilled. Thus, the operation of
takaful may be envisaged as a profit sharing business venture between the
takaful operator and the individual members of a group of participants.
Takaful operations are regulated
and supervised by BNM since 1988 with the appointment of the BNM Governor as the
Director-General of Takaful. In October 1995, the ASEAN Takaful Group (ATG), a
grouping of takaful operators in Brunei, Indonesia, Malaysia and Singapore was
formed to enhance mutual co-operation and to facilitate the exchange of business
among takaful operators in ASEAN. In 1997, the Malaysian takaful industry to a
leap forward with the formation of ASEAN Retakaful International (L) Ltd. (ARIL)
as an offshore retakaful company in Labuan. The establishment of ARIL was to
create a vehicle for more dynamic retakaful exchanges among ATG members and
providing additional retakaful capacity for further reduce their dependence on
TYPES OF BUSINESS
The takaful business carried on
by the Malaysian takaful operators are broadly divided into family takaful
business (Islamic "life" insurance) and general takaful business (Islamic
Family Takaful Business
In general, a family takaful
plan is a combination of long-term investment and mutual financial assistance
The objectives of this plan are: -
* to save regularly over a fixed period of time;
* to earn investment returns in accordance with
* to obtain coverage in the event of death prior to
maturity from a mutual aid scheme.
Each contribution paid by the
participant is divided and credited into two separate accounts, namely: -
* The Participants' Special Account (PSA)A certain
proportion of the contribution is credited into the PSA on the basis of tabarru'.
The amount depends on the age of the participant and the cover period.
* The Participants' Account
(PA)The balance goes into the PA which is meant for savings and investments
Examples of covers available under family takaful business
are as follows:-
* Individual family takaful plans;
* Takaful mortgage plans;
* Takaful plans for education;
* Group takaful plans;
* Health/Medical takaful.
General Takaful Business
The general takaful scheme is
purely for mutual financial help on a short-term basis, usually 12 months to
compensate its participants for any material loss, damage or destruction that
any of them might suffer arising from a misfortune that might inflict upon his
properties or belongings. The contribution that a participant pays into the
general takaful fund is wholly on the basis of tabarru'. If at the end of the
period of takaful, there is a net surplus in the general takaful fund, the same
shall be shared between the participant and the operator in accordance with the
principle of al-Mudharabah, provided that the participant has not incurred any
claim and/or not received any benefits under the general takaful certificate.
The various types of general takaful scheme provided by the
takaful operators include: -
* Fire Takaful Scheme;
* Motor Takaful Scheme;
* Accident/Miscellaneous Takaful Scheme;
* Marine Takaful Scheme;
* Engineering Takaful Scheme.