• The company creates the Waqf Fund by donating initial seed money. Operator receives and deposits contribution (Premium) from the participants into the Fund and pays claims from it.
• The operator protects the Fund against risk exposure arranging Re-Takaful and building up reserves out of the Fund amount. In addition, the Operator generates income for the Fund by investing the Fund money prudently in Shar iah-compl iant inves tment securities.
• Underwriting is carried out on behalf of the Fund and therefore all profits or losses belong to the Fund.
• Participants (Policy holders) are the beneficiaries of the Fund and apart from the claim amount, all surplus i.e. balance accruing in the Fund at the end of the Accounting period is returned to them on a pro-rata basis.
Talking about Takaful, he said it is a
system of Islamic insurance based on
the principle of Ta’awun (mutual
assistance) and Tabarru
(voluntary contribution),
where the risk is shared
collectively and voluntary
by the group. It is a
pact among a group of
members who agree to
jointly guarantee themselves
against loss of
damage to any one of
them as defined in the
pact.
He said his company
Takaful Pakistan Limited
operates on the basis of shared responsibility,
brotherhood, solidarity and
mutual cooperation, and has the capacity
to underwrite risks in all avenues of
General Insurance namely Property
(Fire & Engineering), Marine, Motor,
Liabilities like Personal Accident
Takaful Policy; Bon Voyage-Travel
Accident Takaful; Humsafar-Hajj &
Umrah Travel Takaful; Mobile phone
Takaful; Money Takaful; Fidelity
Gurantee Takaful; Burglary
Takaful; all risks
contents Takaful; Third
Party Liability Takaful;
Products’ Liability Takaful;
Workmen’s Compensation
Takaful and Health
Takaful.
Islamic insurance, he
said, is sharing of the risk
by participants and not
transferring the risk from
policy holder to the Insurance company. Moreover it is sharing of risk besides group savings as you or your heirs get the benefits and part of surplus balance out of the investment made from the Fund and owned by the participants. The surplus balance (the income from the money that Waqf Fund invested in Shariah compliant instruments) belongs to members and is returned to the policy holders without a condition of continuing the Policy for another year. The ‘no claim bonus’ is also there besides paying out proportionate share from surplus profit to the policy holders, he explained.
When asked about the key differences between conventional insurance and Takaful, he said that in conventional insurance the policy-holder pays premium to the company so that he could get compensation in case of loss or damage to the insured. If there is no loss, the entire premium goes into the kitty of the insurance company. As per Islamic laws, in the transaction of money in exchange of money, both the ends of the balance should be equal, but in case of conventional insurance you pay small amount as premium and in case of loss or damage, you get several times more than the premium, this according to Shariah, is tantamount to direct Riba.
Another aspect is the existence of the Gharar. If a car has been insured, both parties do not know if any accident will occur or not and if at all when will it happen, whether in the beginning of the insured year or towards the end and how much loss will be caused. This is called Gharrar (uncertainty) and any sale contract having such uncertainty is void in Shariah. Now if nothing happens during the insured year, all premiums will go in the pocket of the Insurance Company or its shareholders but in case the car is stolen or fully damaged, the company will have to pay several times more than what it got from the Policy holder during the year as premium. Hence it is a deal where one’s benefit is the loss of the other and this comes under Maysir or gambling. The third undesirable element in conventional insurance is Riba (Interest). The premium from all policy holders is invested in interest based instruments for generating more income and from that income the claims (if any) by the policy holders are paid. All these elements are absolutely taken care of in case of Takaful which is a 100 per cent Shariah Compliant instrument.
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