01
TAKAFUL
PRODUCTS:
MODELS &
OPERATIONAL
ISSUES
02
Basic Operational Models for
Takaful – Pure Cooperative,
mudharabah, wakalah, waqf and
combination wakalah &
mudharabah
DISCUSSION Family Takaful products and
their operation – Mudharabah
OVERVIEW and wakalah model, Unit-linked
Model
6.3. General Takaful products
and their operation –
Mudharabah & Wakalah model
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BASIC OPERATIONAL
MODEL ON TAKAFUL
03
BASIC
CONCEPT
OF TAKAFUL
T A B A R R U'
The main distinctive feature of takaful
is the application of tabarruʼ, which in
this context entails a voluntary
contribution by one person to another
during the former’s lifetime without
expecting any compensation in return
but which results in the transfer of the
ownership of the contribution from the
donor to the recipient.
05
The Shariah Advisory Council of
Bank Negara Malaysia (SAC BNM)
defines tabarruʼ as a contract of
gratuity or charity, i.e. to relinquish a
portion from the contribution as a
donation to fulfill the obligation of
mutual help and to use it to pay any
claim submitted by an eligible
claimant.
The tabarruʼ concept is applied to
takaful in order to indicate the
relationship between participants
MUDHARABAH 06
AAOIFI defines mudharabah as a partnership in profit whereby one party provides capital and the
other party provides labour.
Any profit is shared between the capital provider and manager in accordance with a profit sharing
ratio agreed upfront.
Any financial loss will be borne solely by the capital provider, unless the loss is due to the manager’s
negligence (taqsir), misconduct (ta’addi), or a breach of terms (mukhalafah al-shurut).
the takaful operator serves as a manager (mudharib) while participants are capital providers (rabb
al-mal
WAKALAH 06
it is an agency contract whereby a party mandates another party as
their agent to perform a particular task.
Under this model, the takaful operator serves as an agent charged
with managing and investing the contributions of their participants
and, in compensation, will enjoy a predetermined fee.
The profit and underwriting surplus, if any, will be fully distributed to
participants
THE HYBRID MODEL 07
Combines both Wakalah and
In view of the substantial
Mudharabah model
criticisms directed at the practice
of surplus sharing and the
Wakalah principle is applied in
possibility of adopting a
insurance activities while Mudharabah
performance fee, industry players
principle is used in investment of the
developed a new model: a
Takaful funds.
combination of mudharabah and
wakalah called ‘the hybrid model’.
Takaful operator entitled to agency fee
for managing the fund as wakil and a
This model is normally applied to
share of profit for managing the
family takaful products and
investment of the fund as mudarib
divides the participants’ fund into
two pools: PRF and PIF.
This approach seems to be more well-
accepted and favorable than the other
models and are widely adopted by
many newly established takaful
companies and international
organization
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TWO MAIN TAKAFUL
PRODUCTS
F A M ILY T A KA F UL G EN ER A L T A KA F UL
It is Shariah-compliant It is Shariah-compliant
alternative to the life insurance alternative to the general
insurance
04
FAMILY
TAKAFUL
PRODUCT
06
FAMILY TAKAFUL
It is a long-term policy that may span between 10-30 years, where
people come together to mutually indemnify one another against
the disaster that may occur.
The objectives of this plan are: -
to save regularly over a fixed period of time;
to earn investment returns in accordance with Islamic principles;
and
to obtain coverage in the event of death prior to maturity from a
mutual aid scheme.
03
IF S A 2 0 1 3
Subsection 16(1) A licensed takaful
operator, other than a licensed professional
retakaful operator, shall not carry on both
family takaful business and general takaful
business.
Notwithstanding subsection (1), a licensed
family takaful operator may carry on the
general takaful business relating to medical
by reason of disease or sickness or medical
expenses subject to such requirements and
conditions as may be specified by the Bank.
Any licensed takaful operator who
contravenes subsection (1) commits an
offence and shall, on conviction, be liable to
imprisonment for a term not exceeding
eight years or to a fine not exceeding
twenty-five million ringgit or to both.
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ORDINARY FAMILY
TAKAFUL
ORDINARY CONTRIBUTION
All participants mutually agree to contribute to a common pool
of fund s through donation (concept of tabarru')
Premium used in the underwriting activities in the case of
calamity and disaster for any of the members of the group.
Payment made directly to the participant or his / her
beneficiaries in accordance with the underlying takaful contract
I
09
.
The Family Takaful plan comprises the Ordinary Family Takaful plan which
covers
life Takaful plan
Retirement plan
Children Education & Marriage plan
Endowment plan
The Family Takaful is the combination of mutual financial assistance and a tool for
long term investment to develop a caring society of mutual help among Takaful
members
ORDINARY FAMILY TAKAFUL
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LIF E CO V ER A G E
Provides compensation to the covered
person or beneficiaries upon death or
Total Permanent Disability (TPD) of
the covered person.
HEA LT H PR O T ECT IO N
It provides a broader option of coverage
which includes medical and surgical
treatments, disability, critical illness,
personal accidents, hospitalization
benefits, nursing, and specific medical
coverage for women and children
COLLABORATION WITH 12
SAVINGS
The parties contribute through donations into a common pool of funds
from which the underwriting activities are carried out.
The second pool of fund constitutes savings of individual participants
which may be demanded by respective owners at maturityof certain
period of time
The two pool of funds are strategically segregated
The participants benefited individually as well as collectively from the
collaboration with savings.
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COLLABORATION
BASED ON SPECIFIC
GROUPS
Type of family plan usually structured reflecting
community, ethnic or organizational need
Participants from the same community, district, or social
group come together to establish a common pool of
funds for a specific purpose.
Membership to collaborate is limited to those who come
from the same group
Contributions to the fund may be made jointly or severally
by the organization and participant
Benefit from the common pool of fund can only be
enjoyed by the participants or their beneficiaries.
04
GENERAL
TAKAFUL
PRODUCT
17
DEFINITION
General Takaful: it is a short-term policy renewable
periodically; cover assets and other property belonging to the
participants
General Takaful Fund established through participant's
contribution and it is invested according to Shariah-compliant
investment
Proceeds accrue from such investment will be returned to the
fund for indemnifying the takaful participants.
Underwriting surpluses of the Takaful fund are distributed to
the participants annually.
The list is not exhaustive
IFSA 2013
17
IFSA 2013 - general takaful business, which
means all takaful business which is not
family 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.
05
. 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.
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TYPES OF GENERAL
TAKAFUL
The types of general takaful are continuously expanding to provide the
wide coverage of a new risks and contigencies
PERSONAL ACCIDENT TAKAFUL
Provides compensation in the event of death, disablement or
injuries that may arise from an accident
ENGINEERING TAKAFUL
comprises the coverage for machinery breakdown, loss or
damage due to machinery breakdown, boiler and pressure
vessel, as well as plant and machinery being erected
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TYPES OF GENERAL
TAKAFUL
CONTRACTORS' ALL RISK TAKAFUL
Covers any loss or damage during the construction and
maintenance period including the party's liability
EMPLOYERS' LIABILITY TAKAFUL
indemnifies damages and/or injury borne by employees during
employment
PUBLIC LIABILITY TAKAFUL
Provides compensation against any legal liability incurred for
bodily injury to third parties or damage to their property
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CO N CLUS IO N
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THANK YOU
