Takaful Products

Uncertainty can never be eliminated; it remains in the Takaful Contract as well. But, since the Takaful contract comes under Tabarruaat, the uncertainty   (gharar)   is considered to be within tolerable limits under Shariah. Insurance,   being a contract   of   exchange   (muawadat),   contains   "excessive gharar" and is termed as fasid.

Risk or uncertainty can be divided into: Pure Risk and Speculative Risk. Pure Risk involves the possibility of loss or no loss. For example, damage to property due to fire. Pure Risks are the subject of insurance risk protection and Takaful. On the other hand, Speculative Risk involves the possibility of loss, no loss or gain. For example, venturing into a new business, or gambling on horse race. Speculative Risks that include a potential Gain or Profit cannot be insured. Takaful schemes use the principle of indemnification to compensate for the loss that occurs to a Takaful Participant. Takaful insures only Pure Risks and the claims are only payable in the event of Loss to cover repairs, damage, replacement of property, or an agreed fixed amount.

Takaful operators are mutual or cooperative   entities. The goal of Takaful is community well-being and self-sustaining operations,   not high profits. Under the Takaful Mudarabah Model, surplus   (or profits) is shared fairly and equitably between   the shareholders   and the policyholders   (i.e. the 'Participants').   Under the Takaful Wakalah Model, surplus is returned entirely to the Participants.

A Takaful scheme gives us an opportunity to practice the virtues of Islam, including self-purification. Surah AI Maa'idah (V.2) says: "Help one another in furthering virtue and Taqwa (God-consciousness), and do not help one another in evil and transgression".   In a Hadith narrated by Ahmad and Abu Daud: Whosoever fulfils the intentions (needs) of his brother, Allah will fulfil his intentions. And Allah always helps those who help their brothers in need. The first Constitution   in Medina (622 CE) arranged by Prophet Muhammed (PBUH) contained   three aspects directly related to risk protection: social insurance for the Jews, Ansar and Christians; Article 3 concerning   'wergild' or 'blood   money';   and provision   for Fidyah (ransom) and 'aaqila'. We should follow his (PBUH) example to meet our needs and social obligations.

No. Takaful   companies     are   as   competitive     as   their conventional insurance counterparts. Opting for Takaful will not make you pay any higher costs, as such.

Yes, Takaful companies offer the same variety of products offered by any insurance company, whether it is Fire, Marine, Motor, etc. In addition, most of the Takaful operators have the expertise   and experience to deliver   tailor-made   specific solutions for the benefit and convenience of their clients. The only exceptions are those risks that are not in conformity with the Shariah, e.g. breweries, casinos etc.

All Takaful Operators are governed by the SECP's Takaful Rules, 2005 that require the Takaful operators to constitute a "Shariah Board” comprising of Shariah Scholars of repute. Moreover, all Takaful companies have to undergo a "Shariah audit" as well, in addition to the customary Accounting audit, in each accounting period.

In Islam, there is room for diversity within certain prescribed parameters. Over the centuries, several Takaful Models have evolved which are approved by the Islamic scholars. While they all share the same fundamental goal of co-operative risk sharing, these models differ slightly in legal structure and organizational   operations. Takaful Models are usually described by the Islamic contracts used; namely, Hibbah, or 100% Tabarru' [Sudan], or Al Mudarabah [Bahrain/Malaysia], or AI Wakalah [Saudi Arabia], or Wakala/Waqf [Pakistan].

According to the SECP’s Takaful Rules, 2005, in Pakistan a Takaful product shall be based on the principle of Wakala or Mudaraba or both. Therefore, Takaful Operators in Pakistan follow a refined hybrid model named "Wakala - Waqf model. It is a Wakala model in which the fund is made a separate legal entity by virtue of it being a waqf. 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 (contribution).

Unlike insurance companies, whose investment income may contain Riba, Takaful companies   invest funds in Property, Islamic Banks, Shariah compliant Stocks and other Shariah approved securities like Sukuk bonds etc.

The Takaful Operator acts only as the Wakeel of the Waqf Fund. If, at the end of the year, there is surplus in the Fund (I.e. after adding all its income and deducting all the outgo), such surplus will be distributed amongst the participants proportionately after taking into account any claim benefits already availed.

A General Takaful operator   may create a single   PTF or separate PTFs for different classes of business." (Section 8(5) of the SEECP's Takaful Rules, 2005). The surplus is thus calculated in accordance with the practice adopted.

procedures, including claims, are the same as in conventional insurance companies. The difference lies in the nature of the contract, not in the procedures.

Takaful is a new phenomenon in Pakistan. The first Takaful company was established in 1979 - The lslamic lnsurance Company of Sudan. Now, there are more than 100 Takaful Companies in over 20 countries.

Although the end result is the same since both insurance and Takaful aim to provide compensation against possible losses, yet the crucial difference lies in the way that each does this. The notion "ends justify means" does not hold when it comes to lslam where both the ends as well as the means have to be in order. Chicken can either be slaughtered or given an electric shock; both achieve the same end, a dead chicken. However, the former way makes the meat Halaal for eating where as the later renders it Haraam.