Introduction of Project What is Insurance? What is conventional insurance? Modern Insurance Model How insurance is against the principles of Shariah? Takaful (Islamic insurance) Takaful Models Market Analysis Pak Kuwait Takaful and EFU General Insurance Products offered by both companies Observations
To highlight Difference b/w Conventional insurance and Islamic Insurance according to:
– – – – Procedures; Products; Growth; Revenues;
– – – – Annual reports of Pak Kuwait Takaful Co. Ltd. Annual reports of EFU General Ltd. Reports and Articles published by SECP Reports and Articles published by State Bank of Pakistan
• Insurance is a risk transfer mechanism.
• Shift some of uncertainties of life to others shoulders.
• Insurance is used as the back of all innovators.
• Developments were only possible through Insurance.
• Insurance plays an important role in economic, social and technological progress of a man.
• Equitable transfer of the risk of a loss from one entity to another. • Provide premium and secure large losses. • People contribute to a general sum that could be used for emergencies. • Firstly practiced in 1750 B.C. by Mediterranean Sailing Merchants • The Greeks and Romans introduced
• In 17th century, London's growing importance as a centre for trade increased demand for marine insurance. • In 1732 the first insurance company was formed in the South Carolina, USA. • Two types of economies – Natural economies (without money,
markets, financial instruments) Only people use to help each other – Money economies (markets, money, financial instruments) Modern sense helped businesses through use of insurance
Modern insurance model
How insurance is against the principles of Shariah?
• Al-Gharar: Refers to ‘unknown’ or ‘uncertain’ factors in a conventional insurance contract.
– Al-Jahalah – Gambling
• Al-Maisir: This the ‘gambling’ element and is said to derive from the ‘Gharar’ element.
• Riba: Refers to the interest factor present in the investment activities of conventional insurance companies.
– Riba AL-Nasiya – Riba Al-Fazl
Ø The word “Takaful” derived from “Kafala” which means “to guarantee” Ø Takaful means “guaranteeing each other” or “joint guarantee”
Ø Ø Takaful System is derived from Tabarru' system
§ means "donation; gift; contribution”
Ø It’s a mutual fund where all participant contributes to support one another in difficulties Ø Ø Takaful was practiced in form of “Aqilah” before the era of Prophet Mohammad (PBUH)
Ø Aqilah means compensation by killer for the heir of victims
Ø Wakalah (agency) Model:
– Wakalah fee is charged by the takaful company to meet operational expenses – Charged annually per policy
Ø Mudarabah Model:
– Policyholders get profit on their part of funds only if Takaful Company earns profit – Sharing of profit & loss b/w takaful operator & policyholder
Ø Wakalah plus Waqf model:
– In Pakistan, mostly “Wakal + Waqf Model” is in practice; – Operators and participants maintain a Waqf fund; – The company pay losses from this fund.
Pak Kuwait Takaful Company (Model)
Note: Above data has been obtained from SECP
Came into existance in 2004 and started operations in 2005 Honoured to be the first Islamic insurance company in Pakistan Initial paid up capital of Rs. 250 million and an authorized capital of Rs. 500 million PKTCL has been incorporated as a Joint Venture amongst:
Product and Services offered
• Motor Takaful
• Marine Takaful
• Property Takaful
• Engineering Takaful
• The Company was incorporated as a Public Limited Company on September 2, 1932
• The shares of the company are quoted on Karachi and Lahore Stock Exchanges of Pakistan;
• Principal place of business is located at EFU House, M.A. Jinnah Road, Karachi, Pakistan;
• Network of 60 branches throughout the country.
Products and Services
Ø Ø Marine Insurance
Ø Fire Insurance
Ø Motor Insurance
Ø Engineering Insurance
Premium Income Figures (in Growth RatioReturns Received of Insurance million) as per Business Before Takaful before Takaful
Source: Security and Exchange Commission of Pakistan (SECP)
Pak Kuwait Takaful and EFU General Insurance
Advantages of Takaful over the conventional insurance
Ø Full return if unwilling to continue premium
Ø Investment without interest
Ø Insured get proﬁts not the bonus
Ø Agent’s commission paid by insurer – not by insured
Ø Premium returned in General insurance
Ø Advertising costs
Ø Distribution of Zakat
Organization Principle Value Proposition Laws Ownership Management Status Form of Contract
Conventional Insurance Takaful
Profit for shareholders Profit maximization Secular/Regulations Shareholders Company management Contract of Sale Mutual for participants Affordability & spiritual satisfaction Shariah plus regulations Participants Operator Cooperative, Islamic contracts of Wakala of Mudarbah with Tabar’ru (contribution) Shariah compliant, Riba-free Participants’ account
Interest based Shareholder’s account
Marketing approaches for Growth Education sessions for General public Increase operating Branches Should hire experienced & qualified Workforce • Focus on Import & Export businesses • • • • • •