Takaful

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3. Conventional Insurance is motivated on increasing the profit, while Takaful is non-profit oriented, but mutual assistance oriented.

4. In Conventional Insurance the policy holders do not have the right to elect the director of the company and see the annual accounts, whereas in Takaful it’s transparent and the operator is elected by the participants.

5. In Takaful system if the participant dies before maturity, he is entitled for entire premiums, including profit (on premium), dividends, bonuses and donations, while if he/she is alive on maturity, except donation he gets all other benefits.

6. In Conventional Insurance, agents payment is done from the Insured’s paid premium, whereas in Takaful it is paid by the company as they work for the company.

7. In Takaful system if the policy holder / participant die before the expiry of policy the insurable interest goes to his/ her heirs according to the principal of Mirth or Wasiyyah (Islamic Will).

Conventional insurance

Conventional insurance operates in such a way that premium is paid by policy holders to insurance company and then this amount is invested by insurance company in interest bearing or non shariah compliant investing areas. Amount of interest and profit is received by insurance companies and then surplus is retained in the company without distributing it among policy holders and only claims are met with this surplus

[pic 1]

Takaful insurance

Takaful operates in such a way that the participants contribute their money and formulate a pool of money. This money is then invested to earn Halal profit in sharia compliant investments. The amount of profit earned is then added in money pool and is then distributed among the participants after satisfying any claim as a renewal discount. The Takaful operator only receives Wakalah fee.[pic 2]

- These are Takaful companies that are currently operating in Malaysia(local and international) and whether they are composite or single license

Takaful Operators

No.

Name

Ownership

1

AIA AFG Takaful Bhd.

Foreigner

Single license

2

AmFamily Takaful Berhad

Local

Single license

3

CIMB Aviva Takaful Berhad

Local

Composite license

4

Etiqa Takaful Berhad

Local

Composite license

5

Great Eastern Takaful Sdn Bhd

Foreigner

Composite license

6

Hong Leong MSIG Takaful Berhad

Local

Composite license

7

HSBC Amanah Takaful (Malaysia) Sdn Bhd

Local

Composite license

8

ING PUBLIC Takaful Ehsan Berhad

Foreigner

Single license

9

MAA Takaful Berhad

Local

Composite license

10

Prudential BSN Takaful Berhad

Local

Composite license

11

Syarikat Takaful Malaysia Berhad

Local

Composite license

12

Takaful Ikhlas Sdn. Bhd.

Local

Composite license

International Takaful Operator

No.

Name

Ownership

1

AIA Takaful International Bhd

Foreigner

Composite license

- How many years are they given to separate their businesses by the Islamic Financial Services Act 2013?

One of the main highlights of the IFSA is that it requires composite players to split their family and general takaful businesses under separate licences. Currently, eight of the 12 takaful companies in Malaysia are composites, and they have been given five years to separate their operations. The IFSA may well lead to some level of consolidation in the market in the coming years. But at the same time, we may see solidly capitalised takaful institutions at a time when the market is in need of regional takaful champions to provide leadership to the growing internationalisation of the industry.

On 30 June 2013, the Financial Services Act 2013 (“FSA”) and the Islamic Financial Services Act 2013 (“IFSA”) (collectively referred to as “Acts”) have come into effect by substituting and repealing the Banking and Financial Institutions Act 1989, the Insurance Act 1996, the Payment Systems Act 2003, the Exchange Control Act 1953, the Islamic Banking Act 1983 and the Takaful Act 1984. The objectives of the Acts are to provide Bank Negara Malaysia/ Central Bank of