A Review of Takaful by Prof. Khawaja Ahmed Saeed
Al-Huda Centre of Islamic Banking &
Islamic Economics
Event
Two Days Specialized Training Workshop on
Takaful (Islamic Insurance)
Presentation Topic
Insurance Industry in Pakistan: A Review &
Takaful-Understanding the Concept
Presentation by
Prof. Dr. Khawaja Amjad Saeed
Principal, Hailey College of Banking & Finance
University of the Punjab, Email: kamjadsaeed@yahoo.com
Venue, Date & Time
Avari Hotel, Lahore. August 10-11, 9:30 1
Insurance Industry In Pakistan: A Review TAKAFUL:
Understanding The Concept
Prof. Dr. Khawaja Amjad Saeed*
PRESENTATION FRAME
A: Insurance In Total Framework
B: Insurance Policy
C: Takaful
*Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore-Pakistan
Email: kamjadsaeed@yahoo.com – Website: www.kamjadsaeed.edu.pk Mob: 03334363363
Member Governing Council, International Federation of Accountants (IFAC) (1997-2000),
President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and
Management Accountants of Pakistan (1997-2000), President, Association of Management
Development Institutions of South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of
the Punjab, Lahore (1994-1996), Founder Director, Institute of Business Administration (IBA),
University of the Punjab, Lahore (1973-1996).
2
A: Insurance in Total Framework
1. Sources
2. Inspiration
3. Pakistan: Insurance Companies
4. KSE: Listed Insurance Companies
5. KSE: Par Value Analysis
6. KSE: Total and Insurance Sector
7. SLIC: Growth of Number of Policies and
Lives Covered
8. Products Offered as Revenue Drivers
9. KSE: Top Ten Insurance Companies
Gross Premium Written: 2005
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B: Insurance Policy 2007
C: Takaful
1. Protection Certain Basic Right
2. Al-Takaful
3. Takaful-Inretrospect
4. Main Takaful Operations
5. Global Takaful Sector
6. Types f Main Takaful
7. Family & General Takaful
8. General Takaful
9. Five Takaful Scheme
10. Information Needed
4
B: Insurance Policy 2007
C: Takaful
11. Motor, Accident & Liability Takaful
Schemes
12. Engineering Takaful Scheme
13. House Owoner’s & Householder’s
Scheme
14. Family Takaful
15. Family Takaful Plan
16. Family Takaful: Individual & Group Plans
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A-1: Sources
1. Downloads from Internet-2007.
2. Insurance Policy of Pakistan, April, 2007.
3. Pakistan & Gulf Economist, Karachi
Various Issues.
4. ICIEF Work, Malaysia.
5. Journal of Islamic Banking Finance,
Karachi.
6. Sharing thoughts with Scholars in
Malaysia 2006.
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A-2: Inspiration: Takaful (Islamic
Insurance)
“Instead of turning more clerks and government
servants, your College is now offering suitable
subjects for students which would enable them
to take place in:
Commerce
Trade
Industry
Banking
Insurance Business
It should be the aim of our college to produce
first class experts in---- specialized subjects”
Quaid-e-Azam Address in Edwards College,
Peshawar, April 18, 1948.
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A-3: Pakistan: Insurance Companies
Particulars Number %
A: Local
- General Insurance Companies 48 86
- Life Insurance Companies 03 05
Total 51 91
B: Foreign
- General Insurance Companies 03 05
- Life Insurance Companies 02 04
05 09
Total 56 10
Source: Download on March 26, 2007 from website of Board of Investments, Gop, Islamabad
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A-4: KSE: Listed Insurance Companies
Year Number Percentage
1949 02 07
1952-69 11 38
1982-1989 06 21
Average annual increase 0.48 19 66
1990-2006 10 34
Average annual increase 0.63 29 100
Source: Computed from: KSE: Daily Quotation, April 27, 2007
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A-5: KSE: Listed Insurance Companies:
Par Value Analysis
Particulars Number Percentage
Above Par 23 79
Below Par 06 21
Total 29 100
Source: Computed from: KSE: Daily Quotation, April 27, 2007
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A-6: KSE: Total & Insurance Sector
April 27, 2007
Particulars Total Number Percentage
1. KSE: Listed 657 29 4.4
companies number
2. Paid up capital Rs. 601 09 1.50
billion
3. Turnover (number- 3,958 06 0.15
billion) October 2006
to March 2007
4. Market capitalization 3,579 96 2.68
Rs. billion
5. GDP ($b) 137 1.60 1.16
Source: Computed from: KSE: Daily Quotation, April 27, 2007
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A-7: SLIC: Growth of number of Polices
& Lives Covered
Year Number of Polices In Force: Number of Lives (group life)
(Individual life)
S.# Number Base index Rolling Number Base Rolling
(million) % Index (million) index % Index
2005 2.04 112 106 3.73 113 96
2004 1.93 106 104 3.90 118 106
2003 1.85 102 103 3.63 111 107
2002 1.80 099 099 3.44 104 104
2001 1.81 100 100 3.30 100 100
Annual Average Growth (% Percentage coverage to total Pakistan
1.26 2.40 2.60
Source: Computed from: SLIC Annual Report 2005, P.61. 12
A-8: Products Offered as Revenue
Drivers
S. No. Products
1 Fire
2 Marine
3 Motor
4 Miscellaneous*
*Scope being expanded
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A-9: KSE: Top Ten Insurance Companies
Gross Premium Written: 2005
S.No. Company Rs. b %
1 Adamjee 6.7 36
2 EFU 6.6 36
3 NJI 1.7 09
15.0 81
4 Other Seven (7) 3.6 19
18.6 100
• Source: Computed from: comparative study for the year
ended December 31, 2005, Adamjee Insurance Company
Limited, P1.16.
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B: Insurance Policy: 2007
1: Aim
1. Increase penetration.
2. Remove impediments to insurance.
3. Rational role of public sector in line with
international practices.
4. Increase coverage from 0.28% to1.00 in 3
years.
2: Contribution
1. Increase savings
2. Risk investigation
3. Capital formation and investment levels
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B: Insurance Policy: 2007
3: Strategy
1. Improve coverage and outreach.
2. Areas:
- Health
- General
- Micro Insurance
3. SLIC conversion into company
4. Postal life insurance-company with
insurance law
5. Public sector insurance entities to be
corporatized
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B: Insurance Policy: 2007
3: Strategy
6. BODs be strengthened with professionals
7. Aggressive marketing
8. Open insurance of public property to
private insurance companies
4: Ministry’s Suggestions
1. Introduction of Takaful
2. Others--------
Source:Extracted from: Daily Times & Dawn, April 14, 2007
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C: Takaful
C-1: Protection of Certain Basic Rights
The Right of protect:
1. Religious
2. Life
3. Dignity/Honour
4. Property
5. Mind
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C: Takaful
C-2: Al-Takaful
• Joint guarantee.
• Pact among a members or participants
who agree to jointly guarantee among
themselves against loss or damage.
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C: Takaful
C-3: Takaful – Inretrospect
- Started 28 years ago:
- UAE: The Islamic Arab Insurance Co.
- Sudan: Islamic Insurance Co.
- 1984: Malaysia
- Pioneering role
- First legal framework (Takaful Act)
- Sudan & Iran
- Islamic Regulatory environment
- Now movement has been blossomed
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C: Takaful
C-4: Main Takaful Operations
- Estimate.
- 60 Takaful companies.
- 3 Retakaful companies.
- Takaful windows.
- One of the fastest growing segments in
insurance.
- 20% p.a average growth.
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C: Takaful
C-4: Main Takaful Operations
- World takaful contributions:
%
- General takaful 60
- Family takaful 40
100
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C: Takaful
C-4: Main Takaful Operations
Geographical Spread
%
1. South & East Asia 56
2. Family Takaful Middle East 36
3. Africa 07
4. Europe, USAUnited States of America & Other 01
100
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C: Takaful
C-5: Global Takaful Sector
Leading Countries
1. Malaysia
2. Indonesia
3. Saudi Arabia
4. USAUnited States of America
5. Iran
6. UAE
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C: Takaful
C-5: Global Takaful Sector
Leading Countries
7. Egypt
8. UK
9. Kuwait
10. Algeria
11. Qatar
12. Jordan
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C: Takaful
C-6: Types of Main Takaful
The commercial activity of takaful is
reflected in two basic types of business
that it undertakes.
The types of business are as follows:
- General Takaful
- Family Takaful Business
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C: Takaful
C-7: Family & General Takaful
FAMILY TAKAFUL: GENERAL TAKAFUL
A Family Takaful plan Provide Protection in
provides cover of the form of mutual
mutual aid among its financial help to
members or compensate its
participants expressed members or
in the form of financial participants for any
benefits paid from the material loss, damage
Family Takaful Fund or destruction that any
should any of its of them might suffer
members be inflicted arising from a
by a tragedy catastrophe.
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C: Takaful
C-8: General Takaful
• Fire takaful scheme
• Motor takaful scheme
• Accident takaful scheme
• Liability takaful schemes
• Engineering takaful schemes
• House owner’s Householder’s Takaful
schemes
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C: Takaful
C-9: Fire Takaful Scheme
Coverage Assets covered
For loss or damages Building and/or
caused by fire, lighting machines
or explosion (domestic) Stocks
Householders
Additional Coverage: Coverage Amount
Explosion Any compensation
Earthquake under the coverage will
Windstorm be based on the actual
Flood market value during the
Aircraft Coverage fire.
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C: Takaful
C-10: Information Needed
• Location of Building
• Structure of Building
• Type of Building
• Occupation of Building
• Sum covered
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C: Takaful
C-11: Motor, Accident & Liability Takaful Schemes
Motor Takaful Scheme
- Private Car/Motorcycle
Accident Takaful Scheme
- Personal Accident
- Group Personal Accident
Liability Takaful Scheme
- Employer’s Liability Takaful
- Public Liability
- Workmen’s Compensation
- Contractor’s All Risk
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C: Takaful
C-12: Engineering Takaful Scheme
• Machinery Breakdown Takaful
• Loss of Profits Due to Machinery
Breakdown
• Boilers and Pressure Vessel
• Erection All Risk
• Storage Tanks
• Marine Cargo (Inland Transits)
• Marine Cargo (By Sea)
• Marine Cargo (by Air)
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C: Takaful
C-13: House Owner's & Householder's Takaful Scheme
Coverage House Owners
• Cover against loss or damage of building (house).
House Holders
• Cover against loss or damage of household contents.
Scope of Cover
• Fire, lightning, thunder and underground fire
• Explosion
• Aircraft damage
• Impact damage
• Bursts or overflow from water tanks, pipes or any
facilities
• Theft caused by forcible entry
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C: Takaful
C-13: House Owner's & Householder's Takaful Scheme
Scope of Cover
• Tidal waves, hurricane, thunderstorm or heavy rain
• Earthquake and volcanic explosion
• Flood
• Liability to the public
• Loss of rent up to 10% of sum covered of the house.
Eligibility
• Individuals owning a house
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C: Takaful
C-14: Family Takaful Scheme
• The modus operandi for Islamic
Insurance companies operating life
business are almost similar but more
clarification is needed. Life policies are
issued in the name and style of Family
Takaful Scheme.
• Each installment paid by the participants
is divided and credited into two separate
accounts namely “The Participant
Account” and the “Special Account”
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C: Takaful
C-14: Family Takaful Scheme
• The amount that is credited into these
two accounts is invested as per Shariah
Code and profits are shared between the
Participants and the company in an
agreed ratio. The major portion of the
profit (say 80%) is paid to the policy
holders and the company is entitled to
get the balance amount of the profit only.
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C: Takaful
C-15: Family Takaful Plan
INTRODUCTION
With the Family Takaful Plan you can be
assured of a certain sum of money which
will go a long way to ease the financial
burden of your loved ones in the event of
your untimely death. You will enjoy tax
relief too from your Takaful installment.
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C: Takaful
C-16: Family Takaful Plan
Individual Plans Group Plans
Family Takaful Plan Group Family Takaful
Takaful Mortgage Plan
Takaful Annuity Scheme Group Medical Takaful
family Takaful Plan Plan
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C: Takaful
C-16: Family Takaful
• Flexible monthly installments.
• Long-term financial program to facilitate the
creation of your personal savings and retirement
fund.
• Choice of maturity periods between 10 to 40 years
at your convenience.
• Supplementary over for hospitalization benefits,
personal accident, permanent disability.
• Open to all individuals between the ages of 18 to
55 years old.
• No forfeiture of your takaful installments in the
event of cancellation.
• Facility of part withdrawal.
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C: Takaful
C-16: Family Takaful
Purpose
• A systematic savings and investment program
that could grow into a long-term fund for your
family endowment in case of your untimely
death before the maturity period.
• As an assurance to help you through with any
financial tide in case of mishap such as
accident, permanent disability or to finance
your hospitalization bills
Eligibility
• Open to all individuals aged between 18 to 55
years old.
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C: Takaful
C-16: Family Takaful
Maturity Period
• 10 Years
• 15 Years
• 20 Years
• 25 Years
• 30 Years
• 35 Years
• 40 Years
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C: Takaful
C-16: Family Takaful
Supplementary Cover
• Permanent Total Disability
• Personal Accident
• Hospitalization Benefits
Mode of Payment
• Salary deduction
• Bank Standing Instruction
• Direct Payment by cash or cheque
• Credit or Charge Card
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