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Introduction

The word Takaful is derived from the Arabic word “kafala” which literally means to be responsible or liable for or to guarantee. Allah says in Surah Al-Maidah: “And help one another in goodness and piety, and do not help one another in sin and aggression…”. Takaful holds a different concept from conventional insurance as it is based on Shariah compliance. It is a cooperative system of reimbursement in case of loss, and it is a form of mutual help (taʿāwun) in furthering good virtue by helping others who are in need or in hardship. Takaful has always been known to the community as the “Islamic” version of conventional insurance which is rejected by the Shariah as it contains elements of uncertainty (gharar), interest (riba) and gambling (maysir). As we all know, if no loss occurs and policyholders receive nothing, it is unclear what the policyholder is buying or paying for. In the event of a loss, policyholders receive varied sums of compensation. On top of that, insurance funds are frequently invested in interest-bearing securities, therefore riba and maysir are present in such agreements. Takaful, where participants contribute to a takaful fund based on the idea of mutual aid, is thus an alternative to conventional insurance. It is carried out by mutual donation (tabarruʿ) and not through the “sale of coverage” of a commercial. In contrast to the traditional insurance contract, which is a bilateral exchange contract, takaful implies a unilateral, charitable contract. However, in a charitable contract, gharar is accepted.

Three guiding principles form the foundation of Takaful, and they are: Mutual responsibility, mutual assistance to one another and lastly, protecting one from catastrophes and other hardship whereby the financial contribution is based on the concept of tabarruʿ.

Based on research conducted, Malaysians purchase a much smaller proportion of Takaful products than they do conventional insurance. Comparative to conventional insurance, Takaful operators are still growing at a slow rate. Therefore, this study is crucial for them as Takaful operators will have to identify the elements that Malaysians consider when choosing Takaful products to raise the caliber of their goods and services and draw in more customers.

The Differences Between Conventional Insurance and Takaful

There are many factors influencing the choice of takaful over conventional insurance, and this is due to the difference between them. Furthermore, as Muslims, we should always pick the safer option, "اليقين لا يزول بالشك", which means certainty is not abrogated by doubt. In this case, conventional insurance may involve riba and some other elements that are not Shariah-compliant. On the other hand, takaful practices are free from the elements of riba, gharar and maysir and evolved around the elements of mudaraba[i], tabarru’ (donation) and other shariah-justified elements. Furthermore, while conventional insurance is only focused and based on commercial concerns and factors, takaful is built on mutual cooperation. There are numerous other differences between the two, but in conclusion, Muslims should always choose the safer alternative when it is shariah compliant to avoid any doubt and uncertainty.

Elements that Influence Clients to Purchase Takaful Products

According to research and surveys, many clients switch from conventional insurance to Takaful products primarily to avoid the previously mentioned prohibited elements of uncertainty. Additionally, there are numerous other elements that draw and attract clients to takaful products and have an impact on their decisions, some of which include:

1) It is undeniable that takaful agents play a crucial role in promoting the products and persuading potential clients to purchase them. Their ability to communicate, from their first and initial pitch to their closing statements, determines the likelihood of a sale in addition to the significant reasons that will be discussed later. It is important to build on a strong first impression by gaining trust and establishing credibility.

2) Awareness-raising is as important to make the public consciousness of the issue. The takaful agents in this situation ought to inform and increase public understanding of the distinctions between takaful and conventional insurance. They should emphasize that takaful is a safer option and alternative and that it is our responsibility as Muslims to find avenues to maintain their religious obligations to protect both their akhirah and worldly living.

3) The expansion of the takaful product selection. Takaful agents are becoming more innovative and creative in expanding their range of products. As a result, both their present and potential clients can choose from a variety of products to choose from and locate the one that best meets their needs and demands.[ii]

Learning About the Benefits of Takaful

As previously discussed, and noted, takaful agents play a crucial role in promoting the advantages and benefits of takaful. On top of that, respondents of the study also highlighted that they learned about takaful by reading the newspapers, internet and takaful agents.[iii] Since these takaful agents are the frontline personnel and the points of contact for potential takaful clients, takaful operators must regularly monitor their agents to ensure that they are knowledgeable about takaful products, both in theory and in practice. This also seems to imply that the act of endorsing and promoting takaful products can be seen as a form of dakwah. Additionally, some clients might prefer researching on their own on the internet and some might prefer to have a credible and reliable agent that can answer their queries regarding the product and the benefits of the takaful products.

Conclusion

In conclusion, out of all the elements and factors stated that influence and draw clients to purchase takaful products are indeed the takaful agents. Takaful operators and agents should work hand in hand to constantly design and develop suitable promotions for their products. This is in the hope that Malaysian Muslims specifically will appreciate and understand Takaful products, which are Shariah compliant. Therefore, this could then lead to an increase in sales and extensive growth of takaful in Malaysia.

Major Reference

Naail Mohammed Kamil and Norsham Binti Mat Nor, Factors Influencing The Choice of Takaful Over Conventional Insurance: The Case of Malaysia

http://iaif.ir/images/khareji/articles/risk/16.pdf

Endnotes

[i] Mudarabah is partnership where one party provides the capital while the other provides labor and both share in the profits. The party providing the capital is called the rabb-ul-mal ("silent partner", "financier"), and the party providing labor is called the mudarib ("working partner").

[ii] Naail Mohammed Kamil and Norsham Binti Mat Nor, Factors Influencing The Choice of Takaful Over Conventional Insurance: The Case of Malaysia, pg 8.

[iii] Naail Mohammed Kamil and Norsham Binti Mat Nor, Factors Influencing The Choice of Takaful Over Conventional Insurance: The Case of Malaysia, pg 9.

About the author

Nur Aini Mufidah binte Jasmani is an undergraduate student of the Department of Fiqh and Usul al-Fiqh at International Islamic University (IIUM), Kuala Lumpur