Al-Huda Centre of Islamic Banking &
Islamic Economics
Event
Two Days Specialized Training Workshop on
Takaful (Islamic Insurance)
Presentation Topic
Insurance Industry in Pakistan:
Takaful-Understanding the Concept
A
Review
&
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.
2.
3.
4.
5.
6.
7.
Sources
Inspiration
Pakistan: Insurance Companies
KSE: Listed Insurance Companies
KSE: Par Value Analysis
KSE: Total and Insurance Sector
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
3
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
5
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.
6
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.
7
A-3: Pakistan: Insurance Companies
Particulars
Number
%
Total
48
03
51
86
05
91
Total
03
02
05
56
05
04
09
10
A: Local
- General Insurance Companies
- Life Insurance Companies
B: Foreign
- General Insurance Companies
- Life Insurance Companies
Source: Download on March 26, 2007 from website of Board of Investments, Gop, Islamabad
8
A-4: KSE: Listed Insurance Companies
Year
1949
1952-69
1982-1989
Average annual increase 0.48
1990-2006
Average annual increase 0.63
Number
02
11
06
19
10
29
Percentage
07
38
21
66
34
100
Source: Computed from: KSE: Daily Quotation, April 27, 2007
9
A-5: KSE: Listed Insurance Companies:
Par Value Analysis
Particulars
Number Percentage
Above Par
23
79
Below Par
06
21
29
100
Total
Source: Computed from: KSE: Daily Quotation, April 27, 2007
10
A-6: KSE: Total & Insurance Sector
April 27, 2007
Particulars
Total
Number Percentage
1. KSE: Listed
companies number
657
29
4.4
2. Paid up capital Rs.
billion
3. Turnover (numberbillion) October 2006
to March 2007
601
09
1.50
3,958
06
0.15
3,579
96
2.68
137
1.60
1.16
4. Market capitalization
Rs. billion
5. GDP ($b)
Source: Computed from: KSE: Daily Quotation, April 27, 2007
11
A-7: SLIC: Growth of number of Polices
& Lives Covered
Year
S.#
Number of Polices In Force:
(Individual life)
Number of Lives (group life)
Number
(million)
Base index
%
Rolling
Index
Number
(million)
Base
index %
Rolling
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
13
A-9: KSE: Top Ten Insurance Companies
Gross Premium Written: 2005
S.No.
1
Company
Adamjee
Rs. b
6.7
%
36
2
3
EFU
NJI
6.6
1.7
36
09
15.0
81
3.6
18.6
19
100
4
Other Seven (7)
• Source: Computed from: comparative study for the year
ended December 31, 2005, Adamjee Insurance Company
Limited, P1.16.
14
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
15
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
16
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
17
C: Takaful
C-1: Protection of Certain Basic Rights
The Right of protect:
1. Religious
2. Life
3. Dignity/Honour
4. Property
5. Mind
18
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.
19
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
20
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.
21
C: Takaful
C-4: Main Takaful Operations
-
World takaful contributions:
- General takaful
- Family takaful
%
60
40
100
22
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, USA & Other
01
100
23
C: Takaful
C-5: Global Takaful Sector
Leading Countries
1. Malaysia
2. Indonesia
3. Saudi Arabia
4. USA
5. Iran
6. UAE
24
C: Takaful
C-5: Global Takaful Sector
Leading Countries
7. Egypt
8. UK
9. Kuwait
10. Algeria
11. Qatar
12. Jordan
25
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:
A Family Takaful plan
provides
cover
of
mutual aid among its
members
or
participants expressed
in the form of financial
benefits paid from the
Family Takaful Fund
should any of its
members be inflicted
by a tragedy
GENERAL TAKAFUL
Provide Protection in
the form of mutual
financial
help
to
compensate
its
members
or
participants for any
material loss, damage
or destruction that any
of them might suffer
arising
from
a
catastrophe.
27
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
28
C: Takaful
C-9: Fire Takaful Scheme
Coverage
Assets covered
 For loss or damages  Building
and/or
machines
caused by fire, lighting
or explosion (domestic)  Stocks
 Householders
Additional Coverage:
Coverage Amount





Explosion
Earthquake
Windstorm
Flood
Aircraft Coverage
 Any
compensation
under the coverage will
be based on the actual
market value during the
fire.
29
C: Takaful
C-10: Information Needed
•
•
•
•
•
Location of Building
Structure of Building
Type of Building
Occupation of Building
Sum covered
30
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
31
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)
32
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
33
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
34
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”
35
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.
36
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.
37
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
38
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.
39
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.
40
C: Takaful
C-16: Family Takaful
Maturity Period
• 10 Years
• 15 Years
• 20 Years
• 25 Years
• 30 Years
• 35 Years
• 40 Years
41
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
42
43