We thrive on prudence, transparency, partnership, friendliness and moderate Islamic approach that cater for both Muslim and non-Muslim customers, individuals or organisations.
Mortgage Reducing Term Takaful (MRTT)
MRTT is merely a Takaful policy taken to cover the outstanding balance of your housing loan in case something occurs that renders you unable to continue paying the monthly installment and provides protection to the Participant's party's next of kin ensuring that the outstanding mortgage will be settled should there be an untimely death or total permanent disablement of the Participant. The sum covered of the Policy will match the loan of the mortgage.
Hire Purchase Reducing Term Takaful (HPRTT)
HPRTT works similar to MRTT. This is a Takaful policy taken to cover the outstanding balance of your hire purchase loan in case something occurs that renders you unable to continue paying the monthly installment and provides protection to the Participant's party's next of kin ensuring that the outstanding loan will be settled should there be an untimely death or total permanent disablement of the Participant.
Group Term Takaful (GTT)
GTT covers several persons under one policy, called a master policy. The individuals covered under this policy are not parties to the contract. Usually, groups covered under this policy are employer-employee groups whereby the employer is the policyowner and the employees are the Persons Covered.
Takaful Hikmah
Takaful Hikmah is a savings scheme specially designed for Cooperatives, associations and clubs around Malaysia. With a minimum contribution of RM10, members of cooperatives, associations and clubs can save, invest and protect themselves and their family members as well. Members and their family members will receive profit sharing returns upon completion of the plan.
CIMB Islamic Market Select
CIMB Islamic Market Select (Market Select) is a capital protected* closed end single contribution investment linked plan with Takaful coverage. Market Select is available in two (2) investment horizons which are three (3) years and five (5) years to suit your needs. The funds are invested in the Islamic Negotiable Instrument of Deposit (NID-i) issued by CIMB Islamic. The NID-i offers privileged opportunity to diversify your investments in markets across the world and capitalize on the best** performing market. The 5-year Market Select provides potential annual returns payout. Both 3-year Market Select and 5-year Market Select commenced on 10 October 2008 with participation rate of 51.28% and 92.78% respectively.
* Subject to default risk by CIMB Islamic.
**Best performing strategy refers to dynamic allocation mechanism to focus on best performing markets. The economies/markets refer to three (3) market classifications of Developed Markets, Asian Emerging Markets and Next emerging Markets.
Takaful Global Giants (TGG)
TGG is a 5-year capital protection closed end single contribution investment linked plan with Takaful Coverage. The fund is invested in the Islamic Structured Product issued by CIMB Islamic. The Islamic Structured Product provides the opportunity to earn returns from the average performance of the Islamic Global Giants Index which is an equally weighted basket of twenty (20) leading global blue chips such as Procter & Gamble, Nestle and Johnson & Johnson. The fund commenced on 24 July 2007 with the participation rate of 155.44% for year 2, 147.33% for year 3, 141.05% for year 4 and 136.01% for year 5.
MyKid Takaful Edu Plan
MyKid Takaful Edu Plan is an education investment-linked plan that gives takaful protection and the potential for higher investment returns which can be used to pay for your child's education. This plan offers flexibility in managing your investment based on your and your child's changing needs as well as provides your child with protection against death as well as total and permanent disability all in one plan. This plan comes with a compulsory contribution waiver rider.
Takaful Child Protector
Takaful Child Protector provides Juvenile Critical Illness, Total & Permanent Disability, Daily Hospital Income, Triple Daily Hospital Income for ICE & Continuation Benefits. This product is exclusively for CIMB Bank customers and available only through telemarketing. This is a Conditional Guaranteed Renewabiliy Plan that offers coverage until the Participant attains the age 23.
Wealth Protector Perdana
A Takaful protection plan that protects your family in the event of an untoward occurrence. It provides adequate funds to your family based on the mutual assistance concept where participants collectively agree to give assistance within the community, in the event of death or total and permanent disability. You can be rest assured that your family can get by should any unfortunate event befallen upon you. What’s more, you will enjoy cash values on top of trusted protection.
go top
3-in-1 Education Plan
Investing in a child education is made easier with a comprehensive 3-in-1 education plan that offers high growth potential and protection through unit trust investment. In the event of death or total and permanent disability, you can be sure of your investment being protected and enabling your loved one will receive the best education available. The plan is available in both conventional and Shariah compliant versions.
Tuesday, December 2, 2008
THE CONCEPT OF TAKAFUL
Takaful is an Arabic word mean "guaranteeing each others". In takaful business, the understanding of the definition is imperative and of perennial concern to takaful practitioners. It must be entrenched in the minds of all participants who take up takaful protection that the participation into takaful scheme must be performed with utmost sincerity in order to help those faced with difficulties.
The concept introduced by Takaful is similar that of conventional insurance. Both of them are financial instruments that assist the unfortunate groups who are confronted with financial predicaments. These instruments are modern methods of shifting risks with a reward awarded to the parties that are willing to accept the exchange in these risks.
The Comparison between Takaful and Conventional Insurance
The insurance concept, of "The fortunate many helping the unfortunate few" is a concept recognized by Islam. The surah Al-Maidah from the 2nd verse in the Al-Quran states:
"Help ye one another in righteousness and piety, but help ye not one another in sin and rancor" is regarded as the main source of how this concept of helping one another is inculcated by Islam.
It is the characteristics that demarcate Takaful from Conventional Insurance? In June 15 1972 Malaysian National Fatwa Committee conducted a research on the conventional insurance contract. The Malaysian National Fatwa Committee in its fifth conference decided that life insurance implemented by the current insurance companies as a muamalah is fasid (illegal/damaged) and is not in compliance with the Islamic principles under the 'aqd aspect because it contains elements of gharar (uncertainty), maisir ( gambling), and riba'.
Elements of Gharar, Maisir, and Riba’ in the Insurance Contract
A. Gharar
Gharar means "Uncertainty".
The definition of uncertainty in the muamalah transaction is:
"When there is a matter that wants to be concealed by one party where it can raise a sense of inequality as well as tyranny to another party".
According to Ibn Rush, Gharar means:
"The lack of information known about a certain product (object), the existence of uncertainty towards the presence of that object, and the lack in quantity and conciseness on the information about the object".
Ibn Taimiyah stated that Al-Gharar means:
"When a party obtains his rights and the other party does not get what are rightfully his".
Al-Gharar is stated in the Kitab Qalyubi wa Umairah which mentions that the Mazhab Imam A-Shafie as defining gharar as:
"An (‘aqd) that has a hidden outcome from us or a situation between two possibilities where the frequent one happens to be the most feared."
Prof Madya Dr. Saiful Azhar Rosly states that:
"Al-Gharar is defined as a contract that refers to a risk and uncertainty raised from one’s manipulation that causes anguish towards a person that has been oppressed. For example in the used car business, the customer is not told of the true condition of the car. After the trade of the car is completed, the gharar in the object of trade can be made a reason to cancel the contract. This is because gharar is a result of an oppressive act done intentionally."
An insurance contact contains gharar because:
"When a claim is not made, one party (insurance company) may acquire all the profits (premium) gained whereas the other party (participant) may not obtain any profit what so ever."
This reasoning is in consonance with the definition of gharar given by Ibn Taimiyah:
"Gharar found in the contract exists because one party acquired profit while the other party did not."
According to a report made by the Islamic Insurance Company Set up Action Committee in Malaysia,
"It is clear that in the insurance contract practiced today contains elements of gharar because Ma’qud Alaih (object) is not clear, and it is connected with :-
# The uncertainty of whether the payment will be accepted as promised.
# The unknown amount to be paid.
# The unknown time it will occur.
The committee stated that the existence of gharar in an insurance contract is due to "trade". In Islam, if a subject is involved in the trade of muamalah then it must satisfy the basic principles found in trade. Some of the principles are:
# The buyer and seller
# (Ijab and Qabul) Sighah
# (Object/Subject Matter) Ma’qud Alaih
What remains a questions now is the existence of uncertainty in the "object" found in the insurance contract due to the unfulfilled conditions determined by the Syariah. For Islam, the conditions for each of the principles are important and must be fulfilled. A few of the principles an object must satisfy include:
# The object can be given in the aqad.
# The time surrender is determined.
# The quantity of the object is determined.
# The place of surrendering the object is determined.
# The object does not consist any elements prohibited by the Syara’.
The same condition applies to a couple who are getting married. They must meet the basic principles of marriage. For instance a groom, bride, guardian, 2 male witnesses who are fair (Adil), and the ijab qabul. But, if one of the conditions are not satisfied then the marriage will not be valid.
What separates Takaful and Insurance is the aspect of "Belief". Let us compare what is the difference between a married couple and a couple that live together without the bond of marriage except by a contract that is legal in the eyes of the law? Surely there exists a distinction even though the contract made by the couple is complete with all the rights mentioned in the contract, however in Islam this still remains illegal as it is against the Syariah Principles.
B. Maisir (Gambling)
The muslim scholars stated that Maisir and Gharar is related. This means that if a transaction consists elements of gharar hence there exists an element of gambling.
These two are so interrelated.
Maisir (Gambling) exists in an insurance contract when:
# The participant contributes a small amount of premium in hope to gain a large sum.
# The participant loses the money paid for the premium when the insured event does not occur.
# The company will be in deficit if it the claims are higher the amount contributed by the participants.
C. Riba
The element of riba exists in the policy loan business offered to the participant in a life insurance product. In this policy loan, the insurance company will charge interest to the participant who made the loan. It is clear here that the interest paid is a form of riba that is prohibited in Islam.
The riba element also exists from the profit of the investment fund that will be used for the payment of claims to the policyholders. This is because most of the insurance funds are invested in financial instruments such as bonds and also stocks which contain the element of riba’.
The solution to the Conventional Insurance
Islamic intellects have mutually agreed Takaful to be the substitute of conventional insurance. The tabarru' system will become the main core of the Takaful concept. This system makes insurance comply with the Islamic muamalah. Thus takaful is free from the elements of gharar and maisir.
Tabarru’
Tabarru' is an Arabic noun that means "donation; gift; contribution". Within the business context, each participant that needs protection from Takaful must be present with a sincere intention to donate in order to help other participants if they are faced with difficulties. In precise words, all participants agree to help one another.
The emphasis on this issue can be observed from a fatwa by Dr. Yusuf Al-Qardhawi that insisted Islamic insurance may exist in condition that each participant contributes into a fund used to support one another.
Today, most companies that practice Takaful is involved in the world of business. Due to that reason, the conditional tabarru' is introduced where each participant who involves in takaful need to donate sufficient amount to cover expected takaful claims. Thus, if a participant is of high risk to the company, then the rate of tabarru' contributed must be balanced with that risk.
Summary
The presence of the tabarru' principle within the takaful confriguration ensure that takaful is within the ambit of Syariah and at the same time eliminate the elements of gharar and maisir.
The use of Tabarru' in takaful contract has ensured that Islamic Insurance does not contradict Syara'. Gharar and Maisir can be eliminated with the existence of this principle. The existence of the Syariah Board (Religious Supevisory Council) ensure that each investment fulfills the Syara' laws likewise in product development. Therefore, there will not exist doubts in the Islamic Insurance muamalah and its transparence gives way to each race to together use the protection provided by Takaful.
Written by : Wan Haizan Wan Harun
Executive, Corporate Communication & Syariah Affairs
Corporate Affairs Department
Takaful Nasional Sdn. Berhad
Translated by : Mastura Mat Lani (Miss)
Executive, Actuarial Unit
Family Takaful Operations Department
Takaful Nasional Sdn. Berhad
And verily, We have sent among every Ummah (community, nation) a messenger...
(AlQuran – An Nahl, 36)
The concept introduced by Takaful is similar that of conventional insurance. Both of them are financial instruments that assist the unfortunate groups who are confronted with financial predicaments. These instruments are modern methods of shifting risks with a reward awarded to the parties that are willing to accept the exchange in these risks.
The Comparison between Takaful and Conventional Insurance
The insurance concept, of "The fortunate many helping the unfortunate few" is a concept recognized by Islam. The surah Al-Maidah from the 2nd verse in the Al-Quran states:
"Help ye one another in righteousness and piety, but help ye not one another in sin and rancor" is regarded as the main source of how this concept of helping one another is inculcated by Islam.
It is the characteristics that demarcate Takaful from Conventional Insurance? In June 15 1972 Malaysian National Fatwa Committee conducted a research on the conventional insurance contract. The Malaysian National Fatwa Committee in its fifth conference decided that life insurance implemented by the current insurance companies as a muamalah is fasid (illegal/damaged) and is not in compliance with the Islamic principles under the 'aqd aspect because it contains elements of gharar (uncertainty), maisir ( gambling), and riba'.
Elements of Gharar, Maisir, and Riba’ in the Insurance Contract
A. Gharar
Gharar means "Uncertainty".
The definition of uncertainty in the muamalah transaction is:
"When there is a matter that wants to be concealed by one party where it can raise a sense of inequality as well as tyranny to another party".
According to Ibn Rush, Gharar means:
"The lack of information known about a certain product (object), the existence of uncertainty towards the presence of that object, and the lack in quantity and conciseness on the information about the object".
Ibn Taimiyah stated that Al-Gharar means:
"When a party obtains his rights and the other party does not get what are rightfully his".
Al-Gharar is stated in the Kitab Qalyubi wa Umairah which mentions that the Mazhab Imam A-Shafie as defining gharar as:
"An (‘aqd) that has a hidden outcome from us or a situation between two possibilities where the frequent one happens to be the most feared."
Prof Madya Dr. Saiful Azhar Rosly states that:
"Al-Gharar is defined as a contract that refers to a risk and uncertainty raised from one’s manipulation that causes anguish towards a person that has been oppressed. For example in the used car business, the customer is not told of the true condition of the car. After the trade of the car is completed, the gharar in the object of trade can be made a reason to cancel the contract. This is because gharar is a result of an oppressive act done intentionally."
An insurance contact contains gharar because:
"When a claim is not made, one party (insurance company) may acquire all the profits (premium) gained whereas the other party (participant) may not obtain any profit what so ever."
This reasoning is in consonance with the definition of gharar given by Ibn Taimiyah:
"Gharar found in the contract exists because one party acquired profit while the other party did not."
According to a report made by the Islamic Insurance Company Set up Action Committee in Malaysia,
"It is clear that in the insurance contract practiced today contains elements of gharar because Ma’qud Alaih (object) is not clear, and it is connected with :-
# The uncertainty of whether the payment will be accepted as promised.
# The unknown amount to be paid.
# The unknown time it will occur.
The committee stated that the existence of gharar in an insurance contract is due to "trade". In Islam, if a subject is involved in the trade of muamalah then it must satisfy the basic principles found in trade. Some of the principles are:
# The buyer and seller
# (Ijab and Qabul) Sighah
# (Object/Subject Matter) Ma’qud Alaih
What remains a questions now is the existence of uncertainty in the "object" found in the insurance contract due to the unfulfilled conditions determined by the Syariah. For Islam, the conditions for each of the principles are important and must be fulfilled. A few of the principles an object must satisfy include:
# The object can be given in the aqad.
# The time surrender is determined.
# The quantity of the object is determined.
# The place of surrendering the object is determined.
# The object does not consist any elements prohibited by the Syara’.
The same condition applies to a couple who are getting married. They must meet the basic principles of marriage. For instance a groom, bride, guardian, 2 male witnesses who are fair (Adil), and the ijab qabul. But, if one of the conditions are not satisfied then the marriage will not be valid.
What separates Takaful and Insurance is the aspect of "Belief". Let us compare what is the difference between a married couple and a couple that live together without the bond of marriage except by a contract that is legal in the eyes of the law? Surely there exists a distinction even though the contract made by the couple is complete with all the rights mentioned in the contract, however in Islam this still remains illegal as it is against the Syariah Principles.
B. Maisir (Gambling)
The muslim scholars stated that Maisir and Gharar is related. This means that if a transaction consists elements of gharar hence there exists an element of gambling.
These two are so interrelated.
Maisir (Gambling) exists in an insurance contract when:
# The participant contributes a small amount of premium in hope to gain a large sum.
# The participant loses the money paid for the premium when the insured event does not occur.
# The company will be in deficit if it the claims are higher the amount contributed by the participants.
C. Riba
The element of riba exists in the policy loan business offered to the participant in a life insurance product. In this policy loan, the insurance company will charge interest to the participant who made the loan. It is clear here that the interest paid is a form of riba that is prohibited in Islam.
The riba element also exists from the profit of the investment fund that will be used for the payment of claims to the policyholders. This is because most of the insurance funds are invested in financial instruments such as bonds and also stocks which contain the element of riba’.
The solution to the Conventional Insurance
Islamic intellects have mutually agreed Takaful to be the substitute of conventional insurance. The tabarru' system will become the main core of the Takaful concept. This system makes insurance comply with the Islamic muamalah. Thus takaful is free from the elements of gharar and maisir.
Tabarru’
Tabarru' is an Arabic noun that means "donation; gift; contribution". Within the business context, each participant that needs protection from Takaful must be present with a sincere intention to donate in order to help other participants if they are faced with difficulties. In precise words, all participants agree to help one another.
The emphasis on this issue can be observed from a fatwa by Dr. Yusuf Al-Qardhawi that insisted Islamic insurance may exist in condition that each participant contributes into a fund used to support one another.
Today, most companies that practice Takaful is involved in the world of business. Due to that reason, the conditional tabarru' is introduced where each participant who involves in takaful need to donate sufficient amount to cover expected takaful claims. Thus, if a participant is of high risk to the company, then the rate of tabarru' contributed must be balanced with that risk.
Summary
The presence of the tabarru' principle within the takaful confriguration ensure that takaful is within the ambit of Syariah and at the same time eliminate the elements of gharar and maisir.
The use of Tabarru' in takaful contract has ensured that Islamic Insurance does not contradict Syara'. Gharar and Maisir can be eliminated with the existence of this principle. The existence of the Syariah Board (Religious Supevisory Council) ensure that each investment fulfills the Syara' laws likewise in product development. Therefore, there will not exist doubts in the Islamic Insurance muamalah and its transparence gives way to each race to together use the protection provided by Takaful.
Written by : Wan Haizan Wan Harun
Executive, Corporate Communication & Syariah Affairs
Corporate Affairs Department
Takaful Nasional Sdn. Berhad
Translated by : Mastura Mat Lani (Miss)
Executive, Actuarial Unit
Family Takaful Operations Department
Takaful Nasional Sdn. Berhad
And verily, We have sent among every Ummah (community, nation) a messenger...
(AlQuran – An Nahl, 36)
What is TAKAFUL?
What is TAKAFUL?
This is a form of Islamic insurance based on the Quranic principle of Ta'awon or mutual assistance. Takaful is a noun stemming from the Arabic verb "Kafal" meaning to take care of one's needs. Takaful means mutual help among the group i.e. each member of the group pools efforts to support the needy within the group. This is exactly like mutual insurance (cooperative insurance) as was practised in the early days of insurance and even today by certain groups. The concept of Takaful had already existed during the time of the Prophet where the Muslims contributed to a fund called Al-Kanz under the system of aqila. The contribution was for the purpose of helping members of their own community who were liable to pay diyat.
Diyat - Pre-Islamic Arab Custom of Blood -Money
In the pre-Islamic period, it was the custom of the pagan Arabs for a killer to have to pay Blood- Money (diyat) as compensation to the family of the slain. It was the right of the family of the deceased to demand compensation from the tribe or the family of the offender. The good thing about this custom is that it replaced blood-vengeance. Prior to this, the custom was blood called for blood. This led to terrible vengeance wreaked upon the killer or upon any member of his tribe. The duty of exacting vengeance (with the help of the tribe) lay upon the slain's next of kin. Although it is preferable to inflict the penalty on the person responsible for the death/injury, it may be inflicted on any member of his clan or tribe instead of on him. It is clear therefore that, ultimately, the responsibility both for the original act and for exacting vengeance is communal. This could either end the matter or start a blood feud in which the entire kin of both parties were involved.
Blood -money came into existence to curb tit-for-tat killings. It brought about conciliation between the parties at war by healing the wounds inflicted on each other. The matter would be settled on payment of compensation. The usual price to be paid was a hundred camels in the case of loss of life, one-third of that for a deep wound, five camels for the loss of a hand, an eye, or a tooth.When blood-money was paid in cash, it was 1,000 or sometimes 1,200 dinars (gold coins) which was generally spread over a period of three to four years. Although the payment of compensation was the personal responsibility of the killer, the whole tribe contributed towards the payment of the blood-money to the family of the slain so as to avoid bloodshed and destruction. Thus the whole tribe, in a way, offered protection to its individual members against a common danger. This system can be said to be a form of mutual insurance where the whole community contributes (to a common pool) to protect an individual member from financial ruin.
The system of blood-money was retained after the advent of Islam because of its virtue and benefits. The Holy Prophet was reported to have said "the virtues of the Jahiliyya (pagan Arab) are acted upon in Islam". In this connection, the Qur'an enjoined upon the believers not to waste human lives in retaliation but to let the law take its course and if the aggrieved party agreed, to a reasonable compensation, as brotherly love is better than retaliation. (Qur'an 4:92). It is also reported that the Holy Prophet (SAW) also fixed the amount of compensation for various injuries like five camels for bone-deep wounds or ten camels for the loss of every finger or toe. The compensation for death was 12,000 dinars (gold coins). The principle of compensation and group responsibility was reflected in the Covenant of Mutuality (under a system commonly called "Aqila") formed between the immigrants (Muhajirin) and the Medinans (Ansars) as soon as the Holy Messenger arrived in Medina. Through this covenant, all Muslims of Medina, irrespective of their tribe or clan, became one community. A fund was created known as "Al-Kanz" wherein members made yearly contributions. This fund helped to pay compensation on behalf of a member who was liable to pay diyat. There was another mutual system in existence known as "Qasamah". This was introduced to pay compensation in the event of death where the killer could not be identified. Umar, the second Caliph, widened this community when he ordered the preparation of registers (diwan) containing the names of Muslims in all parts of the Muslim state. The persons whose names were contained in those diwans owed one another mutual assistance and had to contribute to the payment of penalty for manslaughter committed by one of their community.
Can Muslim Engage in Risk Control?
It is a Muslim's belief that everything that happens in this world is by the will (Qadha and Qadar) of Allah. Similarly any accident or misfortune that befall us, that results in the loss of life or belongings, is by the will of Allah (swt). If that is the case, some people might ask, why should there be Takaful? Should we then not leave it to Allah and accept whatever accident, misfortune or catastrophe that befall us? Whilst it is true that we should accept whatever "misfortune" that befall us, we are also taught to avoid or reduce the possibility of these "misfortunes" by taking positive steps.
One day the Prophet (s.a.w.) saw a bedouin leaving a camel and he asked the bedouin, "why don't you tie down you camel?" The Bedouin answered, "I put my trust in Allah." The Prophet said, "Tie your camel first, then put your trust in Allah." What the Prophet (s.a.w.) has done here is teaching the bedouin to reduce the risk of losing his camel. Similarly in many actions of the Prophet (s.a.w.), we saw that he took steps to reduce risks although he could have done otherwise if he wanted to.
For example, during the Hijrah, he went to hide in the cave first instead of going straight to Madinah. He commanded the companions to migrate to Madinah by batches instead of in one big group. Again this is to reduce risks. When he went to war, he put on his armour instead of wearing light clothes.
In this modern world, one of the ways that can be done to reduce the risk of loss due to accident or misfortune is through insurance. In fact it is almost impossible to live without being affected by insurance. The house that we buy or rent has got insurance cover. The car that we buy or rent has to have insurance. The bus that we board has insurance. Insurance is all around us whether we like it or not.
This is a form of Islamic insurance based on the Quranic principle of Ta'awon or mutual assistance. Takaful is a noun stemming from the Arabic verb "Kafal" meaning to take care of one's needs. Takaful means mutual help among the group i.e. each member of the group pools efforts to support the needy within the group. This is exactly like mutual insurance (cooperative insurance) as was practised in the early days of insurance and even today by certain groups. The concept of Takaful had already existed during the time of the Prophet where the Muslims contributed to a fund called Al-Kanz under the system of aqila. The contribution was for the purpose of helping members of their own community who were liable to pay diyat.
Diyat - Pre-Islamic Arab Custom of Blood -Money
In the pre-Islamic period, it was the custom of the pagan Arabs for a killer to have to pay Blood- Money (diyat) as compensation to the family of the slain. It was the right of the family of the deceased to demand compensation from the tribe or the family of the offender. The good thing about this custom is that it replaced blood-vengeance. Prior to this, the custom was blood called for blood. This led to terrible vengeance wreaked upon the killer or upon any member of his tribe. The duty of exacting vengeance (with the help of the tribe) lay upon the slain's next of kin. Although it is preferable to inflict the penalty on the person responsible for the death/injury, it may be inflicted on any member of his clan or tribe instead of on him. It is clear therefore that, ultimately, the responsibility both for the original act and for exacting vengeance is communal. This could either end the matter or start a blood feud in which the entire kin of both parties were involved.
Blood -money came into existence to curb tit-for-tat killings. It brought about conciliation between the parties at war by healing the wounds inflicted on each other. The matter would be settled on payment of compensation. The usual price to be paid was a hundred camels in the case of loss of life, one-third of that for a deep wound, five camels for the loss of a hand, an eye, or a tooth.When blood-money was paid in cash, it was 1,000 or sometimes 1,200 dinars (gold coins) which was generally spread over a period of three to four years. Although the payment of compensation was the personal responsibility of the killer, the whole tribe contributed towards the payment of the blood-money to the family of the slain so as to avoid bloodshed and destruction. Thus the whole tribe, in a way, offered protection to its individual members against a common danger. This system can be said to be a form of mutual insurance where the whole community contributes (to a common pool) to protect an individual member from financial ruin.
The system of blood-money was retained after the advent of Islam because of its virtue and benefits. The Holy Prophet was reported to have said "the virtues of the Jahiliyya (pagan Arab) are acted upon in Islam". In this connection, the Qur'an enjoined upon the believers not to waste human lives in retaliation but to let the law take its course and if the aggrieved party agreed, to a reasonable compensation, as brotherly love is better than retaliation. (Qur'an 4:92). It is also reported that the Holy Prophet (SAW) also fixed the amount of compensation for various injuries like five camels for bone-deep wounds or ten camels for the loss of every finger or toe. The compensation for death was 12,000 dinars (gold coins). The principle of compensation and group responsibility was reflected in the Covenant of Mutuality (under a system commonly called "Aqila") formed between the immigrants (Muhajirin) and the Medinans (Ansars) as soon as the Holy Messenger arrived in Medina. Through this covenant, all Muslims of Medina, irrespective of their tribe or clan, became one community. A fund was created known as "Al-Kanz" wherein members made yearly contributions. This fund helped to pay compensation on behalf of a member who was liable to pay diyat. There was another mutual system in existence known as "Qasamah". This was introduced to pay compensation in the event of death where the killer could not be identified. Umar, the second Caliph, widened this community when he ordered the preparation of registers (diwan) containing the names of Muslims in all parts of the Muslim state. The persons whose names were contained in those diwans owed one another mutual assistance and had to contribute to the payment of penalty for manslaughter committed by one of their community.
Can Muslim Engage in Risk Control?
It is a Muslim's belief that everything that happens in this world is by the will (Qadha and Qadar) of Allah. Similarly any accident or misfortune that befall us, that results in the loss of life or belongings, is by the will of Allah (swt). If that is the case, some people might ask, why should there be Takaful? Should we then not leave it to Allah and accept whatever accident, misfortune or catastrophe that befall us? Whilst it is true that we should accept whatever "misfortune" that befall us, we are also taught to avoid or reduce the possibility of these "misfortunes" by taking positive steps.
One day the Prophet (s.a.w.) saw a bedouin leaving a camel and he asked the bedouin, "why don't you tie down you camel?" The Bedouin answered, "I put my trust in Allah." The Prophet said, "Tie your camel first, then put your trust in Allah." What the Prophet (s.a.w.) has done here is teaching the bedouin to reduce the risk of losing his camel. Similarly in many actions of the Prophet (s.a.w.), we saw that he took steps to reduce risks although he could have done otherwise if he wanted to.
For example, during the Hijrah, he went to hide in the cave first instead of going straight to Madinah. He commanded the companions to migrate to Madinah by batches instead of in one big group. Again this is to reduce risks. When he went to war, he put on his armour instead of wearing light clothes.
In this modern world, one of the ways that can be done to reduce the risk of loss due to accident or misfortune is through insurance. In fact it is almost impossible to live without being affected by insurance. The house that we buy or rent has got insurance cover. The car that we buy or rent has to have insurance. The bus that we board has insurance. Insurance is all around us whether we like it or not.
The Mudharabah Model (Profit Sharing)
The Mudharabah Model (Profit Sharing)
By this principle, the entrepreneur or al-Mudharib (takaful operator) will accept payment of the takaful installments or takaful contributions (premium) termed as Ra's-ul-Mal from investors or providers of capital or fund (takaful participants) acting as Sahib-ul-Mal. The contract specifies how the profit (surplus) from the operations of takaful managed by the takaful operator is to be shared, in accordance with the principle of al-Mudharabah, between the participants as the providers of capital and the takaful operator as the entrepreneur. The sharing of such profit may be in a ratio 50:50, 60:40, 70:30, etc. as mutually agreed between the contracting parties.
In order to eliminate the element of uncertainty in the takaful contract, the concept of tabarru (to donate, to contribute, to give away) is incorporated. In relation to this a participant shall agree to relinquish as tabarru, certain proportion of his takaful installments or takaful contributions that he agrees or undertakes to pay thus enabling him to fulfill his obligation of mutual help and joint guarantee should any of his fellow participants suffer a defined loss.
In essence, tabarru would enable the participants to perform their deeds in sincerely assisting fellow participants who might suffer a loss or damage due to a catastrophe or disaster. The sharing of profit or surplus that may emerge from the operations of takaful, is made only after the obligation of assisting the fellow participants has been fulfilled. It is imperative, therefore, for a takaful operator to maintain adequate assets of the defined funds under its care whilst simultaneously striving prudently to ensure the funds are sufficiently protected against undue over-exposure. Therefore the provision of insurance cover as a form of business in conformity with Shariah is based on the Islamic principles of al-Takaful and al-Mudharabah.
Al-Hari Rayais the pact among a group of people, called participants, reciprocally guaranteeing each other; while Al-Mudharabah is the commercial profit-sharing contract between the provider or providers of funds for a business venture and the entrepreneur who actually conducts the business. The operation of takaful may thus be envisaged as the profit-sharing business venture between the takaful operator and the individual members of a group of participants who desire to reciprocally guarantee each other against a certain loss or damage that may be inflicted upon any one of them.
By this principle, the entrepreneur or al-Mudharib (takaful operator) will accept payment of the takaful installments or takaful contributions (premium) termed as Ra's-ul-Mal from investors or providers of capital or fund (takaful participants) acting as Sahib-ul-Mal. The contract specifies how the profit (surplus) from the operations of takaful managed by the takaful operator is to be shared, in accordance with the principle of al-Mudharabah, between the participants as the providers of capital and the takaful operator as the entrepreneur. The sharing of such profit may be in a ratio 50:50, 60:40, 70:30, etc. as mutually agreed between the contracting parties.
In order to eliminate the element of uncertainty in the takaful contract, the concept of tabarru (to donate, to contribute, to give away) is incorporated. In relation to this a participant shall agree to relinquish as tabarru, certain proportion of his takaful installments or takaful contributions that he agrees or undertakes to pay thus enabling him to fulfill his obligation of mutual help and joint guarantee should any of his fellow participants suffer a defined loss.
In essence, tabarru would enable the participants to perform their deeds in sincerely assisting fellow participants who might suffer a loss or damage due to a catastrophe or disaster. The sharing of profit or surplus that may emerge from the operations of takaful, is made only after the obligation of assisting the fellow participants has been fulfilled. It is imperative, therefore, for a takaful operator to maintain adequate assets of the defined funds under its care whilst simultaneously striving prudently to ensure the funds are sufficiently protected against undue over-exposure. Therefore the provision of insurance cover as a form of business in conformity with Shariah is based on the Islamic principles of al-Takaful and al-Mudharabah.
Al-Hari Rayais the pact among a group of people, called participants, reciprocally guaranteeing each other; while Al-Mudharabah is the commercial profit-sharing contract between the provider or providers of funds for a business venture and the entrepreneur who actually conducts the business. The operation of takaful may thus be envisaged as the profit-sharing business venture between the takaful operator and the individual members of a group of participants who desire to reciprocally guarantee each other against a certain loss or damage that may be inflicted upon any one of them.
Principles of Takaful
Principles of Takaful
The principles of Takaful are as follows:
* Policyholders co-operate among themselves for their common good.
* Every policyholder pays his subscription to help those that need assistance.
* Losses are divided and liabilities spread according to the community pooling system.
* Uncertainty is eliminated in respect of subscription and compensation.
* It does not derive advantage at the cost of others.
Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits but to uphold the principle of "bear ye one another's burden." Commercial insurance is strictly not allowed for Muslim as agreed upon by most contemporary scholars because it contains the following elements: i) Al-Gharar (Uncertainty) ii) Al-Maisir (Gambling) iii) Riba (Interest)
There are three (3) models and several variations on how takaful can be implemented.
1. Mudharabah Model
2. Wakalah Model
3. Combination of both
The principles of Takaful are as follows:
* Policyholders co-operate among themselves for their common good.
* Every policyholder pays his subscription to help those that need assistance.
* Losses are divided and liabilities spread according to the community pooling system.
* Uncertainty is eliminated in respect of subscription and compensation.
* It does not derive advantage at the cost of others.
Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits but to uphold the principle of "bear ye one another's burden." Commercial insurance is strictly not allowed for Muslim as agreed upon by most contemporary scholars because it contains the following elements: i) Al-Gharar (Uncertainty) ii) Al-Maisir (Gambling) iii) Riba (Interest)
There are three (3) models and several variations on how takaful can be implemented.
1. Mudharabah Model
2. Wakalah Model
3. Combination of both
Islamic References to Takaful
These fundamentals are based on the sayings of the Islamic prophet Mohammed. Based on the hadith and Quranic verses mentioned below, Islamic scholars had decided that there should be a concerted effort to implement the Takaful concept as the best way to resolve these needs. Some of the examples are:
* Basis of Co-operation Help one another in al-Birr and in al-Taqwa (virtue, righteousness and piety): but do not help one another in sin and transgression. (Surah Al-Maidah, Verse 2)[1]
* Allah will always help His servant for as long as he helps others. (Narrated by Imam Ahmad bin Hanbal and Imam Abu Daud)
* Basis of Responsibility The place of relationships and feelings of people with faith, between each other, is just like the body; when one of its parts is afflicted with pain, then the rest of the body will be affected. (Narrated by Imam al-Bukhari and Imam Muslim)
* One true Muslim (Mu’min) and another true Muslim (Mu’min) is just like a building whereby every part in it strengthens the other part. (Narrated by Imam al-Bukhari and Imam Muslim)
* Basis of Mutual Protection By my life, which is in Allah’s power, nobody will enter Paradise if he does not protect his neighbour who is in distress. (Narrated by Imam Ahmad bin Hanbal)
“The basic fundamentals underlying the Takaful concept are very similar to co-operative and mutual principles, to the extent that the co-operative and mutual model is one that is accepted under Islamic Law."
* Basis of Co-operation Help one another in al-Birr and in al-Taqwa (virtue, righteousness and piety): but do not help one another in sin and transgression. (Surah Al-Maidah, Verse 2)[1]
* Allah will always help His servant for as long as he helps others. (Narrated by Imam Ahmad bin Hanbal and Imam Abu Daud)
* Basis of Responsibility The place of relationships and feelings of people with faith, between each other, is just like the body; when one of its parts is afflicted with pain, then the rest of the body will be affected. (Narrated by Imam al-Bukhari and Imam Muslim)
* One true Muslim (Mu’min) and another true Muslim (Mu’min) is just like a building whereby every part in it strengthens the other part. (Narrated by Imam al-Bukhari and Imam Muslim)
* Basis of Mutual Protection By my life, which is in Allah’s power, nobody will enter Paradise if he does not protect his neighbour who is in distress. (Narrated by Imam Ahmad bin Hanbal)
“The basic fundamentals underlying the Takaful concept are very similar to co-operative and mutual principles, to the extent that the co-operative and mutual model is one that is accepted under Islamic Law."
Takaful In Islam
Takaful is an Islamic insurance concept which is grounded in Islamic muamalat (banking transactions), observing the rules and regulations of Islamic law. This concept has been practised in various forms for over 1400 years.[citation needed] It originates from Arabic word Kafalah, which means "guaranteeing each other" or "joint guarantee". In principle, the Takaful system is based on mutual co-operation, responsibility, assurance, protection and assistance between groups of participants.[citation needed] It is a form of mutual insurance.
Subscribe to:
Posts (Atom)
