ZZZE1012

PROJECT OUTLINE

THE COMPARISON BETWEEN THE CONVENTIONAL INSURANCE AND TAKAFUL INSURANCE IN MALAYSIA

1.0 INTRODUCTION

1.1 Background

a) Attention Getter :

There are generally two types of insurance in Malaysia such as conventional insurance and takaful insurance.

b) Preview of points :

The purpose of this essay is to compare between the conventional insurance and takaful insurance.

c) Thesis statement :

The four main differences are can be categorized based on the principles, investment of funds, products and policies.

1.2 Objectives

a) To compare the insurance law and principles of Conventional and Takaful Insurance. b) To compare the investment of funds approach of Conventional and Takaful Insurance. c) To compare the products approach of Conventional and Takaful Insurance. d) To compare the policies approach of Conventional and Takaful Insurance. e) To recommend the application of Takaful Insurance than the Conventional Insurance.

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PROJECT OUTLINE

2.0. DISCUSSION

CONVENTIONAL INSURANCE The Principles

TAKAFUL INSURANCE

1) The enactment of the Insurance Act 1963 was culminated by the governments intervention to regulate the insurance industry and replaced by the Insurance Act 1996.

1) The operation of Takaful is regulated by separate Insurance Act 1996 and Takaful Act 1984 which subject to the governing law.

2) Includes

elements

of

interest,

2) Free from interest (Riba), gambling (Maisir) and uncertainty (Gharar). 3) All businesses will be transacted in accordance with Islamic principles, rules and practices.

gambling and uncertainty. 3) All businesses will be based on conventional practices.

Investments Of Funds

1) Invest their funds in interest-based avenues and without any regard for the concept of Halal or Haram.

1) Invests only on Shariah compliant business and the profits are

distributed in accordance with the pre-agreed ratios in the Takaful

2) Investment of premiums conducted by insurer with no involvement by

Agreements. 2) Takaful contract specified under principles of al Mudharabah and al Wakalah. 3) Right of insurable interest is

policyholders. 3) Right of insurable interest is vested in the nominee absolutely in Life

insurance.

determined by Islamic principles of Faraid (inheritance).

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PROJECT OUTLINE

Products

1) Life insurance or Assurance 2) General Insurance (everything which is non-life)

1) Family Takaful Business 2) General Takaful

The policies

1) The term of a policy varies based on the type of the policy and may have an indefinite period as long as the policyholder continues to make

1) All takaful policies have a fixed and definite term or period of maturity and this is in recognition of the Islamic principle of avoiding

premium payments. 2) The insurer guarantees the payment of the benefit or claim within the stipulations of the contract.

uncertainty (Gharar). 2) The operator gives no contractual guarantees. The underlying

principles of community, solidarity and brotherhood create joint

indemnity or risk sharing among the participants.

REFERENCES

Abdirrahman Sh. Mohamed Omar. 2011. Takaful and Actual Practices. Kuala Lumpur: International Centre for Education in Islamic Finance. Anon. 2011. MATTA and firm offer Islamic insurance scheme for pilgrims. The Star, 9th April. Anon. 2011. RAM: Increasing demand for takaful in Malaysia. The Star: 12th April. Anon. 2011. Tunai haji secara persendirian tak perlu pakej lengkap insurans: Berita Harian: 11 April. Delia Zamir. 2010. Takaful Ikhlas refutes talk of takeover by Etiqa. The Star: 18th August.

Mark R. Green & James S. Triesdimann. 1988. Risk & Insurance. Cincinnati, Ohio: South Western Publishing Co. Muhammad Nejatullah Siddiqi. 1987. Insurance In An Islamic Economy. United Kingdom: The Islamic Foundation. Omar Fisher & Dawood Y. Taylor. 2000. Prospects for Evolution of Takaful in the 21st Century. United States of America: Harvard University. Norhaziah Hashim. 2006. The Journal of Muamalat and Islamic Finance Research Vol.(3): 98106. Oswald Timothy Edwards & Yon Bahiah Wan Aris. 2002. Fundamentals Of Insurance. Shah Alam: Pusat Perkembangan Pendidikan, Universiti Teknologi Mara. The Malaysian Insurance Institute. 2009. Pre Contract Examination For Insurance Agents. Kuala Lumpur. http://arzim.blogspot.com/2010/01/future-of-takaful-business-its.html http://www.starproperty.my/PropertyGuide/Finance http://www.takaful-malaysia.com.my http://www.piam.org.my