Takaful Concept

Takaful is an Islamic insurance concept based on Shariah principles. Islam’s core concept of insurance is traced back to the Prophet (PBUH) period where relations rested on Takaful, support and solidarity. Takaful has been practiced by the Muhajirin of Mecca and the Ansar following the Hijra of the Prophet (PBUH) over 1400 years ago. Hence, Takaful is a performance that focuses on a solid base of mutual cooperation among a group of individuals agree among themselves to jointly indemnify the loss or damage that may inflict upon any of them. The overall objective of mutually sharing losses is to eliminate the element of uncertainty, emphasize social solidarity, cooperation and mutual unity among participants. Long ago, people recognized this concept which has been approved by Islamic Shariah Principles. Furthermore, Takaful Insurance represents a modified model of Takaful practice that suits the needs of our modern life development and changes.

Industry Overview

Takaful is an Islamic system of mutual insurance built around the concept of donation. It is distinguished by its distinct nature of supporting the Islamic financial system of operation.

Takaful insurance developed with the onset of Islamic banking in the 70’s and the 80’s, when Islamic markets all over the world, particularly n the Gulf, witnessed a surge in economic development and the emergence of new Islamic banks. With this, automatically came the inherent and imminent need to insure the properties and transactions of such banks. The potential for Takaful is enormous given that insurance penetration in most Islamic countries does not exceed1% of gross domestic product. However, many of the challenges facing Takaful operators are strategic. The concept itself is relatively new to the market. Skills and resources are being borrowed from conventional insurance policies, and a significant investment is required for creating the business.

Although Takaful market is still in a formative stage, market projections estimate a growth between 15% and 20% over the next 10 years ,and reaching US$7.4 billion in premiums by 2015. With challenges around customer services and productivity, technology can enable this growing industry through its formative stage.