Takaful

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Presentation on Takaful

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Takaful

  1. 1. Principles underlying Takaful Jabran Noor
  2. 2. Agenda <ul><li>Main purpose of insurance </li></ul><ul><li>Conventional vs Takaful </li></ul><ul><li>Global Takaful Business </li></ul><ul><li>Takaful Models </li></ul><ul><li>Potential Marketing Approaches </li></ul>
  3. 3. What purpose does insurance serve?
  4. 4. AED 1000 1000 0 70% 30% Expected Value Outcome Probability 1000 70% 700 0 30% 0 700
  5. 5. AED 1000 1000 0 70% 30% Outcomes Probability (1000,1000) 49% 980 (1000,0) 21% 210 (0,1000) 21% 210 (0,0) 9% 0 1400
  6. 6. AED 1000 1000 0 70% 30% Outcomes Probability (1000,1000,1000) 34% 1029 (1000,1000,0) (1000,0,1000) (0,1000,1000) 44% 882 (1000,0,0) (0,1000,0) (0,0,100) 19% 189 (0,0,0) 3% 0 2100
  7. 7. CONCLUSION ?????? Number of Persons Total Value Expected Value Per Person 700 700 1400 700 2100 700 7000 700
  8. 8. What purpose does insurance serve? CONCLUSION ?????? Insurance Cannot alter your expected outcome So what is the point in insuring??
  9. 9. CONCLUSION ?????? Number of Persons Value per person Probability of no money 700 30% 700 9% 700 3% 700 0.00006%
  10. 10. What purpose does insurance serve? Insurance does a very good job in reducing risk of having no money (i.e. downside risk) Downside Risk
  11. 11. Difference between banking & insurance
  12. 12. Main difference between conventional insurance and Takaful <ul><ul><li>Conventional => profits to shareholders </li></ul></ul><ul><ul><li>Takaful => interests of pool participants </li></ul></ul>
  13. 13. Principles of Conventional Insurance in conflict with Islamic Principles Uncertainty (Gharar) Gambling (Maysir) Interest (Riba) Forbidden (Haram) x
  14. 14. <ul><li>What is uncertainty? </li></ul><ul><li>Difference between gambling and insurance </li></ul><ul><li>Why is interest prohibited? </li></ul><ul><li>What investments are prohibited? </li></ul>
  15. 15. Potential of Takaful Business
  16. 16. Globalization of Takaful Business
  17. 17. Takaful Flows Source: PWC Mudahraba model (profit & loss sharing) Management fee + percentage share of surplus Wakala model (agency) Fixed fee applied to either contributions or investment income Policyholder Fund Investment income Shareholder Fund Investment income Explicit fees Interest free loan if deficit in PF (Qard Al-Hassan) Expenses Claims Retakaful Brokerage Policyholder contributions Surplus / (Deficit) Hybrid model (agency) Mix between Wakala Model and Mudaraba model
  18. 18. Potential Marketing Approaches / Channels Mosque Marketing ‘ Affinity marketing’ approach in co-operation with mosques Faith-based associations Marketing direct to ‘faith-based’ associations Ethical Product Aim to market products as ‘ethical investments’ (not directly religious) Mutual Insurance Highlighting the cooperative/ mutual nature of insurance, not islam Ethnic Marketing Primarily targeting ethnic angle (e.g. Pakistani/ Bangladeshi) rather than religious
  19. 19. Thank You

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