Alhuda CIBE - Presentation on Takaful by Tariq saeed ch

1. Tariq Saeed Chaudhry
Group Manager – Corp Sales
Pak-Qatar Family Takaful Limited
02 November ,2010
Lahore, Pakistan

2. Agenda
• About Pak-Qatar Takaful Group
• Life is Full of Risks
• Conventional Insurance vs. Takaful
• The Practical Side of Takaful

3. Pak-Qatar Takaful Group

4. KEY FACTS: Pak-Qatar Takaful Group
• First Takaful Group in Pakistan,
• The Group is sponsored by leading financial
institutions from the State of Qatar
• Paid-up Capital:
– Family Takaful : Rs. 533 million
– General Takaful: Rs. 307 million
– Total: Rs. 840 million

5. Major Achievements
• Received an “A” minus (having Stable Outlook) rating
from JCR-VIS Credit Co. while still in second year of operations
• Have Re-Takaful arrangements with some of the best Re-
Takaful global companies in the world
• Are present in 14 cities having 25 branches
• Have a trained sales force of 900+ strength in the market
in less than 3 years or operations
• Have on board 300+ corporate clients in less than 3
years of operations
• Have declared 15% Surplus for Individual customers for
the financial year ended 31 December 2009, in second year of
operation

6. Awards & Recognition
• WON: Declared as the “Best Family Takaful
Operator” in Pakistan by 1st
National Achiever
Award (2009)
• NOMINATED: for “Best Takaful Operator”
in the world by CPI Financial, UAE (2009)
• WON for “Best Use of Technology” in
Islamic Finance Industry by CPI Financial, UAE (2009)
• RANKED: Top 4 in “Best Marketing
Strategy” by World Takaful Summit, London, UK
(2009)
• WON: Brands of the Year Award – 2009

7. Life is full of Risks…

8. Motor Fire Marine
Travel
Machinery
Life
Health

9. Risk Mitigation
Since the beginning, people have tried to protect
themselves from risks and resulting losses
• What is Risk?
– Risk is the potential danger that threatens to harm or
destroy an object, an event or a person

10. Risk Mitigation Tools
Available Risk Mitigation Tools?
– Avoid Risk Mitigation:
• A concept generally misunderstood as Tawwakul.
Tawakkaul by definition however is employment of all Halal
available means/resources and entrusting Allah SWT with
the outcome
– Self-Insurance or setting aside contingency money
for the rainy day
– Conventional Insurance:
• A commercially viable system but inherently flawed with
Shari’ah defined ills such as Riba, Gharar, and Qimar/Maysir
– Takaful:
• A Halal and Ethical alternate to conventional insurance

11. Risk Mitigation in Islam
• Is the concept of risk mitigation permissible in Islam?
– This very concept is not only lawful/permissible in Islam but is in fact encouraged
• Islamic history is replete with examples featuring activities involving risk
mitigation:
– Hadith:
• “Tie the Camel and then Submit to the Will of Allah”
– Dhaman Khatr al-Tareeq:
• A person would undertake another person’s risks without any consideration/fee
in return
– Dhaman Al-d’ark:
• A person would influence a sale by promising to compensate for the loss if the
subject-matter proved faulty
– Aqila:
• A risk sharing mechanism in which community members pooled their share of
Diyat (blood money)
• The underlying theme in all these examples is the concept of brotherhood
and mutual solidarity

12. TAKAFUL
CONVENTIONAL INSURANCE
Conventional Insurance vs Takaful

13. The Conventional Insurance Process
• The customer pays premiums in exchange for claim (at the
time of risk actualization) from the Insurer
PREMIUMS (MONEY)
CLAIMS (Upon Risk Actualization)

14. Shariah’s Stance on Conventional Insurance
concept of
Insurance?
practice of
Insurance?
?
Shariah has no objections as to the concept or objectives
of insurance ; it only has reservations with the way it is
being practiced…

15. Shariah’s Stance on Conventional Insurance
Point # 1
• It is a sales-purchase contract. In
Shari’ah terms it is called Aqd
Muawaza
Point # 2
• Premiums belong to the company
Point # 3
• Insurance company pays the claims
from its own pockets
Point # 4
• Premiums are invested in all kinds of
investment avenues, including Riba-
based businesses

16. Riba, Gharar, Qimar/Maysir
• Because this is sales-purchase contract i.e. Aqd Muawaza,
this kind of risk mitigation involves:
R I B A G H A R A R Q I M A R / M A Y S I R
DIRECT RIBA
IN-DIRECT RIBA
The difference between the premiums paid by
the policyholder and the claims received
Premiums are invested in Riba-based
investment avenues

17. Riba, Gharar, Qimar/Maysir
• Because this is sales-purchase contract i.e. Aqd Muawaza,
this kind of risk mitigation involves:
R I B A G H A R A R Q I M A R / M A Y S I R
G H A R A R
Gharar is present because the Subject
Matter of the contract does not exist, is not
specifiable, and the time of delivery is
uncertain
In Aqd Muawaza, Shariah does not allow Gharar &
Qimar/Maysir.

18. Riba, Gharar, Qimar/Maysir
• Because this is sales-purchase contract i.e. Aqd Muawaza,
this kind of risk mitigation involves:
R I B A G H A R A R Q I M A R / M A Y S I R
In Aqd Muawaza, Shariah does not allow Gharar &
Qimar/Maysir.
Q I M A R /
M A Y S I R
Total loss of premiums paid by the participant
in case the risk doesn’t actualize

19. T A K A F U L

20. Definition of Takaful
• The word “Takaful” originates from Arabic language.
• Its root word is “kafala” which means “to
guarantee”.
• Through inflection it changed to “takafala” which
means “to help each other” or to “jointly guarantee
each other.”

21. The Concept of Takaful
• Takaful is a community-pooling system in which
participants contribute their savings into the common
fund to help those who need it most in times of financial
difficulty
• It is based on the concept of brotherhood and mutual
solidarity.
• EXAMPLES: The concept of Takaful is manifested in the
system of Baitul Maal, the cooperative societies and the
joint-family set ups etc…

22. Takaful Process
• Takaful Operator creates the Waqf Fund or the “Taburru Fund”
• Participants contribute their premiums/contributions on the
basis of “Taburru” into this Waqf Fund
• The Waqf Fund pays the claims
Takaful Operator
WAQF FUND
Contributions
Claims
Surplus

23. Key Points on Takaful Process
Point # 1
• Contributions are paid on the basis of
Taburru. In Shariah such a contract is called
Aqd Taburru
Point # 2
• Contributions are credited to the Waqf
Fund; Operator acts as Wakeel
Point # 3
• The Waqf Fund pays the claims
Point # 4
• Contributions are invested only in Shari’ah
Compliant investment avenues
Point # 5
• An independent Shariah Board supervises
business activities for Shariah compliance
WAQF

24. Recap – Fundamental Differences between
Conventional Insurance & Takaful
AQD MUAWAZA AQD TABURRU
PREMIUMS BELONG
TO COMPANY
CONTRIBUTIONS CREDITED TO
TABURRU FUND
RIBA-BASED
PROFITS
COMPANY PAYS
THE CLAIM WAQF
TABURRU FUND PAYS
THE CLAIM
HALAL INVESTMENT
PROFITS

25. The Practical Side of Takaful

26. Gap!!!
Present Financial
Protections Tools
Present Financial
Protections Tools
Public
Beliefs
Public
Beliefs
Public
Awareness
Public
Awareness
Public
Needs
Public
Needs
Takaful Bridges the Vital Gap

27. Applied Takaful:
from Investors’ Perspective
• Global Market Size :
• “Current Global Trends suggest US$ 8.9 billion in gross contributions
by 2010” (E&Y, WTC 2010)
• Takaful is growing 35% faster than conventional insurance worldwide (Dr.
Ahmed Al Janahi, Managing Director NOOR Takaful, WTC 2009)
134
# Takaful Operators in 2009
+
Approx.
36 15
Window Operators Irani Operators
• KEY FACT: 60% of customers of Takaful in Malaysia are non-Muslims.
>18
Re-Takaful Operators

28. Applied Takaful:
from Customer’s Perspective
• Takaful resonates with the beliefs and values system of people
from different cultures:
Shariah
Compliant
Ethical
Transparent
& Full-
Disclosure
Shariah &
Socially
Responsible
Investments
Surplus
Sharing

29. Family Takaful Model

31. How can Takaful Help you?
- Corporate Takaful Products
- Individual Takaful Products

32. Family Takaful Products, Corporate
Group Healthcare
The Group Health
Takaful Plan is
designed to cater to
your employees’
well-being.
It covers their
hospitalization due
to any reason, major
medical expenses,
maternity/childbirth
as well as day-to-day
medical expenses.

33. Family Takaful Products, Corporate
Group Family Takaful
The Group Family
Takaful is a risk
coverage Plan that
provides protection
to participant’s
employees in the
event of Death due
to any cause
(Natural, sickness,
accident)

34. Family Takaful Products, Corporate
Retirement Income
This Plan enables the
employer to
provide its
employees with
retirement
benefits, in either
lump sum
payment or as
periodic income

35. Family Takaful Products, Individual
Savings & Protection
Why borrow loans
and incur debts?
A more dignified way
of fulfilling your
needs is through
savings.
Maximize your savings
through Takaful

36. Family Takaful Products, Individual
Education Plan
A Takaful plan which
ensures the
continuity of your
child’s education
even when you are
not around
OR
cannot afford the
tuition fees

37. Family Takaful Products, Individual
Mortgage Takaful
In an event of the
participant’s
sudden death or
disability, the
Takaful Operator
will settle the
outstanding
mortgage finances
thus ensuring the
security of home
for loved ones

38. Family Takaful Products, Individual
Retirement Income
A Plan that provides
regular income
upon your
retirement

39. Share ‘n Care Savings Takaful
The NEEDS
Share ‘n Care
accumulates
small
savings
amount and
grows it into
a large fund
to fulfill all
your
financial
needs

40. Salient Features of Share ‘n Care

41. Share ‘n Care Savings Takaful

42. ABC Education Takaful
ABC Takaful
ensures the
continuity
your child’s
education
even when
you are not
around or
cannot
afford the
tuition fees

43. Difficulties in Ensuring Continuity of Children’s
Education
Affordability of
Higher
Education
1.TUITION FEES
2.FAMILY SIZE
Untimely Death
of Income-
Generator
Children become
breadwinners of
the family
Loans Are
Short-term
solution
Loans incur
debts and debts
further create
problems
Who should acquire
education and to what
extent? Sons given
more preference

44. The Escalating Cost of Education
• An average of 5 children / family in Pakistan
– To afford quality education of every child is becoming increasing
difficult
• Cost of tuition fees and textbooks increasing exponentially
– IBA BBA = Rs. 640,000/-
– LUMS BBA = Rs. 960,000/-
MBA = Rs. 900,000/-
– KU BBA = Rs. 158,000/-
– SZABIST BBA = Rs. 502,720/-
– CBM EMBA = Rs. 400,000/-

46. A Simple Illustration of ABC Education Takaful

47. Jazaak Allah Khairan for your patience
• For Feedback:
– Email: tariq.chaudhry@pakqatar.com.pk
– familytakaful@pakqatar.com.pk
– URL: www.pakqatar.com.pk