Asim Rabbani10668

Majid Mehmood 10659

M. Zulqarnain Saeed
10657
Noman Ilyas 10677
 Synopsis


• Introduction of Project
• What is Insurance?
• What is conventional insurance?
• Modern Insurance Model
• How insurance is against the principles of
Shariah?
• Takaful (Islamic insurance)
• Takaful Models
• Market Analysis
• Pak Kuwait Takaful and EFU General Insurance
• Products offered by both companies
• Observations
 Project Introduction
• Purpose:
 To highlight Difference b/w Conventional insurance and
Islamic Insurance according to:
–
– Procedures;
– Products;
– Growth;
– Revenues;


• Consultation:
– Annual reports of Pak Kuwait Takaful Co. Ltd.
– Annual reports of EFU General Ltd.
– Reports and Articles published by SECP
– Reports and Articles published by State Bank of Pakistan
–
–

 Insurance Meaning


• Insurance is a risk transfer mechanism.



• Shift some of uncertainties of life to others

shoulders.


• Insurance is used as the back of all

innovators.


• Developments were only possible through

Insurance.


• Insurance plays an important role in

economic, social and technological
progress of a man.
 Conventional insurance

• Equitable transfer of the risk of a loss

from one entity to another.
• Provide premium and secure large
losses.
• People contribute to a general sum
that could be used for
emergencies.
• Firstly practiced in 1750 B.C. by
Mediterranean Sailing Merchants
• The Greeks and Romans introduced
Conventional insurance
cont’d...

• In 17th century, London's growing

importance as a centre for trade increased
demand for marine insurance.
• In 1732 the first insurance company was
formed in the South Carolina, USA.
• Two types of economies
– Natural economies (without money,
markets, financial instruments)
 Only people use to help each other
– Money economies (markets, money,
financial instruments)
 Modern sense helped businesses through
use of insurance
Modern insurance model
 How insurance is against
the principles of Shariah?
• Al-Gharar:
 Refers to ‘unknown’ or ‘uncertain’ factors in a
conventional insurance contract.
– Al-Jahalah
– Gambling


• Al-Maisir:
 This the ‘gambling’ element and is said to derive
from the ‘Gharar’ element.


• Riba:
 Refers to the interest factor present in the
investment activities of conventional insurance
companies.
– Riba AL-Nasiya
– Riba Al-Fazl
 Takaful (Islamic Insurance)

Ø The word “Takaful” derived from “Kafala” which means “to

guarantee”
Ø
Ø Takaful means “guaranteeing each other” or “joint
guarantee”
Ø
Ø Takaful System is derived from Tabarru' system
§ means "donation; gift; contribution”
Ø
Ø It’s a mutual fund where all participant contributes to support
one another in difficulties
Ø
Ø Takaful was practiced in form of “Aqilah” before the era of
Prophet Mohammad (PBUH)
Ø
Ø Aqilah means compensation by killer for the heir of victims
Ø
 Takaful Models
Ø Wakalah (agency) Model:
– Wakalah fee is charged by the takaful company
to meet operational expenses
– Charged annually per policy
Ø Mudarabah Model:
– Policyholders get profit on their part of funds
only if Takaful Company earns profit
– Sharing of profit & loss b/w takaful operator &
policyholder
Ø Wakalah plus Waqf model:
– In Pakistan, mostly “Wakal + Waqf Model” is
in practice;
– Operators and participants maintain a Waqf
fund;
– The company pay losses from this fund.
Takaful Models
Pak Kuwait Takaful
Company (Model)
Market Analysis

Note: Above data has been obtained from SECP

Came into existance in 2004 and started operations in
2005
Honoured to be the first Islamic insurance company in
Pakistan
Initial paid up capital of Rs. 250 million and an
authorized capital of Rs. 500 million
PKTCL has been incorporated as a Joint Venture
amongst:

 Product and Services
offered


• Motor Takaful


• Marine Takaful


• Property Takaful


• Engineering Takaful


• The Company was incorporated as a Public

Limited Company on September 2, 1932


• The shares of the company are quoted on Karachi

and Lahore Stock Exchanges of Pakistan;


• Principal place of business is located at EFU

House, M.A. Jinnah Road, Karachi, Pakistan;


• Network of 60 branches throughout the country.

 Products and Services
Ø
Ø Marine Insurance
Ø

Ø Fire Insurance
Ø

Ø Motor Insurance
Ø

Ø Engineering
Insurance
 Premium Income Figures (in
Growth Ratio of Insurance
million) as per Returns Received
Business Before Takaful
before Takaful

Source: Security and Exchange Commission of Pakistan (SECP)

Revenues
Net Profit
Revenues: Motor Insurance
(In millions)
Net Profit: Motor
Insurance/Takaful
Pak Kuwait Takaful and EFU
General Insurance
 Advantages of Takaful over
the conventional insurance


Ø Full return if unwilling to continue premium



Ø Investment without interest



Ø Insured get profits not the bonus



Ø Agent’s commission paid by insurer – not by insured



Ø Premium returned in General insurance



Ø Advertising costs


Ø Distribution of Zakat
 Observations

Issue Conventional Insurance Takaful

Organization Principle Profit for shareholders Mutual for participants

Value Proposition Profit maximization Affordability & spiritual satisfaction

Laws Secular/Regulations Shariah plus regulations

Ownership Shareholders Participants

Management Status Company management Operator

Form of Contract Contract of Sale Cooperative, Islamic contracts of

Wakala of Mudarbah with Tabar’ru
(contribution)
Investments Interest based Shariah compliant, Riba-free

Surplus Shareholder’s account Participants’ account

 Suggestions
• Marketing approaches for Growth
• Education sessions for General public
• Increase operating Branches
• Should hire experienced & qualified
Workforce
• Focus on Import & Export businesses
•
•
Thanks for your
precious time