A Comparison between the Capitalist and the Islamic Insurance with a Focus on Deficit and Surplus

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ACKNOWLEDGEMENT

My thanks go out to all who have helped me complete this study and with whom this project may have not been possible. In particular, my gratitude goes out to friends, facilitator and family for extensive and helpful comments on early drafts. I am also deeply indebted to the authors who have shared my interest and preceded me. Their works provided me with a host of information to learn from and build upon, also served as examples to emulate.

DECLARATION

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TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER 01: INTRODUCTION1

References for Islamic Takaful1

Principles of Takaful2

Research Question3

Aims and Objectives3

Disposition4

CHAPTER 02: LITERATURE REVIEW5

Introduction5

Islamic Conceptions5

Riba Free Insurance (Takaful)6

Conventional Insurance Requirements6

Takaful7

Tabarru11

Mudaraba and Wakalah in takaful13

Islamic Insurance Products13

Family Takaful14

Life Insurance14

Participant's Special Account16

General Takaful16

Re-Takaful17

Insurance Governance19

CHAPTER 03: METHODOLOGY22

Introduction22

Qualitative Research22

Research Method and Design Appropriateness23

Informed Consent23

Confidentiality24

Validity24

Data Analysis25

Qualitative Data Analysis25

REFERENCES27

CHAPTER 01: INTRODUCTION

Takaful is an Islamic insurance concept, based on Islamic mou'amalat (banking), respecting the norms and rules of Islamic law. This concept has been practiced in various forms for over 1400 years. It comes from the Arabic word Kafala, which means "guaranteeing each other" or "joint guarantee". In principle, the Takaful system is based on mutual cooperation, responsibility, assurance, protection and assistance between groups or participants. It is a form of mutual insurance (Bagsiraj, 2002).

References for Islamic Takaful

These fundamentals are based on the sayings of Prophet Muhammad . The scholars of Islam have decided, from the hadiths and verses, there must be a concerted effort to apply the concept of Takaful as the best way to address these needs. Examples:

Principle of cooperation: help each other in al-Birr al-Taqwa (virtue, piety, righteousness), but not to help one another in sin and transgression (Al Ma'ida v. 2) (Hussain and Sherifa, 2002)

Allah will always help His servant as long as it will help others (Narrated by Imam Ahmed ibn Hanbal and Imam Abu Dawood)

Responsibility principle: it is the relationships and feelings of people of faith between them, as with the body: when one member is affected by pain, the whole body is affected. (Reported by Bukhari and Muslim)

Two true believers (Mou'min) are as a construction in which each part strengthens the other. (Reported by Bukhari and Muslim)

Principle of Mutual Protection: By my soul, which is under the power of Allah, no one will enter Paradise if he does not assist its neighbor in distress. (Narrated by Imam Ahmad ibn Hanbal) (Iqbal and Philip, 2005)

Principles of Takaful

The below mentioned are the principles of Takaful:

Purchasers of an insurance contract cooperate with each other for their common good. Each subscriber pays the premium to help those in need. Losses are divided and liabilities spread according to the system of "pooling". The uncertainty is eliminated by the ...