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Asim Rabbani 10668Majid Mehmood10659M. Zulqarnain Saeed 10657Noman 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.
• Two parties involve( insurer and policy holders)
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 the origins
of health and life insurance c. 600 AD
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)
The word “Takaful” derived from “Kafala” which means “to guarantee”
Takaful means “guaranteeing each other” or “joint guarantee”
Takaful System is derived from Tabarru' system means "donation; gift; contribution”
It’s a mutual fund where all participant contributes to support one another in difficulties
Takaful was practiced in form of “Aqilah” before the era of Prophet Mohammad (PBUH)
Aqilah means compensation by killer for the heir of victims
Ibu Abidin was the first Islamic Scholar to come up with the meaning, concept and legal basis of an Islamic insurance contract
Takaful Models
Wakalah (agency) Model:– Wakalah fee is charged by the takaful company to meet
operational expenses– Charged annually per policy
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
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
24%
24%
15%
7%4%
3%
2%
21%
Market Share of Companies Be-fore Takaful
ADAM JEE
EFU
NICL
NJI
HAMSHIRE
Askari Insurance
Asia Insurance
OTHERS
Note: Above data has been obtained from SECP
7%
93%
Market Share after Taka-ful
TakafulConven-tional Insur-ance
• 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
Marine Insurance
Fire Insurance
Motor Insurance
Engineering Insurance
2000 2001 2002 2003 2004 -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2,783
3,204 3,497
4,248
5,168
1,548 1,819 1,794
2,074
2,941 2,816 3,030
3,381
4,159
6,035
Fire BusinessMarine BusinessAccident Business
Source: Security and Exchange Commission of Pakistan (SECP)
2000 2001 2002 2003 20040%
5%
10%
15%
20%
25%
30%
35%
40%
4%
13%
8%
21%
35%
Growth Ratio
Years
Gro
wth
rati
oGrowth Ratio of Insurance Business Before
TakafulPremium Income Figures (in million) as per
Returns Received before Takaful
2004 2005 2006 2007 2008 2009 -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2,536
3,860
5,418
6,111 6,137
5,570
EFU General Insurance
Revenues
2005 2006 2007 2008 2009 -
100
200
300
400
500
600
700
800
900
6
117
362
485
812
Pak Kuwait Takaful
Net Profit
2005 2006 2007 2008 2009
(20)
-
20
40
60
80
100
120
140
160
Pak Kuwait Takaful
Profi
t2004 2005 2006 2007 2008 2009
-10000
-5000
0
5000
10000
15000
20000
322 506 762
14536
-5471
732
EFU General Insurance
Years
Profi
t
Revenues: Motor Insurance(In millions)
2005 2006 2007 2008 20090
100
200
300
400
500
600
4.13595
76.13255
235.2935
314.94905
528.034
Pak Kuwait Motor Takaful
2005 2006 2007 2008 2009 -
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
4032.83 4042
43644151
3574
EFU Motor Insurance
Net Profit: Motor Insurance/Takaful
2005 2006 2007 2008 2009
-20
0
20
40
60
80
100
120
-5.17725
-0.687056.00795
15.1489
95.576
Pak Kuwait Takaful
2005 2006 2007 2008 2009
-300000
-200000
-100000
0
100000
200000
300000
785 1,352
(252,922)
87,745
186,691
EFU General Insurance
Pak Kuwait Takaful and EFU General Insurance
2005 2006 2007 2008 2009
(10,000)
(5,000)
-
5,000
10,000
15,000
20,000
Comparison of Net Profit
Pak Kuwait
EFU
Linear (EFU)
Advantages of Takaful over the conventional insurance
Full return if unwilling to continue premium
Investment without interest
Insured get profits not the bonus
Agent’s commission paid by insurer – not by insured
Premium returned in General insurance
Advertising costs
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
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