Islamic Insurance – Takaful
Assalamu Alaikum Wa Rahmatullahi Wa Barakatuh
Islamic Insurance or Takaful goes back to the time of the Prophet (saw), when he approved the payment of compensation to the aggrieved party by the aggressor. Also traditionally in Arab culture if a tribesman had to pay blood money, which involved a payment of a large sum of money to someone, then the entire tribe would come together and contribute a small amount to make up the lump sum. This is how modern day Life Insurance works
The scholars & the learned of Islam sight these examples of why insurance / takaful is permissible.
You also have others scholars who have the exact opposite view and provide their evidence of, riba (interest), gharar (uncertainty) and maysir (gambling).
The second era of Islam history also sees a surge of takaful / insurance users by the Muslims Arabs while trading with the India, Far East and other Asian countries. The Ottoman Empire was also using Insurance for trading but their insurance models were mainly based on western standards. After the end of colonial era, Muslim countries started to feel the need to accept their true identity especially in the financial and economic sense. Ibn Abidin (1784-1836) is considered as the first Islamic scholar that for the concept and legal structure of Takaful. Later, Isalmic financial experts and jurists started giving fatawas on the illegality and non-shariah compliance of traditional insurance and introduced the new Islamic insurance, Takaful structure as an alternative in the late 20th century.
There are different kinds of models used by different countries for Takaful. Mudarbah structure is the one used that is used by many countries. It is basically a contract of profit and loss sharing between the insurer and the policy holder. There are other models of Takaful such as Wakalah based Takaful, hybrid (Wakalah plus Mudarbah Takaful) and Waqf model of Takaful.
Current developments in Islamic Insurance
The growing use of Technology in financial and economic matter has given rise to FinTech sector that is disrupting the traditional environment of banking and finance throughout the globe. Islamic finance and Islamic insurance is adopting these technologies to remain completive in the market and to gain young generations that are addicted with technology.
InsureTech is the sector through which Islamic Takaful can be obtain easily with the help of modern technology. Maybank Takaful wallet aid is one of the famous Takaful providers in Malaysia whose funds are managed by Etiqa Takaful Berhad (ETB). Zurich Takaful and prudential BSN Takaful are another example of famous InsureTech companies. With the help of FinTech, Takaful companies can obtain more customer base within a short span of time.
Islamic finance is growing very rapidly in the world. Islamic banking, Islamic insurance (Takaful) and Islamic capital market are three main segments of Islamic finance that are attracting many individuals throughout the world. According to IFDR (Islamic Finance Development Report), 2018 Islamic insurance or Takaful assets are worth 46 Billion US Dollars with the 350 Takaful companies operating on 48 different countries. The largest contributor of takaful is Gulf region with 45% share, followed by MENA region (Middle East and North Africa) with 39% share and Asia with 16 % share.