Conceptual Understanding and Significance of Takaful (Islamic Insurance): History, Concept, Models and Products

Abstract

Human beings are naturally inclined towards safeguarding and protecting themselves from future misfortunes. This natural tendency of risk mitigation has given rise to the concept of insurance which existed thousands of years ago and was fervently practiced by many ancient tribes. Over time, the concept of insurance has changed since it is now being commercialized and have been transformed into a profit-oriented business. To revive the legacy of the real concept of insurance, the takāful (Islamic insurance) scheme was introduced in the second half of the 20th century differentiating itself from conventional insurance practices. The takāful scheme is strictly based on Islamic law known as Shari'ah. This paper thus expounds on the concept of takāful assimilating a holistic overview of this emerging industry while sorting the differences between the takāful scheme and the conventional insurance mechanisms. It concludes that the takāful (Islamic insurance) scheme is a robustly viable and sustainable alternative to conventional insurance.

History and Development of Takaful Research: A Bibliometric Review

“…Participants agree to share the financial burden and assist group members in overcoming the designated incident (Nazarov & Dhiraj, 2019). Meanwhile, conventional insurance transfers risk from the insured person to the insurer firm (Nazarov & Dhiraj, 2019).…”

“…There are some distinctions between takaful and conventional insurance. The takaful is based on mutual collaboration, solidarity, and indemnification, with one party protecting the other against future losses or catastrophes (Nazarov & Dhiraj, 2019). Participants agree to share the financial burden and assist group members in overcoming the designated incident (Nazarov & Dhiraj, 2019).…”

“…The takaful is based on mutual collaboration, solidarity, and indemnification, with one party protecting the other against future losses or catastrophes (Nazarov & Dhiraj, 2019). Participants agree to share the financial burden and assist group members in overcoming the designated incident (Nazarov & Dhiraj, 2019). Meanwhile, conventional insurance transfers risk from the insured person to the insurer firm (Nazarov & Dhiraj, 2019).…”

“…Takaful operations refer to the primary sources of the Qur’an and Sunnah (Alam & Hidayati, 2020). Therefore, takaful can be accepted among Muslims where the existence of principles such as cooperation ( ta’awun ) and alms ( tabarru’ ) are required (Nazarov & Dhiraj, 2019). Takaful also represents three mutuality aspects: helping each other, protecting each other from loss, and taking responsibility for each other (Dahnoun & Alqudwa, 2018).…”

Indicators of having a micro-family takaful plan amongst low-income earners

“…Family tak aful products can be generally divided into individual and group family tak aful plans. The plans offered under both categories include education, health and mortgages (Nazarov and Dhiraj, 2019). Through these plans, financial compensation is paid to the participant or beneficiary in the event of any loss covered by the policy.…”