Etiqa Takaful : Concepts Used

Definition 
“A scheme based on brotherhood, solidarity and mutual assistance which provides for mutual financial aids and assistance to the participants in case of need whereby the participants mutually agree to contribute for that purpose” – Section 2, Takaful Act 1984

Mutual assistance 
Participants mutually agree to assist each other financially in case of certain defined needs (as defined in the takaful contract) by contributing to a common fund. By jointly guaranteeing each other, the participants are in fact both the insurers as well as the insured at the same time. This is because they are the ones bearing the risks and not the takaful operator.

Management of the fund and operation 
The participants are not involved in the management of the company or the fund. The day-to-day operation is instead, is delegated to the takaful operator, Etiqa Takaful Berhad. Etiqa Takaful is responsible for selecting participants and to determine and collect the takaful contributions. In addition, Etiqa Takaful is also responsible for investing the fund and paying compensation to the entitled participants. The supervisory authority in Malaysia (i.e. Bank Negara Malaysia) requires Etiqa Takaful to put up a standby capital to ensure that the fund is solvent. This means that if the fund is not sufficient to meet its takaful obligations, Etiqa Takaful will provide an interest-free loan from the standby capital. This loan will be repaid by the fund from future surpluses of the fund.

On the other hand, if at the end of each financial year, there is a surplus of income over liabilities in the fund, Etiqa Takaful can have a share of the surplus as a performance fee for successfully managing the fund.

Segregation of funds
It is a legal requirement that separate funds are set-up namely the Family Takaful Fund (for life insurance business), the General Takaful Fund (for general insurance business) and the Shareholders Fund. They have to be kept physically separated and distinct. 

Basic Takaful contract 
The contract to govern the relationship between the participants and the fund when the contribution is made is based on thetabarra’at contract (or a unilateral contract). As mentioned earlier,tabarru' makes the insurance transaction permissible from the Shariah perspective. This fundamentally changes the insurance contract, as it is the participants themselves who are carrying the risk and not the takaful operator. 

Other contracts 
From Syariah perspective, the relationship between the takaful operator and the participants has to be governed by a special contract. In the case of the Takaful scheme managed by Etiqa Takaful, this is established through the wakalah or agency contract. For the service rendered as the takaful operator Etiqa Takaful is thus entitled to payment from the fund in a form of a wakalah fee. Apart from managing the fund, the takaful operator is also responsible in the investment of the said fund and thus other Shariah compliant contracts such as wadiah or mudharabah contracts may also be used. 

Summary 
Takaful as a concept should be attractive because of the double benefits it can provide especially to Muslims. Firstly they get insurance cover that is halal (permissible) and secondly the satisfaction of doing a good deed (tabarru') at the same time. This is because many Muslims today are becoming more conscious of their religious obligations. In addition to the usual value propositions such as value for money products and excellent service, our value proposition to such clients also include Shariah compliance and tabarru'.