The universality of Islam as a religion is clearly reflected in its financial system. Products and services of the system are not meant only for a particular sector of the society. Needless to say, to Muslims these products are undoubtedly essential in fulfilling the obligations required upon them as a religious duty. In this manner they would be free from dealing at least with riba and gharar, two of the elements that are strictly prohibited in Islam, in their financial transaction. Nonetheless, no matter how critical these divine features may be, the system would certainly be of no practical use if it would not able to meet specific objectives or needs of its users. No matter how Islamic would the system be and how impeccable the track record as well as the credentials of its provider or operator, it would not create the appetite for the demand of the system if it is not consumer oriented. After all, it has been the universal wish of Muslims in general to have a workable Islamic financial system in place that can fulfil their financial needs and satisfy their day-to-day business and commerce in accordance with the Islamic injunction. In other words being Islamic alone would not be sufficient unless the system can satisfy the modern-day financial requirements of both individuals as well as corporate bodies.
Financial transactions cannot be separated from the process of trade or commerce. Banking and insurance are two relevant examples of modern-day financial services that would facilitate and boost trade and commerce. It is a fact that modern-day trade and commerce would not flourish and thrive as can be witnessed today without the financial services of banking and insurance. As trade and commerce in general are essential to all, and therefore practised by Muslims and non-Muslims alike, the need for financial services to facilitate activities of trade and commerce are thus universal. But Muslims are compelled to ensure that these services in the first place, are based on the requirements and practices of Shariah. In the area insurance, it is therefore incumbent upon Muslims to establish a system acceptable to these rules. Hence following the introduction and development of Islamic banking, takaful came into being as an Islamic alternative to the conventional insurance system that can complement Islamic banking.
Nevertheless unlike specific obligations required to be performed and strictly adhered to by Muslim individuals as a sacred religious duty, Islamic financial system, including takaful, is open to all. In this respect, it is essential to clarify and make clear at the outset to non-Muslims, that takaful products are not solely meant for Muslims.
Towards this end, any person who requires insurance cover, may participate in any of the takaful products that would satisfy his needs. For example a car owner may participate in a motor takaful scheme, a house may be protected against fire under the fire takaful scheme and an individual may effect a family takaful plan as a means to avail of a certain financial benefit for his family in the event of his early death. What is important as participant or user of the product he must agree and abide by the terms and conditions of the contract that are based on the rules of Shariah. These terms and conditions shall be applicable to both Muslim and non-Muslim participants. Thus a non-Muslim cannot request for exemption even he may not agree to any of the terms and conditions simply on the grounds that he is not practising the Islamic faith. In other words a contract of any takaful product that applies to one shall apply to all. From the standpoint of the contract, obligations and responsibilities between and among the relevant parties are similar and equally applicable to all. Upholding this contractual principle is critical to ensure takaful is as creditable as any form of financial system. Above all, as an insurance product, takaful ought to be at par and at the level playing field with conventional insurance in terms of what it can offer. Yet having said this, takaful has proven to be consumer friendly. Indirectly the profit-sharing agreement as well as the adoption of the financial policy of not charging the operator’s overhead and management expenses on the participant’s contribution demonstrate the principle of putting the interest of consumers first.
Reflecting further this universal value, there is also no discrimination in terms of individuals who may be accepted to participate in takaful. Essentially, any individual who desires for the product and has the capacity as well as the means to fulfil the financial obligations required by takaful in accordance with its contract may participate. However, specifically for family products that provide benefits similar to conventional life insurance policies, the question that may arise would be related to how would extra contributions be calculated for `impaired life’ in view that no payment equivalent to premium is charged under takaful. It is common knowledge in the conventional practise, loading would be charged as extra premium on a policyholder who suffers from certain sickness or disability. Obviously, the concept of paying extra `price’ would be possible in the conventional system as it is based on a buying-selling transaction.
On the contrary, the money paid by a participant in respect of a family product is his instalments for the long-term savings, which also include his share of donation towards a common mortality fund called the Participants’ Special Accounts (PSA). The total sum of donation accumulated in the PSA would be used to pay compensation or benefit in the event of death of a participant before the maturity or expiry of his family plan. For this purpose PSA would be similar to insurance.
In view that the donation portion of the instalment, made in accordance with the Islamic principle of tabarru’, is based on a certain mortality table and other actuarial principles, how would therefore takaful consider and evaluate a proposal from an individual with an `impaired life’ to participate in a family plan. As trustee, the operator is responsible to ensure that the takaful fund, especially the PSA should not be unjustly over exposed simply due to undercharging, incorrect or inadequate amount of tabarru’. In a worst-case scenario the PSA may face a position of deficit, should its assets be determined insufficient to meet it expected liabilities.
As a system that practises joint-guarantee among participants, in the event of loss due to a misfortune, takaful should also be viewed from the perspective of partnership. Hence at the point of entry all participants should be considered as equal partners in terms of their physical health. Any change in this partnership status due to a fortuitous event or a misfortune inflicting upon a participant leading to the payment of benefit or compensation from the PSA is what takaful trying to strive for.
It therefore follows that if it is made known a participant is suffering from a certain disease or disability at the point of entry he is therefore considered to be an unequal partner to other normal participants. To enjoy the benefit provided by the PSA in line with the contract of takaful, he would be required to donate as tabarru’ a relatively higher sum in comparison with normal participants. In other words his savings portion would be correspondingly lower by the relatively extra amount of tabarru’ that is required upon him. Again in this regard the additional tabarru’ rate would be determined on the actuarial basis. In this manner takaful is transparent, fair and more importantly seen as steadfastly upholding the principle of equity which would pave the way for all individuals irrespective of their physical conditions the opportunity to participate in its products.