As Taka­ful in­surance grows in Nige­ria

Daily Trust - - OPINION -

Taka­ful in­surance is grow­ing in Nige­ria faster than con­ven­tional in­surance. Man­ag­ing Di­rec­tor/CEO Jaiz Taka­ful In­surance Plc, Mr Mo­modou Musa Joof re­cently said Taka­ful in­surance (Is­lamic in­surance) gen­er­ated N100 mil­lion in pre­mium in­come in the last four months and is grow­ing at 30 to 40 per cent per an­num while con­ven­tional in­surance is grow­ing at five per cent an­nu­ally.

Joof said Taka­ful is about profit shar­ing be­tween the com­pany and cus­tomer. Taka­ful is a type of Is­lamic in­surance where mem­bers con­trib­ute money into a pool­ing sys­tem in order to guar­an­tee each other against loss or dam­age. Taka­ful in­surance com­pa­nies were in­tro­duced as an alternative to com­mer­cial in­surance com­pa­nies, without in­ter­est (riba) gam­bling (al-maisir) and un­cer­tainty (al­gharar) prin­ci­ples out­lawed by Sharia. Jaiz Taka­ful In­surance as a Sharia com­pli­ant in­surance provider which is now open for busi­ness to Mus­lims and non-Mus­lims alike. It dif­fers from con­ven­tional in­surance in that Jaiz Taka­ful col­lects a cus­tomer’s money for pre­mium on his in­surance. If he suf­fers a loss, the in­surance com­pany pays him and if he doesn’t suf­fer a loss, the profit gen­er­ated by the in­surance pool is given back to those who didn’t suf­fer any loss in the year.

Jaiz ben­e­fits 30 per cent from the pre­mium paid for man­age­ment ex­penses, which it uses to pay salaries and share­hold­ers. The 70 per cent is paid into a sep­a­rate ac­count known as the par­tic­i­pant ac­count. This is used in set­tling claims, rein­sur­ance and com­mis­sions to in­ter­me­di­aries bro­kers and agents - and other statu­tory fees. So what­ever is left is shared pro­por­tion­ately among those who haven’t suf­fered any losses dur­ing the year. Taka­ful is based on the Is­lamic prin­ci­ple of Taawun or mu­tual ben­e­fits. The pre­mium paid by a cus­tomer re­mains as his in­vest­ment if it does not suf­fer loss.

Taka­ful orig­i­nated within the an­cient Arab tribes as a pooled li­a­bil­ity that obliged those who com­mit­ted of­fences against mem­bers of a dif­fer­ent tribe to pay com­pen­sa­tion to the vic­tims or their heirs. This prin­ci­ple later ex­tended to many walks of life in­clud­ing sea trade, in which par­tic­i­pants con­trib­uted to a fund to cover any­one in a group who suf­fered mishaps on sea voy­ages.

Taka­ful sub­scribers have a bond among them­selves as par­tic­i­pants who agree to jointly in­dem­nify the loss or dam­age that may in­flict upon any of them out of the funds or con­tri­bu­tion pool. Most im­por­tantly, at the end of a busi­ness year, any profit made un­der Taka­ful will be pro­por­tion­ately shared among its par­tic­i­pants and share­hold­ers in re­la­tion to the scale of their in­vest­ment. Sub­scribers of Taka­ful shall be en­ti­tled to share prof­its on con­tri­bu­tions paid in con­sid­er­a­tion for their par­tic­i­pa­tion in Taka­ful prod­ucts, to be pro­vided by Jaiz Taka­ful In­surance Plc sub­ject to dec­la­ra­tion of profit at the end of the fi­nan­cial year.

Taka­ful in­vests only in ha­lal prod­ucts, that is, prod­ucts that do not have any bear­ing with in­ter­est. Such in­vest­ment must not be in­ter­est based be­cause there is dif­fer­ence be­tween in­ter­est and profit. Se­condly, a pro­por­tion of the Taka­ful fund will be taken out as Tabaru or Sadaka, which is just like pay­ing tithe.

It in­sures any­thing that is eth­i­cal and at the end of the year, the profit that the com­pany gen­er­ates, 80 per cent of it will be dis­trib­uted to the clients or par­tic­i­pants who did not suf­fer losses in the cause of the year. Those who suf­fer losses would have been paid first be­fore the dis­tri­bu­tion of profit. The el­e­ment which goes to the needy, which is called Zakat is also dis­trib­uted be­fore profit is shared.

Given the gen­eral ap­a­thy of Nige­ri­ans to­wards any­thing in­surance, we be­lieve Taka­ful in­surance should be given a chance to prove it­self as a wor­thy alternative. It should how­ever be sub­jected to the same strin­gent con­di­tions of li­cens­ing and mon­i­tor­ing that the Na­tional In­surance Com­mis­sion of Nige­ria [NAICOM] ap­plies on the in­dus­try.

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