As Takaful insurance grows in Nigeria
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.