1 Al-Huda Centre of Islamic Banking & Islamic Economics Event Two Days Specialized Training Workshop on Takaful (Islamic Insurance) Presentation Topic Insurance Industry in Pakistan: A Review & Takaful-Understanding the Concept Presentation by Prof. Dr. Khawaja Amjad Saeed Principal, Hailey College of Banking & Finance University of the Punjab, Venue, Date & Time Avari Hotel, Lahore. August 10-11, 9:30

2 Insurance Industry In Pakistan: A Review TAKAFUL: Understanding The Concept PRESENTATION FRAME A:Insurance In Total Framework B:Insurance Policy C:Takaful Prof. Dr. Khawaja Amjad Saeed* *Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore-Pakistan – Website: Mob: Member Governing Council, International Federation of Accountants (IFAC) ( ), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and Management Accountants of Pakistan ( ), President, Association of Management Development Institutions of South Asia (AMDISA) ( ), Pro Vice-Chancellor University of the Punjab, Lahore ( ), Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore ( ).

3 1.Sources 2.Inspiration 3.Pakistan: Insurance Companies 4.KSE: Listed Insurance Companies 5.KSE: Par Value Analysis 6.KSE: Total and Insurance Sector 7.SLIC: Growth of Number of Policies and Lives Covered 8.Products Offered as Revenue Drivers 9.KSE: Top Ten Insurance Companies Gross Premium Written: 2005 A: Insurance in Total Framework

4 B: Insurance Policy 2007 C: Takaful 1.Protection Certain Basic Right 2.Al-Takaful 3.Takaful-Inretrospect 4.Main Takaful Operations 5.Global Takaful Sector 6.Types f Main Takaful 7.Family & General Takaful 8.General Takaful 9.Five Takaful Scheme 10.Information Needed

5 B: Insurance Policy 2007 C: Takaful 11.Motor, Accident & Liability Takaful Schemes 12.Engineering Takaful Scheme 13.House Owoners & Householders Scheme 14.Family Takaful 15.Family Takaful Plan 16.Family Takaful: Individual & Group Plans

6 A-1: Sources 1.Downloads from Internet Insurance Policy of Pakistan, April, Pakistan & Gulf Economist, Karachi Various Issues. 4.ICIEF Work, Malaysia. 5.Journal of Islamic Banking Finance, Karachi. 6.Sharing thoughts with Scholars in Malaysia 2006.

7 A-2: Inspiration: Takaful (Islamic Insurance) Instead of turning more clerks and government servants, your College is now offering suitable subjects for students which would enable them to take place in: Commerce Trade Industry Banking Insurance Business It should be the aim of our college to produce first class experts in---- specialized subjects Quaid-e-Azam Address in Edwards College, Peshawar, April 18, 1948.

8 A-3: Pakistan: Insurance Companies ParticularsNumber% A: Local - General Insurance Companies Life Insurance Companies0305 Total 5191 B: Foreign - General Insurance Companies Life Insurance Companies Total 5610 Source: Download on March 26, 2007 from website of Board of Investments, Gop, Islamabad

9 A-4: KSE: Listed Insurance Companies YearNumberPercentage Average annual increase Average annual increase Source: Computed from: KSE: Daily Quotation, April 27, 2007

10 ParticularsNumberPercentage Above Par2379 Below Par0621 Total29100 Source: Computed from: KSE: Daily Quotation, April 27, 2007 A-5: KSE: Listed Insurance Companies: Par Value Analysis

11 A-6: KSE: Total & Insurance Sector April 27, 2007 Particulars Total NumberPercentage 1. KSE: Listed companies number Paid up capital Rs. billion Turnover (number- billion) October 2006 to March , Market capitalization Rs. billion 3, GDP ($b) Source: Computed from: KSE: Daily Quotation, April 27, 2007

12 A-7: SLIC: Growth of number of Polices & Lives Covered YearNumber of Polices In Force: (Individual life) Number of Lives (group life) S.#Number (million) Base index % Rolling Index Number (million) Base index % Rolling Index Annual Average Growth (% Percentage coverage to total Pakistan Source: Computed from: SLIC Annual Report 2005, P.61.

13 A-8: Products Offered as Revenue Drivers S. No.Products 1 Fire 2 Marine 3 Motor 4 Miscellaneous* *Scope being expanded

14 A-9: KSE: Top Ten Insurance Companies Gross Premium Written: 2005 S.No.CompanyRs. b% 1Adamjee EFU NJI Other Seven (7) Source: Computed from: comparative study for the year ended December 31, 2005, Adamjee Insurance Company Limited, P1.16.

15 B: Insurance Policy: : Aim 1.Increase penetration. 2.Remove impediments to insurance. 3.Rational role of public sector in line with international practices. 4.Increase coverage from 0.28% to1.00 in 3 years. 2: Contribution 1.Increase savings 2.Risk investigation 3.Capital formation and investment levels

16 B: Insurance Policy: : Strategy 1.Improve coverage and outreach. 2.Areas: -Health -General -Micro Insurance 3.SLIC conversion into company 4.Postal life insurance-company with insurance law 5.Public sector insurance entities to be corporatized

17 B: Insurance Policy: : Strategy 6.BODs be strengthened with professionals 7.Aggressive marketing 8.Open insurance of public property to private insurance companies 4: Ministrys Suggestions 1.Introduction of Takaful 2.Others Source:Extracted from: Daily Times & Dawn, April 14, 2007

18 C: Takaful C-1: Protection of Certain Basic Rights The Right of protect: 1.Religious 2.Life 3.Dignity/Honour 4.Property 5.Mind

19 C: Takaful C-2: Al-Takaful Joint guarantee. Pact among a members or participants who agree to jointly guarantee among themselves against loss or damage.

20 C: Takaful C-3: Takaful – Inretrospect -Started 28 years ago: -UAE: The Islamic Arab Insurance Co. -Sudan: Islamic Insurance Co : Malaysia -Pioneering role -First legal framework (Takaful Act) -Sudan & Iran -Islamic Regulatory environment -Now movement has been blossomed

21 C: Takaful C-4: Main Takaful Operations -Estimate. -60 Takaful companies. -3 Retakaful companies. -Takaful windows. -One of the fastest growing segments in insurance. -20% p.a average growth.

22 C: Takaful C-4: Main Takaful Operations -World takaful contributions: % -General takaful60 -Family takaful

23 C: Takaful C-4: Main Takaful Operations Geographical Spread % 1. South & East Asia56 2. Family Takaful Middle East36 3. Africa07 4. Europe, USA & Other

24 C: Takaful C-5: Global Takaful Sector Leading Countries 1.Malaysia 2.Indonesia 3.Saudi Arabia 4.USA 5.Iran 6.UAE

25 C: Takaful C-5: Global Takaful Sector Leading Countries 7.Egypt 8.UK 9.Kuwait 10.Algeria 11.Qatar 12.Jordan

26 C: Takaful C-6: Types of Main Takaful The commercial activity of takaful is reflected in two basic types of business that it undertakes. The types of business are as follows: -General Takaful -Family Takaful Business

27 C: Takaful C-7: Family & General Takaful FAMILY TAKAFUL:GENERAL TAKAFUL A Family Takaful plan provides cover of mutual aid among its members or participants expressed in the form of financial benefits paid from the Family Takaful Fund should any of its members be inflicted by a tragedy Provide Protection in the form of mutual financial help to compensate its members or participants for any material loss, damage or destruction that any of them might suffer arising from a catastrophe.

28 C: Takaful C-8: General Takaful Fire takaful scheme Motor takaful scheme Accident takaful scheme Liability takaful schemes Engineering takaful schemes House owners Householders Takaful schemes

29 C: Takaful C-9: Fire Takaful Scheme CoverageAssets covered For loss or damages caused by fire, lighting or explosion (domestic) Building and/or machines Stocks Householders Additional Coverage:Coverage Amount Explosion Earthquake Windstorm Flood Aircraft Coverage Any compensation under the coverage will be based on the actual market value during the fire.

30 C: Takaful C-10: Information Needed Location of Building Structure of Building Type of Building Occupation of Building Sum covered

31 C: Takaful C-11: Motor, Accident & Liability Takaful Schemes Motor Takaful Scheme -Private Car/Motorcycle Accident Takaful Scheme -Personal Accident -Group Personal Accident Liability Takaful Scheme -Employers Liability Takaful -Public Liability -Workmens Compensation -Contractors All Risk

32 C: Takaful C-12: Engineering Takaful Scheme Machinery Breakdown Takaful Loss of Profits Due to Machinery Breakdown Boilers and Pressure Vessel Erection All Risk Storage Tanks Marine Cargo (Inland Transits) Marine Cargo (By Sea) Marine Cargo (by Air)

33 C: Takaful C-13: House Owner's & Householder's Takaful Scheme Coverage House Owners Cover against loss or damage of building (house). House Holders Cover against loss or damage of household contents. Scope of Cover Fire, lightning, thunder and underground fire Explosion Aircraft damage Impact damage Bursts or overflow from water tanks, pipes or any facilities Theft caused by forcible entry

34 C: Takaful C-13: House Owner's & Householder's Takaful Scheme Scope of Cover Tidal waves, hurricane, thunderstorm or heavy rain Earthquake and volcanic explosion Flood Liability to the public Loss of rent up to 10% of sum covered of the house. Eligibility Individuals owning a house

35 C: Takaful C-14: Family Takaful Scheme The modus operandi for Islamic Insurance companies operating life business are almost similar but more clarification is needed. Life policies are issued in the name and style of Family Takaful Scheme. Each installment paid by the participants is divided and credited into two separate accounts namely The Participant Account and the Special Account

36 C: Takaful C-14: Family Takaful Scheme The amount that is credited into these two accounts is invested as per Shariah Code and profits are shared between the Participants and the company in an agreed ratio. The major portion of the profit (say 80%) is paid to the policy holders and the company is entitled to get the balance amount of the profit only.

37 C: Takaful C-15: Family Takaful Plan INTRODUCTION With the Family Takaful Plan you can be assured of a certain sum of money which will go a long way to ease the financial burden of your loved ones in the event of your untimely death. You will enjoy tax relief too from your Takaful installment.

38 C: Takaful C-16: Family Takaful Plan Individual PlansGroup Plans Family Takaful Plan Takaful Mortgage Takaful Annuity Scheme family Takaful Plan Group Family Takaful Plan Group Medical Takaful Plan

39 C: Takaful C-16: Family Takaful Flexible monthly installments. Long-term financial program to facilitate the creation of your personal savings and retirement fund. Choice of maturity periods between 10 to 40 years at your convenience. Supplementary over for hospitalization benefits, personal accident, permanent disability. Open to all individuals between the ages of 18 to 55 years old. No forfeiture of your takaful installments in the event of cancellation. Facility of part withdrawal.

40 C: Takaful C-16: Family Takaful Purpose A systematic savings and investment program that could grow into a long-term fund for your family endowment in case of your untimely death before the maturity period. As an assurance to help you through with any financial tide in case of mishap such as accident, permanent disability or to finance your hospitalization bills Eligibility Open to all individuals aged between 18 to 55 years old.

41 C: Takaful C-16: Family Takaful Maturity Period 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years

42 C: Takaful C-16: Family Takaful Supplementary Cover Permanent Total Disability Personal Accident Hospitalization Benefits Mode of Payment Salary deduction Bank Standing Instruction Direct Payment by cash or cheque Credit or Charge Card

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