What Distinct Principles of Takaful Insurance Can Make Your Business Gain More Clients?

Focal Points:

• What is takaful insurance?
• Main principles of takaful insurance
• Offerings of AI Salam Bank benefiting SMEs
• Positive impact of takaful insurance on society

The word "Takaful” is derived from an Arabic word which means mutual guarantee. It implies takaful insurance involves a pool system concept of contributing money in which members who contribute money to this pool system can get an assurance of getting insured against each other's loss and damage.  This insurance is based on Sharia law, an Islamic religious law that describes how individuals are responsible to cooperate and protect each other in difficult times. The policies under this insurance cover life, health, and general insurance needs.

All parties and policyholders who signed the takaful agreement must agree to guarantee each other and make contributions to the pool instead of paying separate premiums. The collected contributions in this pool create a takaful fund that is accessible to all the participants. Through this fund, they can get full coverage for their requirements. Like conventional insurance policies, takaful insurance specifies the nature of the risk and the length of coverage. These insurance policies bear costs and expenses including sales and marketing, underwriting, and claims management.

Key principles of takaful insurance:

The principles of takaful insurance are established based on the concept of “al-asl fi al-ashya’ al-ibahah" which means “all things are permissible unless prescribed otherwise”. The general takaful contract runs on four main principles which are discussed below:

• Permissible takaful interest: According to this principle, the permissible interest is valid when there exists a relationship between participants and the subject matter. This means, there are certain conditions, fulfilling which participants can avail the benefits. The first condition is the ownership of property. If a member is the owner of the property, he can use the insurance when it is damaged or destroyed. The second condition is potential legal liability. In this case, when a member faces a financial loss from legal liability, he can get the insurance benefits. For example, employers must pay compensation to their employees if some compensation occurs during employment. The third condition is contractual rights. Under these conditions, a member can get insurance coverage if there is a provision in the contract that one party is responsible for the damage caused to the property and third-party liability.
• Utmost good faith: This principle talks about the transparency of disclosing matters to the group members. All participants signing the takaful agreement are obliged to share all material information, at the inception of the contract and upon the claim settlement. The misrepresentation of any material facts can lead to the contract to be considered void. As per the Sharia law, the misconduct of takaful operators can also lead to criminal sanctions.
• Principle of indemnity: Under this principle, participants should not get more than the actual amount of loss to prevent making a profit from the claim. Property contracts and liability takaful are the two major subjects subjected to this principle. Heath and personal accident measures would not be considered as the contracts of indemnity.
• Principle of subrogation: As per this principle, participants can receive compensation from the third party through takaful operators. This principle reinforces the above principle by preventing the participants from collecting twice for the same loss.

How will AI Salam Bank benefit small and medium-sized businesses in 2024?

Recently, AI Salam Bank, a leading provider of a wide range of innovative and unique Shari'a-compliant financial products and services has announced the launch of two campaigns, targeting small and medium-sized enterprise clients.  These exclusive campaigns will be going to become the one-stop-shop for business owners to get a diverse range of products meeting their banking and takaful insurance needs. Throughout the campaigns, the bank will offer competitive pricing for availing takaful insurance products that will offer huge benefits to the clients.

During the first campaign, the bank is going to offer a 10% discount for the first 150 clients who issue a new policy under “AI Salam Takaful”.  During the second campaign, the bank will provide a discount voucher of $26.5 on Motor insurance takaful policies to the clients who came from any of the channels of the bank in the first quarter of 2024. In addition, Mohammed Buhijji, the head of retail banking at AI Salam Bank, recently stated that the bank aims to offer a one-stop solution for getting banking and takaful insurance products for their clients. He said, “The bank will expand their product portfolio by offering matchless discounts to their existing and new clients on issuing takaful policies through their branches.”

Can takaful insurance cause a positive social impact?

Everyone on this Earth needs insurance beyond cast and creed. Takaful insurance can come out as cement to build social concrete for minority communities. This type of insurance will provide all the benefits and facilities to the underprivileged people of the country to ensure their safety from an unexpected event or circumstance. Furthermore, this insurance can offer protection to these people from natural calamities such as floods, storms, and earthquakes. By availing of this insurance, farmers belonging to such categories can get facilities of modern technology such as to predict weather data, use of highly advanced farming equipment, and more, to enhance their product output. Salaam Takaful, a leading Islamic insurance provider has set an example by providing insurance to the farming community through the latest digital solutions, strengthening the social impact for a progressive nation. Because of its positive impacts on society, many nations have initiated offering takaful policies to individuals. However, Nigeria is predicted to grow at a promising CAGR of 25.2% during 2023-2032.

To sum up, the takaful insurance industry is experiencing significant growth due to the growing demand for takaful insurance among Muslim-majority. Further, the concept of distributing investment profits among all the participants will boost the domain with immense investment opportunities.  

To measure the effectiveness of market campaigns and profitable product launches, feel free to talk to our industry experts today! They can also help your business make informed decisions about their products, services, and marketing strategies.

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