I ended Part III discussing about Takaful Model. Since the model is the center or heart of a takaful company, I would like to pick up few points and continue from there. Again takaful models commonly used in markets today are Mudharabah and Wakalah. Nevertheless, there have been few attempts to introduce new concepts such as Wakaf in takaful however not much details available to talk about it. Why takaful model is so crucial? By understanding the model, one can easily tells how his premium is managed and where his claims benefit comes from. This is very important in order to avoid the element of "gharar" or uncertainty in takaful. Majority of ulama' or Islamic scholars labelled conventional insurance as "haram" or prohibited due to 3 main elements, i.e. 1. "gharar" (uncertainty), 2. "maisir" (gambling) 3. "riba" (interest/usury). Thus, all takaful players must emhasize and publicize its takaful model in all its marketing communications so that participants (policyholders) are well aware. It should also be advisable that all relevant staff to always share and explain the model during sales promotion.
I guess all regulators nowadays will not object the selection of takaful model used however they may request to review the parameters used within the model which affect the distribution of suplus, investment profits and acquisition cost. Regulator may request for a review should they feel that the amount going to takaful operator is considered excessive unless the management is able to convince based on actual facts from the industry. For instance, the wakalah/ujrah fees for general takaful may be much higher in order to cover the higher acquisition cost such as commissions to intermediary. As a compromise, the distribution of surplus to operator may be much lower compared to family/life takaful. This is also due to the fact that general takaful is mostly short term compared to long term in family takaful. Actuary usually will run a profit testing simulation to determine whether the product to be introduced is giving reasonable returns to all stakeholders whether policyholders as well as shareholders. This simulation will determine the prudent parameters to used.
