Why the rate of contribution
for family takaful varies by age for different participant? Is this considered fair and equitable?
Let’s
try to understand the following situation where all participants are paying
equal contributions irrespective of any factors.
11) Assuming
that there are two individuals aged 70 and 20 subscribe to family Takaful
product covering death with sum covered (benefits) of RM1.0 million each. The plan requires the participant to
contribute till their life expectancy i.e. 75 (actual is
74.84) in Malaysia.
If the contribution rate is say RM5,000 per annum and both will die on
their life expectancy year, the first person will contribute only RM25,000
whilst the second will contribute RM285,000
with the same benefits payout of RM1.0 million to their beneficiaries. Obviously, there exist unfairness and
inequality between the two participants for the same benefit amount. In other words, the huge shortfall between
the benefit payout and the contribution made by the first person shall be topped-up
or subsidized by other sources as the normal investment profit say 5% per annum
is insufficient to cover the shortfall.
22) As
a result, there shall be a scientific and reasonable methodology to best
estimate the duration of future contributions to be made by participant before
his death. Therefore, participant age
has been unanimously agreed as one of the factor to determine the contribution
amount for each particular participant.
Well, the actual formula to determine the contribution rate is very scientific
and sophisticated which was developed by the actuaries based on advanced
statistical methodologies to best best estimate the prudent contribution rate
for each participant under family takaful plan.
Consequently, Shariah has no objection for such a
scientific method to determine the appropriate and prudent contribution with
the objective to best estimate and establish a “fair and equal” contribution
rate for all participants.
