Distinguishing characteristics of takaful insurance in comparison with conventional insurance

Abstract

Takaful insurance, with its continuous development in recent years, however, a large number of members of Muslim societies still refrain from dealing with Takaful insurance companies. Indeed, many of them do not see a difference between takaful companies and traditional insurance companies, hence the problem of the study emerged by clarifying the differences The distinction between Takaful and conventional insurance companies. This study aims to explain the most prominent characteristics of takaful insurance that distinguish it from conventional insurance. The study also seeks to clarify the foundations of the work of Takaful companies that distinguish it from other traditional insurance companies. In order to achieve the aim of the study, the researcher will use the inductive and descriptive approach to trace the most relevant writings and make use of them in determining the mechanisms of takaful and traditional insurance. The study also follows the analytical and deductive approach to conclude the most prominent differences between takaful and traditional insurance. The researcher divided the study into several sections: In the introduction, the study mentioned the general framework of the topic, such as defining the goal of the research, its problem, and its questions. In the first section, the study clarified the concept of takaful insurance in the Arabic language and idiomatically, the concept of a legal insurance contractz the characteristics of the takaful insurance contract, the evidence for takaful insurance in law, and the aspects of agreement and similarities between takaful companies and traditional insurance companies. In the second section, the study highlighted the differences between takaful and conventional insurance, explaining the effect of these differences in contracts and procedures, and the relationship between the parties to the takaful insurance. Finally, the study mentioned the conclusion, recommendations and references. The study showed at the beginning the most important aspects of agreement between Takaful and conventional insurance, which are: Takaful and conventional insurance companies are subject to the companies' laws in their countries, and the regulations and instructions. The Takaful and the conventional insurance companies share in common that they are subject to the supervisory authorities in the state, especially the Central Bank, as well as both of them carry out insurance work and provide various insurance products, even if the legal and legal adaptation for them differs. They also agree that dealing with the two companies requires the existence of a contract whereby the subscriber pays an insurance premium despite its different names, adaptation, amount, or continuity, as well as their subjection to single taxes and fees from the state, and their mandatory reinsurance. The study showed that the most important differences between takaful insurance and conventional insurance are that the takaful insurance contract is a donation contract (Tabarru contract), unlike conventional insurance, which is a contract of exchange (Aqad al-Muawadat)z as it differs in the relationship between shareholders and participants It is limited to a commercial netting relationship, where the company's client buys the traditional insurance policy, while their relationship in the takaful companies is based on Mudarabah or Waka la for a fee in exchange for the company's carrying out all the company's technical and administrative work. There are fundamental differences related to the commitment of the Takaful companies to the Sharia rulings, while the traditional insurance companies include uncertain (Garar), ignorance, gambling, and forbidden transactions. Also, there are differences related to the basics of insurance coverage, so insurance cannot be on interest-based debts or usurious bonds, just as it is not permissible to insure interestbased institutions, and institutions of moral and commercial corruption, while the various traditional insurance companies create insurance forms whose primary purpose is to achieve profit without a consideration of the legality factor and the moral perspective. There are differences related to the technical aspect, such as different operating mechanisms and procedures, mediation in the company's work, insurance premiums, profitability in contracts and cash reserves. There are differences related to the insurance surplus that belongs to the shareholders of the traditional companies, while the insurance surplus in the Takaful insurance companies goes back to the subscribers and their fund. Takaful insurance companies are also distinguished by having a Sharia supervisory board to audit the company's activities legally and supervise its work, while traditional companies do not include such a body.