Al Wakalah and its impact on the growth and performance of Takaful companies: a Malaysian case

Annuar, Hairul Azlan and Rosly, Saiful Azhar and Abdul Rashid, Hafiz Majdi (2004) Al Wakalah and its impact on the growth and performance of Takaful companies: a Malaysian case. The European Journal of Management and Public Policy, 3 (1). pp. 82-117. ISSN 1726-6475

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Abstract

Marketing Islamic insurance (takaful) products does not imply exploiting the religious factor alone. Equally important is the marketing channel. As a marketing tool the agency system is vital. Insurance agents who sell policies are not employees of insurance companies. They work on a commission basis and thus are motivated by the volume of sales made. By using agents, insurance companies can cut overhead costs and help expand markets without using or setting up new costly subsidiaries. The first takaful company in Malaysia, Syarikat Takaful Malaysia Berhad (STMB), does not use the agency system (al wakalah), in contrast to the second company, Takaful Nasional Sendirian Berhad (TNSB). The different marketing channel used has a lot to do with both companies following different Islamic scholars’ views of the al wakalah contract. It centres upon differences in juristic interpretation (iktilaf) on whether the takaful company, as a manager (mudharib), can use part of the capital, in terms of premiums provided by the policyholders (rabulmal), to pay agents’ commissions. This study looks at how this difference in juristic views has impacted the performance of both takaful companies. The study found that TNSB performed better than STMB. In this sense, al wakalah is able to generate greater benefits (manfaat) than the takaful companies while not causing harm (madarrah)to the customers. It is therefore crucial for STMB to review its policy on al wakalah and embrace the system to improve its performance.

Item Type:	Article (Journal)
Additional Information:	3397/3469
Uncontrolled Keywords:	Takaful, wakalah, Islamic insurance
Subjects:	H Social Sciences > HF Commerce > HF5001 Business. Business Administration > HF5601 Accounting. Bookkeeping
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Accounting
Depositing User:	Dr Hairul Azlan Bin Annuar
Date Deposited:	20 Sep 2011 12:34
Last Modified:	14 Dec 2011 08:32
URI:	http://irep.iium.edu.my/id/eprint/3469

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