It is a truly great blessing for us that to be followers of the perfect religion to have a complete set of guidelines and procedures in the form of the Shari’ah. Our world faces rapid social and economic changes. Life has become fast-paced and mechanical and business processes are innovative. Challenges lie ahead. However, our religion offers solutions to these new challenges if we simply follow its tenets and principles.
In this era, insurance is essential for protection against any unforeseen occurrences that may befall life, property and valuables and other possible losses. Thus insurance becomes a major component in certain economies. Takaful is a new spectrum of risk management that has emerged in recent decades. It is based on the principles, features, and structures that set it apart from conventional insurance in the light of Shari’ah.
Modern conventional insurance contracts are unacceptable in Islam as certain elements in it directly contradict the rules of Shari’ah. The Islamic concept to get protection against risk does prohibit any attempt to avoid risk altogether, however it does not prohibit the reduction of risk.
The elements of uncertainty (gharar), gambling (maysir), and interest (riba) make conventional insurance products prohibited risk-sharing instruments for Muslims. In other words, the need of insurance is right, but its procedure is wrong.
Takaful provides such coverage of losses, where members contribute money into a pool in order to “guarantee each other against loss or damage” and takaful explains how it is the responsibility of individuals to cooperate and protect each other’s interests.
At present many takaful and window takaful companies are providing services approved by the Securities and Exchange Commission of Pakistan (SECP) and under the supervision of religious scholars or Ulema e ikram.
The SECP has framed comprehensive rules for Takaful companies and window takaful operators are also bound to carry their operations according to these rules. SECP monitors the affairs of the Takaful companies.
The United Insurance Co of Pakistan Ltd
The United Insurance Company of Pakistan Limited was established on October 20, 1959 and its shares are quoted on Karachi Stock Exchange. The UIC were a composite company doing live and general insurances in West & East Pakistan (General and Life Insurance). In 1971-72, after the nationalization of life insurance, United Insurance has been in the business of general insurance.
Under the dynamic leadership of the Chairman of United International Group, Mian M. A. Shahid along with the board of directors, the United Insurance Company has remained financially sound and professionally managed as the fourth largest general insurance company of Pakistan with the largest branch network of more than 110 branches all over the country. UIC has maintained its IFS rating of A+ as ascertained by PACRA.
The Company obtained approval to operate as window takaful operator on August 18, 2014 from the SECP under Takaful Rules 2012 to carry on general takaful business comprising fire, marine, motor, engineering, miscellaneous, crop, livestock and health; with Halal statutory allocated funds from its paid-up capital of Rs 50 million.
The apex regulator SECP directed through its circular to the insurance companies takaful, and window takaful operations to conduct trainings and organize workshops to raise awareness and overcome challenges that confront the takaful industry. UIC adopted SECP’s directives and has been regularly organizing training sessions and workshops for its management and sales force on a periodic basis.
The financial highlights of The United Insurance Company of Pakistan Limited – Window Takaful Operations from August 18, 2014 to September 30, 2015, are summarized thus:
The United Window Takaful Operations maintain re-takaful arrangements with the world’s renowned Re-Takaful Companies namely; Swiss-Re Takaful Ltd, Switzerland, GIC Re-Takaful, Dubai and Lubuan Re, Malaysia. On the basis of strong treaty arrangements, United Window Takaful is quite capable to hold big risks.
There was indeed a time when there was no attraction in takaful business due to the unwillingness of the general public to obtain coverage through this mode. Investors were not interested in investment in takaful companies because of their limited businesses and relatively lower profitability margins with high cost. In 2014, the Government allowed insurance companies to act as window takaful operator. The interest of the insurance companies in window takaful operations is evident now as they continue to expand their operations in this business. The impact of the SECP’s decision is also clear as the takaful business market has rapidly improved and all its stakeholders i.e. the religious scholars, industrialists, government and the public; now exhibit rising interest in takaful.
Therefore, it can be hoped that takaful shall continue to progress and that eventually it shall be at par with insurance. Hence, this is a great prospect for all insurance companies of Pakistan to come forward and seize the opportunity to enter this promising field. Those who will be quick to take the initiative now will soon be industry leaders.