Smart Investor Malaysia


Is Takaful Not Attractive For Most Malaysians?


“Wisdom is not measured by appearance.”

As a husband, father, son, and even brother, I am the breadwinner and main contributor to the family finances. I work hard to give my best to my loved ones. The pressure is on to make sure I can leave my loved ones in the same or even better state when I am gone

As a Chief Agency Officer, I am aware of the need for takaful protection in life. It can alleviate unexpected situations Takaful benefits provide for its participants in times when emergency funds are required because of a disaster resulting in death, accident, critical illness, or hospitalisation.

The adage preparing for a rainy day holds true with a comprehensive takaful plan that can maintain our, or our beneficiaries’ lifestyles in times of disaster.

I am often asked what is takaful and how is it different from conventional insurance.

Takaful vs Conventional Insurance?


Conventional insurance and takaful share the objective of protecting against financial loss. However, closer inspection reveals some clear differences.

Takaful is based on Islamic principles of mutual cooperation (taawun). Participants (customers) fulfil their obligations by contributing a certain amount of donation (tabarru’) into a fund to protect one another against losses or damages covering life, general (assets) and medical. A takaful operator manages this fund.

The takaful operator disburses the funds according to its participants in the event of loss or damage suffered. Surplus monies will be distributed between customers and operator at the end of the financial term based on an agreed ratio. This will only be done after all obligations of assisting customers has been fulfilled.

Despite being based on Islamic principles, anyone can obtain takaful protection.

Factors Affecting Takaful Contribution Amount

Like conventional insurance, lifestyle factors affect the contribution amount each participant is required to make. These include occupation, age, family history, and underlying health factors.

As takaful is based on the basis of donation, if the tabarru’ fund is insufficient, there may be a revision in the contribution amount. For example, the tabarru’ fund can be short due to volume of claims or medical inflation.

A responsible takaful operator must monitor and revise the fund if necessary, to ensure it s contributors are always adequately protected. It is important in sustaining the tabarru’ fund for the long term. If a revision to contribution amount is necessary, the operator will notify customers beforehand so contributors are never caught unaware.

What Can I Do If I Cannot Afford To Fulfil My Contribution?

If personal circumstances change, let your takaful agent know so that a customised plan can be worked out based on your affordability. There are two main options provided to customers.

Firstly, there is the option of reducing some of the benefits while maintaining the same amount of contribution. Another option is to remove certain riders (add-ons) and replace them with other benefits that may be more relevant to the customer’s needs in life.

This is where a knowledgeable agent is invaluable. A good agent can advise you on the available options, and what may be best for your situation. Everybody’s protection needs differs from person to person. This is why Bank Negara Malaysia requires agents to conduct thorough fact finding to assess customers’ needs and provide recommendations.

Do I Still Need Takaful When My Employer Already Provides Protection?

Many overlook the importance of having their own personal protection plan. They think t heir employers will provide coverage for them until they retire. But work situations can change. Some may receive better offers or choose to work for themselves. When this happens, the protection afforded to them by their employer ceases. The level of protection can also cease or change upon retirement.

Participation in takaful is for future needs. It is not only for one time use. Nobody can guarantee our health throughout life.
Separating your takaful plans to cover different scenarios and needs is advisable.

The rule of thumb is to differentiate existing plans for specific purposes, such as medical, savings, and retirement.

Nowadays, there are plenty of plans with competitive and flexible riders. This allows users to choose add-ons based on their lifestyle needs. It minimises the need for multiple plans as one plan can cover different things. It is recommended to seek professional advice from a knowledge agent to get a better understanding.

How Can I Tell If The Agent Is Right For Me?

Agents are dutybound to ensure they do not bring disrepute to the takaful company, which seeks to help individuals, businesses, and community from financial loss. All agents must be licensed. You can and should ask to see the agent’s credentials before signing o n the dotted line. To obtain the license, the agent is required to pass a high integrity and closely supervised Pre Contract Examination organized by Malaysian Insurance Institute (MII).

Takaful agents are subject to an additional Takaful Basic Exam (TBE) by the Islamic Banking and Finance Institute Malaysia (IBFIM). Many agents now opt to sit for TBE so they have wider breadth of knowledge to better serve customers.

Beyond this, good agents must have solid fundamentals on different plans available. Investing time in the Customer Fact Finding (CFF) form will enable agents to understand the lifestyle and needs of the customer. Only then can agents propose a suitable plan within the customers’ budget, with adequate protection and savings.

What Makes A Great Agent Stand Out From The Rest?

Simply put it is their effort to upskill and improve themselves. Agents must complete the Continuous Professional Development (CPD) training yearly. The minimum is 30 hours. Dedicated agents typically undertake up to 60-70 hours of learning per year to upgrade and upskill themselves with knowledge in providing professional service and advice to help their customers better.

Great agents prioritise customers. They consider customers’ future needs and explain how the recommended plan ca n help address customers’ concerns and provide peace of mind. The agent must also be honest in what the plan can or cannot do for the customer.

Customers may have other concerns as well such as the processing of claims, plan maturity or even lapsation of policies. A well trained agent must be able to answer and address these concerns.

Can Agents Help Me Get Claims Approved?

A common complaint about the industry is the difficulty in getting claims when required. It does not help matters if the agent is absent or not helpful at all. Claims may be denied due to plans not covering certain aspects, or in other cases it may be due to anti-selections. This is where a person does not declare their health conditions when subscribing to a plan. Upon filing a claim, their case is studied and if found to have not declared, their claim could be denied.

Good agents will advise customers to be honest and the onus is also on customers to do so. Customers must make timely contributions to ensure their takaful certificates do not lapse. To this end, agents will also advise customers to go through available online portals to avoid delays which could leave the customer unprotected.

In the case where genuine takaful claims are denied, the customer can write to the takaful provider to appeal or dispute the denial. All takaful providers will act in a fair manner and review the case thoroughly before rejection. The providers are careful to ensure all legitimate claims are honoured.

Investing into protection is a critical life decision. It is wise to engage a certified and knowledgeable person on different plans and coverage. Seeking advice from multiple agents to make more informed decisions is also good.

About the Author

Nazrul Namizan is Chief Agency Officer of Zurich Takaful Malaysia Berhad.

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