Conventional insurance and cooperative or Takaful insurance are an extension of each other through the idea of insurance based on the formation of a group of individuals who are exposed to a unified risk in order to distribute the losses that may occur if the risk is realized, in return for paying a specific amount to the insurance company, and the idea of cooperative or Takaful insurance That these individuals have a special fund to which they can pay donations with the intent of facing risks or alleviating their burdens that one of the individuals participating in the fund may be exposed to. The idea of cooperative or takaful insurance has evolved into a more formal form, through the establishment of insurance companies which is run by Islamic cooperative bodies They are a group of individuals specialized in managing the Takaful insurance business.
It is a system that aims to protect individuals from economic disasters and their devastating effects that cannot be controlled or predicted when, where, and how it will be occur (Salim & others al, 2020).
Also
And
Second: The concept of Takaful insurance:
Takaful, idiomatically, is the system that is not based on the principle of profit as a basis, but aims to break up the parts of the risk and redistribute it to a group of participating individuals through compensation paid to the damaged party of the participants in accordance with the principle of partnership .and in same time that does not conflict with the provisions of Islamic Sharia (Al-Tlais, 2016).
From a legal point of view, Takaful is a contract in which each participant pays a sum of money as a donation to compensate for the damages incurred by the rest of the participants when the insured risk is realized. As all participants are exposed to similar risks and the participants have the right to recover the surplus contributions
Figure (1) the mechanism of action of takaful insurance - prepared by the researcher
The Importance and Principles of Takaful Insurance
Similar to conventional insurance, takaful insurance has a great importance in many economic and social aspects that make it synonymous with conventional insurance and its applications. It was reported by
And
Achieving safety and security for participants’.
Achieving legitimate profit that does not contradict Islamic Sharia.
Contribute to economic development and improve the cycle of money
supply in the national’s economic system.
And
Spreading a culture of takaful among members of society to face and distribute financial losses.
Contribute to limiting the rise in inflation rates by reserving a portion of the cash allocated for spending on consumer goods and services.
Increasing the rates of trade exchange worldwide in general and Islamic countries in particular.
And
Similar to conventional or traditional insurance, takaful insurance operates under a number of principles that distinguish it from others, and they serve as determinants of the insurance process and can be summarized as follows:
Objective principles: It is a set of frameworks and contents within which Takaful insurance operates and embodies its theoretical concept of insurance of its various types, including:
The principle of Islamic Sharia: The Sharia Supervisory Board formed within the Takaful insurance companies formulates the objective principles that embody Islamic Sharia by supervising the company’s transactions and expressing its opinion on the compatibility of these transactions with Islamic Sharia
The principle of justice: The rights of the participants and the rights of the insured are separated, and each party has its own financial account to address the overlapping of rights and duties and ensure justice in assuming responsibility
The principle of avoiding usury: It is considered one of the important principles in the application of Islamic law to the insurance business, as conventional insurance is based in its work on the exchange of cash for cash. This is an embodiment of the usury, which violates Islamic Sharia, and the basis for the refrainment of individuals in Islamic countries from buying insurance policies.
The principle of avoiding (Gharar (and ignorance: The conventional insurance contract based on ignorance because the insured is ignorant of whether he will receive the amount of compensation or not, similar to the insured who is ignorant of the amount of compensation that he will pay.
The principle of avoiding gambling: conventional insurance in the culture of Islamic peoples is considered a form of gambling, because the insured pays specific premiums in the hope of obtaining a larger amount in the future
Technical principles: it’s a set of practical and applied determinants under which to apply the transactions of Takaful insurance companies and
The principle of donation or endowment: This principle stipulates that the insured will participate in the insurance process by presenting them with gifts or financial donations to takaful fund or the contributors' Takaful Authority fund.
The principle of participation: This principle stipulates that the Takaful insurance company and the insured (the participants) jointly Bearing the burden of the loss suffered by one of the participants, and Bearing the deficit in the Takaful Fund, through its distribution to all parties participating in the insurance process.
Although the conventional and Takaful insurance services share in providing protection to the insurance applicant by compensating him for losses, there are fundamental differences between the two types that make one of them fit the requirements of a certain segment of target customers, which we will summarize as follows:
Implementation reference: In Takaful insurance, the activities are carried out in accordance with the provisions of Islamic Sharia, and this includes insurance, investment and compensation activities. In conventional insurance, conventional insurance works are accomplished based on insurance legislation, which differs from one country to another, without the religious rule entering into the contractual duties of how the business is implemented.
Distribution of surplus and profit: in Takaful insurance the insurance surplus is the difference between the total premiums and their returns minus the compensation and the expenses of the insurance process, and it is distributed to the participants. In conventional insurance, there is no insurance surplus in conventional insurance, but there are profits or insurance income resulting from the difference between the total premiums and their returns minus the compensation and the expenses of the insurance operation, this revenue is owned by the insurance company only
Investment revenues: The proceeds of investing the insurance funds are distributed among the participants in the fund, including policyholders and the Takaful insurance company, which takes a share of the investment returns but in conventional insurance Investment returns are due to the insurance company only (Al-Ashery, 2021).
Insurance goals: in Takaful insurance the most Insurance goals is Achieving cooperation and solidarity among the participants On the other hand, commercial insurance aims to Achieving profits at the expense of policyholders
contract form: The contracting process in Takaful insurance companies is either in the form of an agency contract between the company and the participants. or in the form of speculation, or in the form of a gift While insurance The insurance process in commercial insurance companies is carried out in one form, which is the netting contract between insurance amounts and premiums
Takaful Insurance and the Iraqi Insurance Market
Global indicators show that there is strong growth in the global takaful market in general, in the range of 13% to 14% annually in the total contributions for the period 2015-2019. The family takaful market and the general takaful market in 2019 reached approximately 17% and 83%, respectively. General Takaful recorded a higher growth of 17% compared to family takaful at a rate of 1% globally in total contributions in 2019. The GCC countries still dominate the global takaful market with a market share of 77% (mostly in the takaful field),
followed by Southeast Asia with 15%, the majority in the field of family takaful. (Al Etihad , 2021).
Figure (2) Global Takaful Insurance Indicators - Prepared by the researcher based on international reports.
The chart above shows the total written contributions by country for the Southeast Asia region and the Gulf Cooperation Council countries, where it shows the total written contributions in US dollars in family and general takaful combined, along with the relative market share of each country (Arab world insurance.com) .
The Republic of Malaysia has the largest market for family takaful in the world, equivalent to 70% for the countries of Southeast Asia, as shown in the following figure (3), with a total written contributions of 534 million US dollars at the end of 2018, followed by Indonesia, which owns 19% of the takaful market at the level of The world, with a total underwriting contributions of $0.6 billion, with a growth rate of (11%) at the end of 2018, followed by Brunei with a market share of 12% at the end of 2018 globally..
www.Tasarrufakademia.com.isalmic_finance_report_2019.
www.Tasarrufakademia.com.isalmic_finance_report_2019.
The Takaful Insurance Market in Iraq and the most Prominent Challenges
The Takaful insurance market in Iraq is considered one of the modern markets that is still in the stage of completing the legal and legislative frameworks in preparation for the start of promoting Islamic insurance services, which are believed to have a future and many customers due to the presence of a catalyst for the spread of these services. Where the Central Bank of Iraq announced its initiation to establish a Takaful Insurance Company for Islamic banks in cooperation with the Insurance Bureau, with a capital of (15) billion dinars, with the participation of all Islamic banks.. And that this company is subject to Law No. 10 of 2005 regulating insurance business and Islamic Banking Law No. (43) Of 2015.
The Central Bank issued the Takaful controls of the company in accordance with the standards of the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Considering that the Takaful Insurance Company represents the second strategic objective of the comprehensive strategic plan of this bank in developing Islamic financial services and its dealings, for the period between (2016 - 2020), (
Despite the objectivity of the idea, there are challenges that commercial insurance companies will face. He wrote (Kamal, 2019: 3) The problem that insurance companies operating in Iraq will face is that they may lose some of their business in competition with the Takaful / Islamic insurance company because This company, by virtue of its religious composition, is based on the provisions of Islamic Sharia, and it will work on the use of religion for the purposes of promoting its insurance services, which commercial insurance companies cannot do. This means that the competitiveness that Iraqi governments have been calling for since 2003 under the guidance of international financial institutions will be corrupt and weak (Kamal, 2019: 3:
And that there is a basic problem facing takaful insurance faced by commercial insurance, which is represented by the intangibility of insurance services of both types, as many Muslims believe that insurance services are forbidden, so we need an effective strategy to educate consumers about the basic principles of takaful and create demand for takaful products (tahini coolin, 2016: p7) And (Ajmal, 2010 p6) continues that takaful insurance is not clear in general in many global markets, as part of the financial services industry is not in the same formality compared to other financial services such as banking.
As the desire and motivation of Muslims are considered two major factors responsible for the growth of demand for Takaful products, and they are related to the level of public knowledge of Takaful products, for which the growth of demand for them is still limited and at a rate of approximately 10% of the total insurance services in global markets. In general, the level of demand by Muslims and non-Muslims on Takaful products are considered very low due to the lack of understanding among the insurance public (Abo Hassin, 2014:p31)
And (Al-Tlais, 2016) adds another one facing Takaful insurance, represented by the lack of insurance cadres in the field of Takaful insurance, which constitutes a major challenge that affects the efficiency of the performance of Takaful insurance companies and the promotion of their services.
Practical Application
The research community was represented in the Iraqi insurance market, which consisted of the Ethnic Insurance Bureau as a responsible and organizer of the insurance services sector in Iraq, in addition to the general insurance companies, the National Insurance Company, the Iraqi Insurance Company, and the Reinsurance Company, in addition to private insurance companies. In the insurance sector, the insured and potential consumers.
First, the description of the questionnaire:
A court questionnaire was prepared and consisted of (18) paragraphs in order to prove the research hypotheses mentioned in the research methodology, and that the form was divided into two parts. Takaful insurance, which included three axes (the possibility of application, the possibility of substitution, and the possibility of a rise in the total collected premiums). The three axes included questions aimed at proving the hypotheses of the research, and a three-degree Likert scale was used (agree, neutral and disagree) in order to indicate the
answers to the sample vocabulary The respondents were based on the paragraphs of the questionnaire, and the results were interpreted using statistical tools such as the mean, standard deviation, and the spss v17 program.
Personal Information Section:
Table (1) the academic achievement of the sample
Index | Academic achievement | Frequency | ratio |
|---|---|---|---|
1 | BSc | 122 | 0.61 |
2 | Master's degree and equivalent | 34 | 0.17 |
3 | PhD | 6 | 0.03 |
4 | other | 38 | 0.19 |
5 | the total | 200 | %100 |
Table (1) the academic achievement of the sample | |||
Through the above table, we note that the academic achievement of the items of the researched sample was characterized by a high diversity, which gives a great diversity in the answers of the researched sample. This indicates that she has a high level of knowledge that qualifies her to answer the paragraphs of the questionnaire in an objective manner.
Table (2) The occupational level of the sample
index | Career Level | Frequency | ratio |
|---|---|---|---|
1 | Director (general, branch, department) | 22 | 0.11 |
2 | employee | 102 | 0.51 |
3 | unemployed | 76 | 0.38 |
4 | the total | 200 | %100 |
Table (2) The occupational level of the sample | |||
The total percentage of items for the surveyed sample that have a job related to insurance activity was (62%), which varied between an employee, a general manager, and a department or branch in a way that indicates that the surveyed sample possesses technical knowledge in the field of insurance, its concept and principles of work, which is reflected in the quality of the answers provided by them Positive and purposeful.
index | Number of years of service | Frequency | ratio |
|---|---|---|---|
1 | 20 – 15 | 64 | 0.32 |
2 | 30 – 20 | 55 | 0.27 |
3 | 40 and more | 37 | 0.19 |
4 | non | 44 | 0.22 |
the total | 200 | %100 | |
Table (3) Number of years of experience for the sample | |||
The above table and figure shows that the items of the surveyed sample have serious practical experience in the field of insurance services and that they have direct dealings with the insurance service, as the total sample items that have experience and practice in insurance work amounted to (88%), and this indicates that the surveyed sample has an objective and technical opinion It stems from her long experience in the practice and management of insurance activities, and this was reflected in the quality of her answers regarding the questionnaire’s paragraphs.
index | Paragraph | the answers | The ratio | ||
|---|---|---|---|---|---|
Yes | No | ||||
| 1 | Did you buy an insurance policy? | 102 | 98 | %51 | %49 |
| 2 | How many times have you renewed the insurance policy? | 95 | 105 | %48 | %52 |
| 3 | Do you know what Takaful (Islamic) insurance is? | 133 | 67 | %67 | %33 |
| 4 | Do you find a difference between Takaful (Islamic) and commercial insurance? | 129 | 71 | %65 | %35 |
| Table (4) Insurance information - prepared by the researcher based on the outputs of Spss | |||||
The above table represents an additional measure of the relationship of the vocabulary of the researched sample to the activity and insurance services, and through it we see the tangibility of insurance services for the insurance audience and the extent of their interaction with them. The sample surveyed has a relative knowledge of Takaful insurance services and its concept, and what are the benefits derived from it compared to commercial insurance, at a rate of nearly 70% when it answered paragraphs (3 and 4).
The first axis: the possibility of applying the Takaful insurance:- In this section, we will discuss the answers and opinions of the researched sample about the extent to which it is possible to apply and activate Takaful insurance services in the Iraqi insurance sector based on the material, technical and administrative capabilities that this sector possesses, and the availability of the legal and legal environment necessary to activate the services This type of insurance.
| index | Paragraph | Likert scale | mean | St. deviation | ||
|---|---|---|---|---|---|---|
| I agree | neutral | don't agree | ||||
| 1 | Are there technically and administratively qualified cadres in the field of Takaful insurance? | 101 | 53 | 46 | 2.28 | 0.60 |
2 | Do public & private insurance companies have the necessary capital to initiate the establishment of branches of their companies specialized in Takaful insurance services? | 144 | 47 | 9 | 2.67 | 0.55 |
3 | The average per capita income is sufficient to acquire Takaful insurance products? | 103 | 87 | 10 | 2.40 | 0.68 |
4 | The average income of individuals is sufficient to acquire Takaful insurance products? | 89 | 105 | 6 | 2.41 | 0.55 |
5 | Is the legislative framework available that confirms the legality of Takaful insurance services and its conformity with the principles of Islamic Sharia? | 111 | 22 | 67 | 2.22 | 0.61 |
6 | The necessary legal framework is available for concluding takaful insurance contracts, guarantees the rights of subscribers and defines their duties | 156 | 13 | 31 | 2.62 | 0.63 |
Application possibility | 704 | 327 | 169 | 2.44 | 0.62 | |
Through the above table, we note that the arithmetic mean values of the paragraphs of the axis of the possibility of applying takaful insurance exceeded the hypothetical mean and its value (2) on a three-degree Likert scale. Towards agreement on the possibility of applying and producing Takaful insurance services in the Iraqi market based on what was stated in the paragraphs of the axis, and this was confirmed by the standard deviation values, which ranged between (0.55) and (0.68), which indicates a decrease in the dispersal of the sample’s opinions. The value of the general arithmetic mean of the axis has reached (2.44) in a way that is close to agreement in a large proportion with the paragraphs of the axis, which is the possibility of applying and producing takaful insurance services in the Iraqi market.
In this axis, we will discuss the answers and opinions of the researched sample about the extent to which Takaful insurance is considered a successful alternative to commercial insurance within the alternatives available to the insurance public in the Iraqi insurance sector based on the benefits provided by the application of Takaful insurance
| index | Paragraph | Likert scale | mean | St. deviation | ||
|---|---|---|---|---|---|---|
| I agree | neutral | don't agree | ||||
1 | Takaful insurance services are compliance with the principles of Islamic Sharia. | 155 | 33 | 12 | 2.71 | 0.57 |
| 2 | Takaful insurance services are It's low cost | 89 | 88 | 23 | 2.33 | 0.67 |
3 | Takaful insurance provides returns to the participants resulting from the investment of their money added to their insurance accounts | 102 | 74 | 24 | 2.39 | 0.69 |
4 | Takaful insurance provides financial surpluses to be added to the accounts of the participants in the Takaful Insurance Fund | 101 | 75 | 24 | 2.38 | 0.69 |
5 | Takaful insurance provides adequate compensation to the participants and equivalent to the value of the actual loss that they have suffered as it is based on the principle of takaful or cooperation | 100 | 82 | 18 | 2.41 | 0.65 |
6 | Takaful insurance provides the legitimacy of funds (compensation, insurance surpluses, investment returns) as it is a financial activity that is practiced within the limits of Islamic Sharia. | 156 | 33 | 11 | 2.67 | 0.65 |
Takaful insurance is an alternative to commercial insurance | 703 | 385 | 112 | 2.40 | 0.6 | |
The above table shows that there is a large agreement of the opinions of the researched sample with what was stated in the paragraphs of the axis concerned with the question whether the takaful insurance is a successful alternative to commercial insurance within the alternatives available in the Iraqi market. The arithmetic mean values ranged between (2.33) and (2.77), which indicates the direction of the opinions of the surveyed sample with the axis paragraphs, in addition to the concentration of the answers of the surveyed sample in the area of agreement, and this was confirmed by the standard deviation values, which ranged between (0.57) and (0.69). The value of the general arithmetic mean for the axis was (2.40), exceeding the hypothetical mean and its value (2) on the scale, which confirms the concentration of the sample answers in the area of agreement from the Likert scale and its distance from the area of neutrality and disagreement.
In this axis, we will discuss the opinions of the sample of the respondents regarding the impact of takaful insurance on the results and indicators of the Iraqi insurance sector, and the opportunities provided by the application of this insurance, whose results will be reflected on the Iraqi economy in general and the insurance sector, especially if they are efficiently exploited based on global trends in the expansion of Islamic insurance or symbiotic.
index | Paragraph | Likert scale | mean | St. deviation | ||
|---|---|---|---|---|---|---|
I agree | neutral | don’ tagree | ||||
1 | Takaful insurance new services added to the variety of insurance services marketed in the Iraqi insurance market | 163 | 37 | 0 | 2 . 8 1 | 0.38 |
2 | The low cost of Takaful insurance services is considered an attractive factor for insurance premiums | 89 | 110 | 1 | 2 . 4 4 | 0.50 |
3 | The production of takaful insurance services is an attractive factor for the investments of takaful insurance companies in the Iraqi insurance market | 141 | 23 | 36 | 2 . 5 2 | 0.68 |
4 | The practice of public and private insurance companies for Takaful insurance business will add new insurance portfolios to them in a way that will be reflected in their total returns. | 158 | 39 | 3 | 2 . 7 7 | 0.45 |
5 | The production of Takaful insurance services is considered a factor that attracts the Islamic public | 161 | 12 | 27 | 2 . 6 7 | 0.60 |
6 | Producing Takaful insurance services in the Iraqi insurance market is a catalyst for increasing commercial transactions between Iraq and countries that apply Islamic Sharia | 174 | 26 | 0 | 2 . 8 7 | 0.33 |
The rise in the indicators of the Iraqi insurance market | 886 | 247 | 67 | 2.68 | 0.57 | |
The above table shows that the opinions of the researched sample were towards agreement and in a large percentage with what was stated in the axis paragraphs. The arithmetic mean values ranged between (2.44) and (2.87), which is greater than the hypothetical mean on the three-degree Likert scale and with a moderate dispersal rate that ranged between (0.33) And (0.68), which confirms that the application of Takaful insurance services has a great reflection on the indicators of the Iraqi insurance market, as it is a new product that has a wide audience in the Iraqi market. The provision of insurance services in line with the needs and culture of the public will be reflected positively on the total insurance premiums collected, and this will lead to an increase in the Iraqi market share of insurance services at the level of the Islamic world in the medium and long term.