Takaful Intermediaries PDF

TAKAFUL INTERMEDIARIES INS510 INTRODUCTION TO TAKAFUL Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  TABLE OF CONTENT Introduction Rights of Takaful Agent Types of Takaful Intermediaries Obligations of the principal...

TAKAFUL INTERMEDIARIES INS510 INTRODUCTION TO TAKAFUL Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  TABLE OF CONTENT Introduction Rights of Takaful Agent Types of Takaful Intermediaries Obligations of the principal Duties of Takaful Agent Termination of Agency Takaful Agent in IFSA 2013 Retakaful Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)] INTRODUCTION A Takaful intermediary is a professional who solicits Takaful business or invites potential customers to enter into Takaful contracts with Takaful Operators. They are commonly known as Takaful agents, Takaful brokers or Financial Advisers. Intermediaries are usually paid commissions (or brokerage fees for brokers) for each plan promoted which is based on a percentage of the contributions made by customers who are also called “participants”. Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  TYPES OF TAKAFUL INTERMEDIARIES TAKAFUL AGENT TAKAFUL BROKER FINANCIAL ADVISER A Takaful agent According to IFSA Act A financial adviser is an represents a Takaful 2013, Takaful broker is independent party that Operator and primarily defined as a person who, provides financial advisory promotes Takaful plans as an independent business. issued by the Takaful contractor, carries out Operator. Takaful and/or Retakaful broking business. Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)] DUTIES OF TAKAFUL INTERMEDIARIES TAKAFUL AGENT TAKAFUL BROKER FINANCIAL ADVISER Analysing the financial planning Solicits or obtains a proposal Assists the customer in needs of a person relating to a for Takaful certificate on behalf obtaining and renewing a Takaful product; of a Takaful Operator; Takaful cover from a Takaful Recommending an appropriate Offers or assumes to act on Operator. Takaful product to a person; behalf of a Takaful Operator in Recommends and advises Sourcing a Takaful product from negotiating a Takaful the customer on the most a licensed Takaful Operator for a certificate; and appropriate Takaful plan person; Does any other act on behalf of coverage and terms being Arranging a contract in respect of a Takaful Operator in relation offered by Takaful Operator a Takaful product for a person; or to the issuance, renewal or continuance of a Takaful such other business, service or certificate. activity in relation to a financial service. TYPES OF REPRESENTS LICENSED/ INTERMEDIARIES REGISTERED BY: Takaful Agents Takaful Operator Malaysia Takaful Association (MTA) Takaful Broker Customer Bank Negara Malaysia Financial Adviser Customer Bank Negara Malaysia DIFFERENCES Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  DUTIES OF TAKAFUL AGENT The contract of agency between the principal and agent is normally in writing. However, it may be verbal. It contains the terms and conditions relating to the conduct of the agency and the remuneration payable to the agent. Some of the main duties of a Takaful agent are as follows: 1. Promotion of Takaful products and services. 2. Giving advisory services (related to Takaful products) and customer support to the clients. 3. To submit proposal to the principal as required. 4. Provide general awareness about Takaful products and services. 5. Maintain good rapport with his/her existing and prospective clients. 6. Aware about the market conditions to guide their customers accordingly TAKAFUL AGENT IN ISLAMIC FINANCIAL SERVICES ACT 2013 Disclosure Takaful Agent to Represent Non-Compliant of Requirement Licensed Takaful Operator IFSA 2013 Section 140 (Para 10) of IFSA As stated under Section 26 of IFSA Section 136 (4) of IFSA 2013 states 2013 requires all agents who 2013 no person shall market or that if any agent is found to be market Takaful products for a promote Takaful products or business non-compliant with the provisions Takaful Operator to inform as an agent or broker for a person or of the Act and if found guilty, can potential customers that he is an operator other than a licensed be fined not exceeding RM10 agent and acting on behalf of a Takaful Operator. Any person found million or imprisonment for a particular Takaful Operator. guilty of this provision, can be fined period not exceeding five years or not exceeding RM50 million or both. imprisonment not exceeding 10 years, or both.  RIGHTS OF A TAKAFUL AGENT The agent is entitled to receive payment and reimbursement. The agent’s most important right is the right to receive payment for his services, usually in the form of a commission or a fee. The agent is also entitled to reimbursement of moneys which he has expended with the express authority of his principal within the acceptable limits. The agent has the right to perform his duties in the manner which he considers to be appropriate. He may reject any attempt by his principal to control the manner in which he works. OBLIGATIONS OF THE PRINCIPAL The principal has always the following duties towards his agents: To pay remuneration and expenses Indemnify the agent against as agreed; or, failing agreement, as consequences of any act lawfully is customary; or, failing a custom, done, within his authority, on behalf to pay what is reasonable. of his principal. TERMINATION OF AGENCY By notice of revocation given by the principal to the agent. By notice of renunciation By the completion of the By expiration of the given to the principal by transaction where the period stipulated in the the agent. authority was given for that contract of agency. transaction only Generally, by death, By operation of any law By mutual agreement. lunacy or bankruptcy which renders the of the principal or contract of an agent agent. illegal Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  RETAKAFUL Insurance and reinsurance operators are The main reason for insurance operators to buy the twins and they cannot survive if they the reinsurance is that insurance operators are not supporting each other. might not be able to pay the claims if the amount is large. It can happen mostly in the case of fire, flood and etc Retakaful is the backbone of Takaful industry to provide solvency protection The underlying principles applicable in the to the Takaful operators in order to primary takaful contracts such as indemnity, ensure that the claims can be paid when permissible takaful interest, and utmost good due. faith are also applied in Retakaful contracts Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)] RETAKAFUL Retakaful is also a risk sharing mechanism. In Retakaful, the participants are the various takaful operators who seek to share their takaful risks through the mechanism of Retakaful managed by Retakaful operators. Islamic Financial Service Act 2013 (Malaysia) defines the Retakaful as: “takaful cover arranged by a takaful operator with a second takaful operator on the risks of the takaful fund it administers, wholly or partly …” Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  Retakaful is also a contract of donation (uqud al-tabarruat) between the takaful operators to share their respective takaful risks and liabilities based on defined Retakaful contributions, into a defined Retakaful Risk Fund, to cover defined Retakaful risks, in a defined Retakaful period, managed by a Retakaful operator based on various contracts such as almudharabah, al- wakalah or hybrid models retakaful contract Contractual relationship is again based on wakalah bi ajr (agency with fee/hire on services) contract. But the participants are the takaful operators on behalf of the participants. Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  importances of retakaful Protecting the solvency of Providing underwriting the takaful operator and flexibility and the capacity its participants. to accept risk Stabilizing claims cost and Allowing takaful operator to therefore giving greater effectively utilize the assets of stability to takaful the retakaful provider to give contribution pricing. coverage to its clients. Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  TYPES OF RETAKAFUL TREATY FACULTATIVE TAKAFUL RETAKAFUL Retakaful is placed under a Case by case basis standing agreement All risks within the agreement No obligation for both takaful and are automatically accepted by retakaful operators to enter into the retakaful companies the agreement Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]  OPERATIONAL MECHANISM OF RETAKAFUL 1 The individual policyholders (participants) of the takaful products do not involve directly in the retakaful contracts even though the contributions in retakaful are paid using a portion of the takaful participants' fund), 2 In the event of running a deficit to the retakaful funds due 3 to unforeseen claims by its participants, the retakaful operators provide a qard (a loan injection into retakaful Retakaful can be operationalized based on funds) to cover liability. similar structures implemented in Takaful either on Al-mudharabah, Al-wakalah or hybrid The amount of the loan shall be paid in subsequent years or models incorporating al-mudharabah and al- deducted from any refundable surplus in the following years. wakalah  RETAKAFUL Retakaful based on OPERATIONAL al-Mudharabah Model. MODEL The principle of al-mudharabah when applied to Retakaful contract defines the Retakaful operator as the entrepreneur (mudharib) who undertakes the Retakaful business activities and the participants (sahibul mal) consisting of the various takaful operators making Retakaful contributions into the Retakaful Risk Fund to the Retakaful operator (based on tabarru). The Retakaful contract may specify the proportion of profit (surplus) to be shared between the takaful and the Retakaful operator.  RETAKAFUL Retakaful based on al-Wakalah OPERATIONAL Model. MODEL Under, this model the Retakaful operator (the wakeel) manages the Retakaful Risk Fund (muwakkalbih) as an agent of the primary takaful operators (participants) (as the muwakkil) and is paid an upfront fee (the ujrah) for its services. Profits and losses from the management of the Retakaful Risk Fund belong entirely to the primary takaful operators (participants), unless the losses were due to the negligence or misconduct of the Retakaful operator. This model was approved by the SAC in 2002 RETAKAFUL COMPANIES Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)] THANK YOU Mardziyana Mohamad Malom [B.Sh (UM), M.Ec (UKM)]