For Insurance To Masses


Nov 19 - 25, 2007

Takaful Pakistan Limited started insurance operations in March 2007. It is a joint venture consortium of six institutions, two of which are from Middle East. HBFC holds highest shares amongst all four local partners. Takaful Pakistan Limited underwrites all classes of general Takaful business including Fire (Property & Engineering), Marine, Motor, Liabilities, Travel, Health and other types and classes of business. Recently, PAGE interviewed its Chief Executive Officer, Capt. M. Jamil Akhtar Khan, who started his career as a Deck Cadet in the Merchant Navy after obtaining his academic education from Cadet College Hasan Abdal. Thereafter, he graduated and passed out from Pakistan Marine Academy. Capt. Jamil progressively rose to the position of Captain after qualifying as a Master Mariner and commanded various ships of PNSC. Then, he stepped in the insurance industry. While serving in senior positions in reputable general insurance companies, both local as well as foreign, he was actively involved in all key operational aspects like formulating the companies' business strategy plans as well as other sensitive areas of the companies' country-wide operations. Meanwhile, he acquired the highest insurance qualification of ACII (U.K.) achieving "distinction" in the subject "Marine Insurance & World Trade". Actually, in May 2004, Capt. Jamil said to take up a challenging role of setting up the First Takaful Company of Pakistan. But, unfortunately it could not become a pioneer Takaful company of Pakistan. He represented the company on various international Takaful forums and contributed positively towards finalization of the legal framework for Takaful in Pakistan. He had also been teaching the subjects of Marine Insurance & Re-insurance to the students of M.Com in the Karachi University as a visiting professor. He is a known and respected person in Government and private circles in the country as well as in the international Takaful market. Capt. Jamil holds incisive views and knowledge about the insurance sector of Pakistan, longing for a transformation of conventional financial system into absolute Shariah-compliant and conventional insurance business into Takaful.

While describing major distinctions between conventional insurance and Takaful, Capt. Jamil said there is a difference in concept and in contract. Takaful offers Shariah-compliant alternative to insurance. Noteworthy is that insurance per se is not something that is objectionable or forbidden (Haraam) in Islam. It is for the good social cause. It is the internal mechanism of the conventional insurance companies which operate in contrast to the Shariah principles. In conventional insurance, policy is like a sale contract wherein insured and insurer agrees on certain premium. Hence, it is money for money exchange. It contains the highly objectionable elements of Gharrar (uncertainty), Maiser (gambling) and direct as well as indirect Riba (usury). When gain of one party is contingent upon the loss to other party (s), gambling element takes place. At year end if insured escapes loss the premium would become insurer's current asset. In Takaful, however, insured pays contribution instead of premium to insurer. It is a risk sharing agreement. In case of loss, contribution funds pool is used to dole out party at loss. There is a pro-rata return of surplus at the end of the policy period to policy holder. While, in conventional insurance this does not happen.

Takaful Pakistan is offering insurance policies in all classes of general Takaful. It fulfilled condition of showing a paid up capital of Rs. 80 million to obtain insurer licence. Later, it got licences to operate insurance business in restricted classes as well. Takaful Pakistan plans to offer insurance products beyond the traditional lines of insurance in a scenario when majority of nation population is living below the poverty line without indemnity of risks. It plans to reach out to the grass root level, giving price affordability and advantage to masses. Unfortunately the government is not in a position to offer free education and health services to all. Therefore, he said, their focus would be on insurance coverage of education and health.

One window Takaful operation would hit hard to pristine Takaful business. Capt. Jamil said it is to benefit only few having ulterior motives of underwriting insurance business via conventional as well as Shariah-complaint modes simultaneously. The both can not get along. It is like selling of Haram (forbidden) and Halal (allowed) things at once. He informed fifteen years ago, Malaysia allowed such one-window banking operation and regretted later on; terming it a mistaken and haphazard decision. Lobby of conventional insurers with vested interests is propagating the cause of allowing "windows" within their conventional insurance branches. They substantiate their stands by presenting myth of lack of trained manpower in Takaful operations. Instead, fact is that "we have sufficient professionally trained workforce to carry Islamic insurance," Capt. Jamil told. In fact, these lobbyists want to get hold on major market share of insurance industry. There is a clear provision within the Takaful Rules 2005 that if any conventional insurance company, if it so desires, it can convert its internal operations into the Takaful mode within a twelve months period. He thinks that is a very reasonable option to any conventional insurer to convert itself into Takaful mode. Currently there are several Takaful companies on the anvil in Pakistan with foreign collaboration. Foreign investors are vying to invest in insurance industry. In fact one might argue that if a "door" is already open for the conventional insurers in the form of transformation or forming a subsidiary, then why they are insisting on one window operation? Five years tenure is enough to mould conventional financial system into Shariah-compliance system, he opined. Sudan in a revolutionary initiative has done it recently.


The total liquid foreign reserves held by the country stood at $ 16,387.5 million on 10th November, 2007.


i) Foreign reserves held by the State Bank of Pakistan:

$ 14,183.2 million.

ii) Net foreign reserves held by banks (other than SBP):

$ 2,204.3 million.

iii) Total liquid foreign reserves:

$ 16,387.5 million.

Takaful Pakistan is trendsetter in Takaful operation as well as in corporate governance and business ethics. Innovativeness in insurance products may compensate loss caused by mal practices in insurance industry in Pakistan. People are unaware of their rights. They should be given at least health and education coverage, he said, which Takaful Pakistan ensures to do in near future. The plan to penetrate insurance products into deprived segments of society at affordable price is under evaluation stage.