This is the Time to Offer Takaful (Islamic Insurance) in India

By Syed Ahmed Salman, Hafiz Majdi Ab. Rashid, Sheila Nu Nu Htay

Abstract

India is known as a multi-racial and multi-religious country. In addition, the second highest Muslim population in the world and also the second highest total population belong to India. Based on the review of religious teachings, conventional insurance is not in favor due to the prohibited elements in its practice. However, Takaful known as an ethical insurance seems to fit in all religions and it has been widely introduced in both Muslim and non-Muslim countries all over the world. However, Takaful has not been offered until now. Therefore, the objective of this paper is to explore on the factors which are pulling Takaful to be offered in India. The review of literature finds that there are seven main attracting factors to offer Takaful in India. Firstly, there is a limited engagement of life insurance by Muslims and hence, if Takaful is offered, it can grasp the untapped market. Secondly, there is historical evidence of existence of unethical conventional insurance practices in India. Third factor is related to the rapid growth of the Takaful industry all over the world showing the wide acceptance of Takaful regardless of the country and religion. Fourthly, India has the second highest Muslim population in the world and thus, India should initiate offering it. Fifth point is related to the involvement of the conventional insurance practices in interest, uncertainty and gambling and these items are prohibited by the main religions in India and the advantage of Takaful is that it is free from these prohibited elements. The six highlight is concerned with the economic growth of India and generally there is a positive relationship between growth of insurance industry and economy. The last fact is the practice of surplus sharing in Takaful which can attract the policy holders. It is expected that the paper will be of interest of investors, Insurance operators, regulators and general public in India.