Abstract
The growing significance of takaful industry (Islamic insurance) in Malaysia is expected to foster sustainable economic growth in Malaysia. Further to this, Malaysia is recorded to be the major player and one of the fastest takaful growth in Southeast Asia. As such, family takaful (Islamic life insurance) segment must be competitive and innovative to increase market penetration and compete with their conventional counterparts. This paper aims to propose a simple yet comprehensive conceptual model by identifying the main determinants that drive family takaful demand in Malaysia. An extensive review of literature available has been carried out to achieve the purpose. Several critical factors namely, agency system (al-wakalah), reputation of takaful operators, products and services, marketing and advertising of takaful products, are found to be the main determinants for family takaful demand.
Highlights
Insurance as practised in the conventional financial system refers to a financial protection system that serves as a risk management strategy or tool, to reduce risk uncertainty and provides a planned financing technique that distribute losses
This study indicated that income, Islamic banking development, education, dependency ratio, and Muslim population factors are positively related to family takaful demand
This study suggests that several factors such as the agency system, reputation and recommendation, products and services, marketing and advertising are considered important factors that determine family takaful demand
Summary
Insurance as practised in the conventional financial system refers to a financial protection system that serves as a risk management strategy or tool, to reduce risk uncertainty and provides a planned financing technique that distribute losses. It can be said that takaful ta’awuni (Islamic co-operative insurance) is not a contract of buying or selling, where a party offers and sells protection and other party accepts and buys the service at a certain cost or price. Rather, it is an arrangement whereby a group of individuals each pay a fixed amount of money, and compensation for the losses of members of the group are paid out of the total sum. The holy Qur’an, in verse 5:2, mentioned that: “... help you one another in Al-Birr and At-Taqwa (virtue, righteousness and piety); but do not help one another in sin and transgression ...”
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