Takaful Assignment 1 (group 20) 2 PDF

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KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCESSEMESTER 2, 20/FINC 2305 PRINCIPLES AND PRACTICES OF TAKAFULGROUP ASSIGNMENT 1PREPARED BY: GROUP 20STUDENT’S NAME MATRIC NUMBER SECTIONLuqman Bin Abdul Hakim @Ramizu 1819387 2Jawaher 1636616 3Nurul Aida Amanie binti Ismail 1724382 2Puteri Nur Nadhirah bi...

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KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES SEMESTER 2, 20/21 FINC 2305 PRINCIPLES AND PRACTICES OF TAKAFUL GROUP ASSIGNMENT 1 PREPARED BY: GROUP 20 STUDENT’S NAME

MATRIC NUMBER

SECTION

Luqman Bin Abdul Hakim @Ramizu

1819387

2

Jawaher

1636616

3

Nurul Aida Amanie binti Ismail

1724382

2

Puteri Nur Nadhirah binti Maharami

1728166

2

Muhammad Zulhaizat Bin Amir Hamzah

1817325

2

SUBMITTED TO: MADAM FADHILAH BINTI ABDULLAH ASUHAIMI & SIR AHMAD BIN KHALIQ

INTRODUCTION We have chosen three Takaful companies which are Hong Leong MSIG Takaful Berhad (HLM Takaful), Etiqa and AIA Public Takaful. HLM Takaful is a licensed takaful operator of Hong Leong Financial Group (HLFG) Malaysia’s Islamic financial services since 2006 that offer Islamic Banking, Islamic Investment, Islamic Wealth Management and Takaful on a Shariah compliant basis. HLM Takaful i-Hospital Care is a product that provides a daily cash benefit upon being hospitalized. Etiqa is the leading insurance and takaful business in ASEAN. It offers life and general insurance just as family and general takaful products through its 10,000 specialists. Etiqa business comprises four operating entities in Malaysia, namely, Etiqa General Insurance Berhad, Etiqa Life Insurance Berhad, Etiqa General Takaful Berhad and Etiqa General Takaful Berhad and also operating entities in Singapore, Indonesia, the Philippines and Cambodia. Etiqa E-Medical Pass Takaful is a standalone medical Takaful plan that provides medical coverage up to age 80. AIA i-Med Basic is a takaful plan offered by the AIA Public Takaful group, which has been operating in Malaysia for over a decade. It is jointly owned by AIA Bhd. (AIA), Public Bank Berhad (PBB) and Public Islamic Bank Berhad (a wholly owned subsidiary of PBB). This AIA i-Med Basic product provides their customers with protection for medical treatment and hospitalization at an affordable price. If they only need basic medical coverage, this package is suitable. This scheme is only available to Malaysian people who live in the country.

COMPARISON

TYPE

HONG LEONG MSIG TAKAFUL (HLM Takaful i-Hospital Care)

AIA PUBLIC TAKAFUL (AIA i-Med Basic)

ETIQA TAKAFUL (Etiqa E- Medical Pass)

OPINION

Purpose

The purpose of this product is to provide the hospitalisation benefit in terms of daily cash allowance to assist customers in completing their medical bills.

AIA i-Med Basic is a Takaful plan which provides coverage for hospitalization and surgical expenses. This plan is a pure medical and health protection plan.

The purpose of e-Medical Pass Takaful is a standalone medical Takaful plan that provides coverage for hospitalisation and surgical expenses.

All 3 companies provide products that can assist participants with their hospitalisation needs.

Coverage

1. Pays cash benefit up to RM500 per day upon hospitalisation. 2. Double cash benefit if hospitalised due to cancer. 3. Hassle-free application directly from us without any medical examination. 4. Renew without any hassle for another 10 years of coverage up to 2 times. 5. Covers hospitalisation in Malaysia, Singapore and Brunei.

1. Hospital Room and Boards (up to 120 days per year). 2. Intensive Care Units (ICU) (up to 120 days per year). 3. In- Hospital Related Fees. 4. RM300 deductible. 5. Underwriting Surplus.

1. In-Patient & Day Care Surgery All of them provide Benefits. coverage for inpatient 2. Out-patient benefits. customers however, only 3. Deductible options. ETIQA TAKAFUL provides both inpatient and outpatient customers which make it stand out from the others.

Contribution/ premium

1. The contribution fully depends on the age of the participants. 2. Coverage period: minimum 10 years. 3. The contribution amount is shown in the appendix.

1. The contribution rate is different between gender and occupational class. 2. The calculation can be referring to the appendix.

1. The participants are charged a certain amount of contribution based on the plan type, deductible option, occupation and attained age at the commencement date. 2. The contribution rates table will be provided in the appendix.

The major criteria to decide the contribution is by looking at the age of the participants. However, AIA and ETIQA include the type of occupation and type of plan as their basis.

Contract used

1. Tabarru’ Donation from the portion of the contribution that will be allocated to the Participants' Risk Fund (PRF), which will be used for mutual aid and assistance among the fellow participants. 2. Wakalah Operators act as an agent on behalf of the participants, to manage the PRF and the Takaful Operator earns Wakalah Fee for services rendered. 3. Ju’alah The agreement in which the participant agrees to reward the Takaful Operator for its achievement or good performance in managing the PRF that leads to Surplus of the fund. 4. Qard The interest-free loan provided by the Takaful Operator in the event of a deficit in the PRF.

1. Tabarru' The balance of Contribution after deduction of Wakalah Fee, which will be allocated into the Participants' Risk Fund (PRF) as a donation for the purpose of mutual help and assistance to fellow Participants in need. 2. Wakalah Participant authorizes AIA PUBLIC to act on their behalf to conduct the affairs of Takaful business. AIA PUBLIC will take a portion of the Participants' Contribution as a Wakalah Fee in return for the services provided. 3. Ju'alah AIA PUBLIC will be entitled to earn up to 50% of the Surplus arising from the PRF. The remaining portion of the Surplus will be distributed to eligible Participants. 4. Al-Qard Al-Hasan Is an interest-free loan provided by AIA PUBLIC to the PRF in the event it becomes deficit to enable it to pay Takaful benefit(s) to eligible Participants.

1. Tabarru’ Fulfill an obligation of mutual help and joint guarantee. 2. Wakalah The Wakalah fee is paid to Etiqa to cover the costs of distributing and managing the plan. 3. Ju'alah Ju'alah is a wage contract that specifies the share of the distribution surplus from the PRF which is agreed between the Takaful Operator and Participants. 4. Mudharabah Mudarabah is a mutual contract between Etiqa and the participant for the investment profit or losses.

In short, all companies mostly used the same model in their products which are, tabarru’, wakalah, Ju’alah . However, the Etiqa takaful has an additional contract that is used which is mudharabah. It is because Etiqa takaful provides an additional investment contract in their product.

Main rider

1. Hospital cash benefit (other than cancer).

1. Hospital Room and Board Benefit.

1. In-Patient & Day Care Surgery Etiqa E-Medical Pass by Benefits. ETIQA offers hospital room and board benefits which include all of the expenses that are being charged in medical bills.

1. Hassle-free application directly from us without any medical examination. 2. Renew without any hassle for another 10 years of coverage up to 2 times. 3. Covers hospitalisation in Malaysia, Singapore and Brunei.

1. Annual and Lifetime Limit 2. Intensive Care Unit (ICU) Coverage 3. In-Hospital Related Fees 4. RM300 deductible 5. Underwriting Surplus

1. Out-Patient Benefits.

1. Hospital cash benefit (other than cancer) ● RM100 – RM500 (in a multiple of RM50, subject to income requirement). 2. Hospital cash benefit due to cancer ● The amount of compensation is doubled.

1. Hospital Room and Boards Benefit. ● RM100 (up to 120 days per year) 2. Intensive Care Units (ICU) (up to 120 days per year). 3. In- Hospital Related Fees. ● Hospital Supplies and Services ● Surgical Fees ● Operating Theatre Fees ● Anesthetist's Fees ● In-Hospital Doctor’s visit (2 visits per physician per day

1. In-Patient & Day Care Surgery Benefits. ● Per day limit ○ Silver: RM 100 ○ Gold: RM 150 ○ Platinum: RM 200 ● Per annual limit: No limit ● ICU, Surgical fees, Anaesthetist fees, OT fees, Hospital supplies and services charges, In-Hospital Physician/ Specialist Visit Charges (limited 2 visits per day), Day care surgery fees, Ambulance fees: As charged*

2. Hospital cash benefit due to cancer. Additional rider

Compensation in RM

2. Deductible Option

ETIQA e-Medical Pass Takaful offers the best additional benefits for the products. It shows that this product is not limited to only participants who are being hospitalized but also the participants that are not hospitalized which only want to undergo minor medical treatment. ETIQA e-Medical Pass Takaful offers the best claims for any emergency. Despite a low contribution rate offered, the participants still can get unlimited claims for any medical bill charged which are subject to the types of benefits which are the same with the participants who undergo daily medical treatment.

Notes: 1. All claims are subject to a Deductible of RM300 for Any One Disability. 2. Annual Limit; RM20,000 3. Lifetime Limit; RM80,000

2. Out-Patient Benefits ● As charged* 3. Deductible Option ● Three options offered: ○ Option 1: RM 1,000 ○ Option 2: RM 3,000 ○ Option 3: RM 5,000 *Subject to overall annual limit

OBSERVATIONS 1. Consequences for any default payments All of the medical coverage Takaful provided by these three companies introduced a grace period for the participants if they failed to make the payment from the due date of contribution payment. HLM Takaful gives 30 days meanwhile AIA Takaful and Etiqa give 31 days of grace period for the participants to make their payment. If they failed to make the payment within the grace period, their Takaful Certificate will be terminated. 2. Strategies to improve current Takaful practices When comparing a takaful company with an insurance company, a takaful company is still new and still needs to improve in many aspects. Though the growth of takaful companies is increasing year after year, some aspects need to be taken into consideration to make takaful more competitive than insurance companies. One of the improvisations that can be made is in terms of a takaful marketing strategy. As we know MSIG, AIA, and ETIKA company provide both insurance and takaful products. However, it seems to appear that the insurance product is much more well known than the takaful product. One of the reasons could be due to the marketing strategies that are done by the company that promoted the insurance product more than takaful itself. Besides, the companies did not emphasize on the importance of muslims to subscribe to takaful operators instead of insurance; rather, they just allow the customer to choose which want they prefer. In our opinion, this is very contradictory as the reason for the establishment of a takaful company is to provide an alternative for muslims to choose the product which is shariah-compliant. Thus, they should create awareness for muslims especially, to have and to choose takaful products rather than insurance products. Plus, the company should make a plan to promote their takaful product more than they are promoting insurance products. Next, in order to compete with the insurance company, a takaful company must be more creative and innovative. The reality is that most of the product in takaful is just a mere replication of the insurance product. It is just that takaful products are shariah compliant. They need to eliminate the stigma that says, “a takaful company is just imitating the insurance company by just adding up the shariah compliant elements into it”. We believe that in order to compete with insurance companies, takaful companies must go further and beyond from what they are now. Meaning, a takaful company must explore, do research, develop new strategies to precede the insurance company. They can come out with the product that is totally new and make their product as a reference for the insurance company, not the vice versa.

Last but not least, we think that all takaful companies must have at least one micro takaful product. This is to reflect back the objective of takaful which is to attain goodness and preserve the well-being of mankind. It is because the product from takaful companies still cannot reach many of B40 groups and below as the product price is not friendly to them. There are some companies that provide micro takaful products but still just a few of them. As we know, the majority of Malaysian family income is from B40 groups. As a result, many of them cannot get a chance to have one takaful product. Our recommendation is that all takaful companies must at least create one microtakaful product to assist those in need. By doing so, we believe that many people from the B40 group will not be left behind and they can enjoy the benefits from the product.

CONCLUSION In conclusion, it can be seen that ETIQA e-Medical Pass Takaful is a better Takaful product offered by ETIQA Takaful. It provides extensive medical coverage such as In-Patient & Day Care Surgery Benefits for the participants that are hospitalized and Out-patient benefits for daily medical treatment in which the participants are given the deductible options with the lowest contributions in the market. The participants have to pay certain amounts of contribution based on the plan type, deductible option, occupation and attained age at the commencement which may increase in accordance to the attained age. Other than that, the hospitalisation expenses will be totally covered by ETIQA and if the participants choose to have deductible options, they have to pay the deductible amount per hospital admission and the rest expenses will be covered by ETIQA. If the participants are unable to pay the contribution, they will be given a 31 days grace period from the due date of contribution payment, however, if they still pay after the grace period, their takaful certificate will be lapsed.

REFERENCES AIA Public Takaful. A-Plus Med-i. https://www.aia.com.my/en/our-products/medical-protection/a-plus-med-i.html ETIQA Family Takaful Berhad. e-Medical Pass Takaful. https://www.etiqa.com.my/v2/health-insurance-takaful/e-medical-pass-takaful Hong

Leong MSIG Takaful. HLM Takaful i-Hospital https://www.hlmtakaful.com.my/Products-and-Services/Family-Takaful/Individual/HLM-Takaful-i-Hospital-Care.aspx#horizontalTab24

Care.

Nugayev, R. & et. al. (2019). Improving the Takaful Sector In Islamic Countries. In Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC). http://www.islamansiklopedisi.info/dia/pdf/c37/c370111.pdf

APPENDIX Hong Leong MSIG Takaful’s brochure https://www.hlmtakaful.com.my/Product-Brochure/Family-Takaful/HLM-Takaful-i-Hospital-Care-A5-Brochure-200219-(1).aspx

MSIG Takaful: Contribution calculation

AIA Takaful’s disclosure sheet https://www.aia.com.my/content/dam/my/en/ecommerce/pds-general/medical_takaful_en_pds.pdf

ETIQA Family Takaful Berhad brochure https://www.etiqa.com.my/sites/Satellite?blobcol=urldata&blobkey=id&blobtable=MungoBlobs&blobwhere=1466401877140&ssbinary=true

ETIQA e-Medical Pass Takaful contribution rate...