|What are the takaful models?|
Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits but to uphold the principle of "bear ye one another's burden." The role of this practice indicates that the policyholders are in fact the managers of the fund and the ones in ultimate control. However, the commercialisation of Takaful has produced several types of Islamic insurance, each reflecting a different experience, environment and perhaps a different school of thought.
Ta’awuni Model (Cooperative Insurance)
The Ta’awuni model practices the concept of pure Mudharabah in the daily transactions where it encourages Islamic values such as brotherhood, unity, solidarity and mutual cooperation. In the pure Mudharabah concept, the Takaful Company and the policyholder will only share the direct investment income; the policyholder is entitled to a 100% of the surplus with no deduction made prior to the distribution. This model is applicable to life family Takaful as the fund is entirely distributed to the participants.
This model includes social-governmental owned enterprises and programs operated on a non-profit basis which utilize a contribution that is 100% Tabarru (donation) from participants who willingly give to the less fortunate members of their community.
Al Mudharaba Model
The surplus is shared between the policyholders and Takaful Operator. The sharing of such profit (surplus) may be in a ratio of 5:5, 6:4, 7:3, etc. as mutually agreed between the contracting parties. Generally, these risk-sharing arrangements allow the Takaful operator to share in the underwriting results from operations as well as the favorable performance returns on invested premiums.
Al Wakala Model
Coperative risk-sharing occurs among participants with a Takaful Operator earns a fee for services (as a Wakeel or Agent) and does not participate or a share in any underwriting results as these belong to Participants as Surplus or Deficit, under the Al Wakala Model, the operator may also charge a fund management fee and a performance incentive fee.