Bridging the Gaps between Insurance & Takaful withUniversal Values

Sudan is recognized as the pioneer of commercial Islamic Insurance. With theguidance of Islamic scholars, financial regulators worldwide graduallyintroduced changes in their legal framework to support Islamic Finance. In ۲۰۱۳,Bank Negara Malaysia (BNM) effectively divided Malaysia's financialbusinesses by implementing the Islamic Finance ACT (Islamic FSA۲۰۱۳) andthe Financial Services Act (FSA۲۰۱۳) which divide the economy and populationalong religious lines. The Wakalah model was indirectly recognised as the onlypermitted Islamic Insurance contract which was subsequently adopted by manyother countries. The various regulations, frameworks and policy documentsintroduced; empower the regulator to micro-govern Islamic Finance companies.This increases the cost of doing business and affects the company's innovation indeveloping alternative IFP-compliant business models. To ensure businessviability and sustainability, many Shariah dispensations and regulatoryprivileges were issued to help Takaful companies. The phrase Shariah Complianthas been effectively abused by companies in their pursuit of profits despite theIslamic Finance Principles (IFP) being a very small component of Shariah. Thispaper intends to demonstrate that a better and optimum approach by theregulator would be to infuse Universal Values (UV)۲ among existing licensedinsurers instead of creating separate laws and micro- regulate them based onShariah Advisory Board’s advice. Such actions by regulators are limits thedevelopment of Assurance solutions and mislead consumers by using the phrase“Shariah Compliant”. This paper offers suggestions on the way forward toexpand the business and bridge the gap between takaful and insurance usingUniversal Values.

Keywords:

Assurance , Guarantees , Insurance , Islamic Insurance , IFP , Universal Values , Takaful , Wakalah