A Research on the Implementation and Potential of Takaful in Pakistan General Insurance Sector

Abstract

Insurance plays a very significant role in the economy’s growth and development. There are two classified forms of insurance i.e. Conventional Insurance and Islamic Insurance called Takaful, an Islamic way of operating the business transactions pertaining to insurance. The purpose of this thesis is to analyze the differences between these forms and the implementation of Takaful in Pakistan General Insurance Sector along with its future potential and growth in our economy. According to the principles of Shariah, various Fatawa were issued by Muslim Scholars and the same has been analyzed historically with an advent of Takaful globally and particularly in Pakistan. The spread of Takaful globally and its increasing trend has anticipated its future potential in our country. The study emphasizes on the process of Takaful being practiced in Pakistan and challenges faced by Takaful Operators. To further analyze the gradual transformation of financial system regarding insurance through Takaful Operators in Pakistan General Insurance Market, three Takaful companies have been reviewed. A survey about the concept of Takaful and its potential in the country indicated that Takaful Operators are complying with the rules and regulations of Shariah in running their insurance business and other investment activities. With respect to its growth in insurance sector, study indicates that strategies should be made effectively to promote Takaful products. The study further identifies the role of SECP contributing towards the growth of Takaful by permitting the Conventional Insurers to open their own Takaful windows which will create a healthy and dynamic insurance market. Lastly, few recommendations have been suggested for the Takaful Operators and SECP to create awareness about Islamic Insurance amongst the general public, to develop strategic alliances and timely reporting of company financials to the investors in order to take effective and corrective investment decisions in the insurance industry.