The impact of the wakalah system on the performance of takaful business in Malaysia
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Marketing takaful products does not imply exploiting the religious factor alone. Equally important is the distribution channel. As a marketing tool the agency system is vital. Insurance agents who sell policies are not employees to the insurance operators. They work on commission basis and thus, motivated by the volume of sales made. By using agents, insurance companies can cut overhead costs and help expand markets without using or setting up new costly subsidiaries. The first Takaful operator in Malaysia, Syarikat Takaful Malaysia Berhad (STMB) did not use the agency system. STMB says that it is against the Shari[ah law to apply the contract of Agency (al Wakalah) in the takaful business. This has a lot to do with the ikhtilaf on whether the takaful operator (Mudarib) can use part of the capital provided by the participants (Rab al mal) to pay for management expenses. On the contrary, the second takaful operator, Takaful Nasional Sendirian Berhad (TNSB), applies the agency system since it holds a different view of the wakalah contract. This study looks at how the differences in juristic views have impacted performance of both takaful operators. The study found that TNSB performed better than STMB. In this sense, the Wakalah system was able to generate greater benefits (manfaat) to the takaful operators while not causing harm (madarrah) to customers. It is therefore crucial for STMB to review their policy on al wakalah and embrace the agency system to improve performance.
Wakalah , Takaful , Malaysia
Annuar, H. A., Rosly, S. A., & Abdul Rashid, H. M. (2006). The impact of the wakalah system on the performance of takaful business in Malaysia. International Journal of Accounting and Finance, pp. 493-532.