Publication:
Shari'ah framework for pricing family takaful products
Abstract
This research investigates the Shari'ah compliance of the pricing elements used in family takaful products. The reviewed literature has revealed a great deal of emphasis on the Shari'ah aspects of the takaful contract, distribution of surplus, models used, incorporating waqf in takaful, and the relationship among the parties. Other research has focused on the operational and technical aspects of takaful such as underwriting, pricing, reserving and risk management. None of these studies has addressed the Shari'ah compliance of the pricing elements of family takaful products. Through qualitative research using open-ended interviews as well as content analysis, this research analyses the conformity of family takaful pricing mechanism with the Shari'ah principles of price-setting (tas'ir). The research findings indicate that the assumptions of mortality and morbidity are Shari'ah compliant based on the principles of ibahah (permissibility), maslahah (public interest), istiqra' (induction) and 'urf (custom). However, the investment returns assumption is not quite fair to the shareholders should there be a loss in the investment. The research also indicates that the concept of time value of money is a Shari'ah compliant element that can be used to price family takaful products. Further, the findings highlight that the pricing elements such as health condition are deemed unfair by some practitioners. Similarly, adding an extra loading to the contribution because of family medical history should not be taken for granted.
Keywords
Pricing , Underwriting , Takaful , Assumptions , Shari'ah
Citation
Soualhi, Y., & Djafri, F. (2021). Shari'ah framework for pricing family takaful products. Intellectual Discourse, 29(1), 89-116.
Publisher
IIUM Press