THIS week’s focus is on Autoriti Monetari Brunei Darussalam’s (AMBD) role as the supervisor of the insurance and takaful industry. Based on unaudited consolidated figures compiled by AMBD, at the end of 2014, the total assets of the financial sector stood at B$22.4 billion, of which six per cent was attributed to Takaful and Insurance. Over the last 10 years, premiums have grown as per stated in the table above. Despite the growth, a survey carried out by AMBD in 2013 concluded that there was a need to promote the benefits and understanding of insurance or takaful among the general public as many did not see any visible benefits in having such a financial product.
Why Takaful & Insurance?
Takaful and insurance can provide assistance in meeting your unexpected loss, either by compensation (eg reimbursing your medical bills) or reinstatement (eg restoring your burnt house to its original state before it caught fire). Takaful and insurance can also assist you when you travel abroad and you lose your luggage or fall seriously ill. Without takaful or insurance, you will be taking the risk of meeting those costs yourself.
Differences between Takaful & Insurance
Takaful provides financial protection based on Syariah principles by sharing risks between participants while insurance works on the principle of transferring your risks to the insurance company. People who choose Takaful enters into a contract (Aqad) with a Takaful operator and the money paid by the participants are pooled into a fund. This pooled money will be used to pay participants in certain situations which is covered by the Takaful. This means that each participant will be covered by the fund when an accident occurs. Meanwhile, in insurance, the moneys paid to the insurance company belong to the insurance company.
So how can takaful or insurance benefit you and your family?
The main purpose of takaful/insurance is to protect against risks. This means that the benefits will usually show when a risk occurs. For example, in motor insurance/takaful, you will only get the benefits of the insurance/takaful if an accident occurs. However, some family takaful and life insurance can be used as a savings mechanism which can provide income to the participant after a certain amount of time. This is different from motor insurance/takaful as it is about saving your money rather than protecting you against risks.
Most people whom have taken a bank loan or financing facility would have also taken takaful/insurance for that loan or financing as this is required by the financial institution. This type of takaful/insurance is to manage the risk between the bank and the borrower in case of the untimely death of the borrower. This means that the borrower’s family will not have to worry about paying off the loan as the takaful operator/insurance company will be responsible for it.
You can obtain takaful / insurance directly from the branches of takaful operators / insurance companies, from authorised agents, from banks that have a bancatakaful/bancassurance agreement with takaful operators/insurance companies or from brokers that have been registered by AMBD.
Tips when looking for takaful protection or insurance
Shop around – get quotes from different takaful operators / insurance companies and compare what they offer. Do not be afraid to ask lots of questions.
Choose the correct plan/policy – list the things you need and choose the insurance/takaful that meets your needs.
Renew your plan/policy – do this when your old insurance/takaful is due to expire or as your circumstances change.
Work out how much you need – make sure you cover the correct value of your property so that you do not find yourself paying more than you need to.
Check exclusions – always ask what is and is not covered by your insurance / takaful.
Check the costs – make sure you pay for the right insurance/takaful for the right price. Cheapest does not mean the best. Usually, lower prices means that you are covered less.
Be aware of excess – excess is the amount of self-insurance that you cannot claim from your insurer/takaful operator. So when you make a claim, the excess will be deducted from your payout.
Be honest with your takaful operator/insurance company – always provide all relevant information to your takaful operator/insurer as this may affect your chance for the benefits.
For further information, members of the public can refer to ‘My Takaful and Insurance Book’ at www.ambd.gov.bn or collect a complimentary copy at Level 7, AMBD, Ministry of Finance Building, Commonwealth Drive, BB3910. (Courtesy of Insurance/Takaful Supervision Unit, AMBD)