Takaful in Iran; Opportunities and Challenges ahead
Friday, 07 January 2022 12:18 Takaful Iran IAIF challenges opportunities 551
The Iranian Association of Islamic Finance held a specialized session on Takaful in Iran; Opprtunities and Challenges ahead.

Dr. Mohammad Javad Mirtaher, CEO of Sabatamin Investment Company, reviewed the insurance industry, stating that the most important issue in the insurance industry is risk management; how you can manage the risk so that you can get the most benefit with the least cost.

He added we have three pillars in insurance. Insurer, insured and premium. Insurers are usually insurance companies and the insureds are actual and legal persons who pay the premium then the insurance company undertakes to pay if any damage occurs.

When we are talking about insurance, we must always keep this in mind. The law of large numbers is very important in insurance companies and what has happened in the world is that the insurance companies in the insurance operation have the principle of balanceif they reach breakeven point with a certain amount of profit, it shows they manage their tasks well. But unfortunately in Iran, the weakest part of insurance companies is the investment sector. Contrary to what is in the world, so the same issue has led to less growth.

Hence, the CEO of an insurance company has to be both the CEO of an investment company and the insurance company and it's very difficult to make balance between them. Consequently, you have to invest in a way that if the loss forecast failed, you could cover it.

Shia jurisprudence is based on the principle of correctness. That is, when you face a new contract, the principle is that it is correct unless something opposed is proven, while it is reverse in Sunni jurisprudence. Because Sunni sharia scholars assume the principle of a new contract based on corruption.

What is common in conventional insurance is that the risk is transferred to an insurance company through the insured, who may be an actual or a legal person. For example, usury is only a condition in a loan agreement. Therefore, the issue of usury is basically irrelevant in the issue of insurance. But in the insurance contract you pay the premium and it is not in the form of gambling that some people put money and others win.

In insurance, everyone pays a premium and the one who suffers the loss is not the winner and the money he receives can just compensate the loss, while in gambling the winner is the one who benefits. But in insurance, no one makes a profit at a loss and there is basically no benefit in insurance.

What is the difference between Takaful insurance and conventional insurance? In Takaful, the parties put money like a fund, and if one of them suffers the loss (he/she is injured), the fund compensates it to the extent of the damage through the collected money.

In Takaful, the biggest problem is the law of large numbers. The number of Takaful insurance may be lower than insurance companies. There may be 15 branches of insurance in insurance industry which are added together and risk coverage is formed, while there is no such a thing in Takaful.

The CEO of Sabatamin Investment Company said look at the form of Takaful insurance, some people gather together and do Takaful insurance. Premiums are paid and the Takaful manager is elected, whose job is to manage them, and the capital is the amount of premiums which is collected.

In conventional insurance risk transfer happens, but in Takaful, risk sharing happens; risk is shared among many people. Sunni jurisprudence regarding this issue says through this job that insecurity and gambling disappear.

• Takaful assets shall be used in the direction of legitimate businesses.

• Managers will have a certain amount of resource revenue for their activities to manage Takaful and cover the expenses related to Takaful activities, but this fee is equal to the management fee and will not be more than that.

• The parties shall have legal authority to sign the contract (such as puberty and other conditions of the sharia contract), which is also true in conventional insurance.

Takaful in Iran

• In terms of sharia there is a huge difference; moreover, there is practically no economic justification due to the high risk of these companies.

. Lack of transparency among insurance experts and policy makers. According to officials, because all economic activities in our country are in accordance with Islam, therefore there is no need for central Takaful insurance companies.

• Lack of awareness and necessary information about Takaful in society

• Limitations on qualified experts

• Reluctance of insurance companies to accept Takaful in Iran

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