For each individual exposing to risks there two options: first bearing the costs and expenses of the incidents and second transferring the risk with an insurance company through premium or an Islamic insurance company.

Islamic Insurance is broader than Takaful. There are 5 structures in Islamic insurance. Mutual structure in Sudan, cooperative structure in Saudi Arabia, participation structure in Turkey and insurance structure in Iran and Takfol structure in Malaysia.

Since the majority of the jurisdiction adapts with Takaful structure it has become a benchmark of Islamic insurance. Takaful is as a joint guarantee between two participant groups. In terms of arising loss or risk it is based on cooperation and mutual assistance.

In a Takaful, what you have is an agreement based on the perception of Ta’awun, we call assistance and mutual support. This means participants or documentation holders of their Takaful plan will protect themselves individually during times of bad luck and give mutual help to all qualified Takaful participants and their nominees.
Although both conventional life and Takaful insurance provide the same purpose of providing coverage, there are core differences:

*An individual enters the contract to give to a fund that can potentially facilitate those experiencing an unpleasant situation. On the other hand, a conventional insurance policy is purchased as personal financial security for a person.

* The conventional investment units of insurance will invest based on their evaluation of what fits their profiles. However, Takaful investments will go after strict ethics. Takaful cannot invest in anything that has the basics of gambling, ambiguity, or the carry out of lending money at irrationally high-interest rates.

*Suppose there is added money for low claim rates by insurers under Takaful. In that case, it will be spread to participants even as the profits from investments will be distributed to participants equally or based on a specific percentage which is decided by the sharia board of Islamic insurance company. Takaful operators make money through presentation fees or by sharing the extra. But the entire mass of payment from the excess that Takaful operators obtain cannot go beyond the quantity paid to Takaful participants.

Regarding how Iranian market can benefit from Takafol and what opportunities and challenges are there is Iranian market in terms of Takaful concept, Alshemari said, in Iran the insurance industry is based on sharia (Shia religion) and Iran’s insurance industry can benefit from Takaful system in Turkey and Indonesia which is reaching a mature stage. Insufficient knowledge of Takafol, branding and marketing could be some challenges in Iran. On the other hand, adopting Takaful window in Iran can attract many people like Sunni individuals and in the future Iranian regulators may ask some of the players to shift from the Takaful window to full-fledged Takafol operators. Moreover, Takaful can operate a competitive price and leverage the whole distribution chance.

Right now we can see many conventional insurance companies in Singapore and some African countries are using Takaful window. In some countries, regulators changed their decisions to accept Takaful because the conventional insurance is not competitive and able to take a risk as much as Takaful does.