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Insurance is a concept that is not easily accepted by most conservative Muslims worldwide since it contradicts with some of the Muslim teachings. The Arab scholars declared insurance unacceptable in 1903. Later in search for an alternate tool, Takaful came into existence in 1970 and officially took off in 1985 when the Grand Counsel of Islamic scholars in Makkah, Saudi Arabia, Majma al-Fiqh, approved of this system. Takaful literally means 'guaranteeing each other'. It stands in lines with Shariah. Shariah is a term that means "path" in Arabic. It prescribes religious codes for Muslims. They believe that Shariah are the commandments from 'Allah.'
Takaful is a concept that provides protection for its community. It is also termed as 'cooperative insurance' wherein the policyholders contribute a certain amount for a common purpose and each of them pay a sum as insurance premium in order to help those who are in need of financial aid. It is a system of mutual help and co-operation. Also the losses are divided and liabilities spread according to the community pooling system. It does not aim to derive benefits at the cost of others. Instead, it eliminates uncertainty in terms of premium and compensation.
The first Takaful Company - the Islamic Insurance Company of Sudan, was established in 1979. Today there are around 28 registered Takaful companies worldwide writing Takaful directly and 10 more Islamic marketing agencies placing insurance risk with conventional and Takaful companies. Malaysia is one of the largest markets outside the Arab region for Takaful, writing 72% of the non-Arab Takaful business. This impressive performance has attracted the attention of Insurers from many countries. This cooperative insurance offers good opportunity for these insurers to take up the challenge of developing insurance business, which runs on the Islamic principles.
Keeping this fact in mind LIC has joined hands with the Saudi insurance company. This joint venture- Indo- Saudi Insurance Company is in a four-way partnership with LIC, LIC international-Bahrain, the New India Assurance Company and Al Hokair group. It will offer 'Takaful' products. This is the first foreign venture where the state owned insurer will retain 50% of the investment in a foreign operation. LIC will offer a range of insurance products like endowment, money-back & single premium policies among others. The returns would need to be inbuilt into the pricing, and cannot be called bonus or profits. Considering the growing interest in Takaful products, it might not be long before even we in India are offered such products.
