While its objective is noble, conventional insurance does not comply with shariah in various aspects such as Risk transfer (company is the risk carrier that lead to maysir/gambling), riba (including in investment) and gharar.
Takaful has been developed as alternative to insurance by removing those non compliant components. It works on risk sharing basis whereby risk is not transferred to company, but shared amongst participants owning same or similar risks.
Those participants are subcribing to a community operating based on solidarity and promised to help each other. They commit to pool money to help any member who suffers loss due to certain agreed cause. All other terms and conditions are also agreed. As other types of contract, parties who enter into contract in his or her full consent.
Participant are forming a solidarity-based community. Although contracts are executed by individual participant and Takaful Operator, unlike conventional insurance, they are not entering contract with Takaful Operator only. In principle, they, each one of them, are bound to contract to each other members of pool. If you have a takaful scheme with 1000 participant, you are literally bound to 1000 individual contracts, one with takaful operator and 999 with other participants. We can imagine that participants are building very strong nets of commitment which is getting stronger and stronger as the number increase.
But, this very core factor, a solidarity amongst the community members factor has not been properly understood, reflected and implemented in operation of takaful scheme. In reality, Takaful Operator treats their participants as they are all insured under conventional insurance concept.
Some Takaful Operator may have pretty cool communication and relationship management, by interacting in more frequent, intense and personal manner with their customers/participants. They may send an email or letter or even a bouquet of flowers or small souvenirs on customer birthday, for example. But all those are being done with the objective to strengthen bond between the company and its customers so that this client do not switch to competitor. This is what exactly conventional insurers have been doing, nothing so special about it.
This is epicentrum of the issue, Takaful Operator builds relationship between company and individual client, but ignoring relationship amongst clients that contractually exists under takaful scheme. What is missing here is that effort to instill the sense of solidarity amongst participant, a feeling that they all belong to one community and they have promised to help each other.
Intense communication and interaction is perhaps the best way to plant this feeling. All we need to do is to change the message. Not so much to make them believe that the company is the best, but more on “look, you are all member of a community which is established based on solidarity and whose members pledge to care of and help each other, with one common objective to deal with or manage risks that all members exposed to. We, your Takaful Operator, is mandated by each of you to operate the scheme of your community and to ensure the objective is met.”
In other words, centre of the message is shifted from ‘the company’ to ‘the community’. This is proven to be key success factor for many similar schemes, including Professor Yunuss Grameen Bank in Bangladesh, kelompok tani and Baitul Maal wa Tamwil in Indonesia and to a great extent, co-operatives.
Some may argue that it is easier to instill such solidarity and community sense to ancient or rural society as they live in the same place or neigbourhood and physically meet everyday. How can we do it for today individualistic urban society?
Well, it is natural tendency of human being to be part of or associated with certain group or society or community. Human is a socialist creature by nature, they can not survive by being fully independent or individualistic. Even a person who claim to be an absolute freeman, unwilling to observe any norms or rules and want to do whatever he wants, will end up with a community. This freeman will meet other freeman with the same view, then another one, another one until they become a group of freemen, with or without they realize it. When the group getting bigger, things start to be out of control, then they have to reach some concensus and naturally a leader raises. They suddenly subject to certain rules and powers, they are no longer freemen.
This very human nature is, to large extent, responsible for social media boom today. While it is not always possible to physically meet, they still can get in touch online, via facebook for example. This is sufficient to proofs that for all human being, “sharing” and “caring” do matters, in whatever form it might be.
The same goes to all participants of any takaful scheme. Facilitating interaction amongst participants is not only to instill solidarity and sense of community, but at the same time to fulfil their need to sosialize.
It is about the time now Takaful Operator to begin thinking about how they can facilitate this interaction. One thought, they may build a platform similar to facebook for their participants. Alternatively, the Takaful Operator might collaborate with facebook to have dedicated group or space for their participants with facebook platform itself.
This mode is not completely stranger to business. Certain corporations with large number of operation in multiple countries do have such platform that allow staffs to interact to each other in more communal way and relax environment. Most of the time employees use tha platform to discuss or share about works. Fun, relax environment and egalitarian atmosphere do bring positive impacts to productivity as it provide comfort to anyone to speak up, express concern or raise ideas.
I do not see serious issues that prevent this type platform to be used to connect participants of takaful scheme. Once may argue that participants group is different from employees of a company. The bond in former is looser than the latter.
Others may have concern on security or business continuity of takaful operators, mainly because the platform gave opportunity to participants to share notes and experiences, both good and not so good. It may allow participant to build significant bargaining power against takaful operator.
These concerns are valid, but there will always be risk in everything. The second concern is also valid for platform for employees. All down to company’s ability to plan and design its communication.
This kind of platform will force the company to ensure solid governance and risk management while operating in more transparent way. Isn’t this good? At the end of the day, the pressure on governance, risk management and transparency will increase anyway from time to time, to any company any industry, with or without this platform.
I do not have a proof at the moment, but I do have strong believe this could be a important differentiator for takaful from conventional insurance.