Irrespective of the fact that whether it is applicable or practically possible in India and Pakistan, one can not deny the fact that this sys-tem is absolutely based on justice, equal distribution of the profits and requires far less premium than the conventional insurance policies. As far as the utilisation of the funds is concerned, both the insurance as well as Takaful are commercial (Tijari), but Takaful is an interest free system. The Takaful operators do share the profit and loss. Although it is a risk to run such a business, but there are successful examples of Takaful already established in Malaysia, Iran, Sudan and to a little extent, in Pakistan and Saudi Arabia.

Takaful models in practice
Theoretically, Takaful is perceived as cooperative insurance where the members contribute a certain sum of money to a common pool. The purpose of this system is not profits but to uphold the principle of “bear ye one another’s burden”. The role of this practice indicates that the policyholders are in fact fund managers and they are the ones having ultimate control. However, the commercialisation of Takaful has produced several types of Islamic insurances, each affecting a different experience, environment and perhaps a different school of thought as analysed by Sabbir Patel of ICMIF (International Cooperative and Mutual Insurance Federation), UK.

Ta’awuni Model (Cooperative Model)
The Ta’awuni model practices the concept of pure Al Mudarebah in the daily transactions. In the pure Mudarebah concept, the Takaful Company and the policyholders will only share the direct investment income. The policyholder is entitled to a 100% of the surplus with no deduction made prior to the distribution. The model is applicable to life family Takaful as the fund is entirely distributed to the participants.

Non-Profit Model
This model includes social or government owned enterprises and programmes operated on a non-profit basis which utilises a contribution that is 100% ‘Tabarru’ (donation) from the participants who willingly give to those members of the society who fall victim to any misfortune.

Al Mudarebah model
The surplus is shared between the policyholders and Takaful operator. The sharing of such profit may be in ratio of 5:5, 6:4, or as mutually agreed by the contracting parties. Generally, these risk sharing arrangements allow the Takaful operator to share in the underwriting results from operations as well as the favourable performance returns on the invested premium.

Al Wakala model
Cooperative risk sharing occurs among participants where a Takaful operator earns a fee for services as Wakeel or agent, and does not participate or a share any underwriting results. As these belong to participants as surplus or deficit, under the Al Wakala model, the operator may also charge a fund management fee and a performance incentive fee.

Al Mushareka
Both the operator (the shareholders) and the policyholders are partners and divide the profit equally.