The distribution of takaful products through banks
Produced in partnership with Dr Hiba Allam, PhD in Islamic Insurance Law
The distribution of takaful products through banks

The following Banking & Finance practice note Produced in partnership with Dr Hiba Allam, PhD in Islamic Insurance Law provides comprehensive and up to date legal information covering:

  • The distribution of takaful products through banks
  • What is bancatakaful?
  • How is bancatakaful typically conducted?
  • How is bancatakaful documented?
  • Bilateral bancatakaful agreement
  • Tripartite bancatakaful agreement

Like their conventional counterparts, takaful operators (ie Islamic insurance providers) have a number of ways to distribute their Shari’ah compliant life insurance products (referred to as family takaful products) and their non-life insurance products (referred to as general takaful products) to the public. Such distribution channels include the takaful operators’ direct sales force, independent insurance brokers and e-tools. An additional distribution channel is bancatakaful.

What is bancatakaful?

Bancatakaful refers to the distribution of takaful products through banks, be it Islamic or conventional, provided that the conduct of bancatakaful activities is in line with the principles of Islam (Shari’ah).

The key rationale for takaful operators to use banks as distribution channels for their takaful product is so that they can:

  1. tap into the banks’ existing customer base

  2. associate themselves with reputable banks and benefit from the banks’ experience in product distribution

  3. maintain smaller direct sales teams as the takaful products are sold through banks to banks’ customers by banks’ staff, and

  4. maintain smaller support teams as banks’ staff become the point of contact (as well as the point of sale) for the customer/participant (ie policyholder)

The key rationale for banks to enter into a bancatakaful arrangement is threefold:

  1. diversify the range of products offered to their customers, including meeting the demands of the customers for risk cover as part of their financial planning. Banks may sell the

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