A1.1 Introduction to Shariah

1.1.1 Objective of Shariah

Shariah is the entire body of Islamic law, and the term literally means "the way to the water source." It is a wide-ranging body of law and personal rules, regulating matters not limited to jurisprudence, politics, business, banking, family, and society. The main objectives of the Shariah is to ensure that human life is based on ma’ruf (good) and to cleanse it of munkar (evils). The term ma’ruf denotes all the qualities that have always been accepted as ‘good’ by the human conscience, and conversely, the world munkar denotes all those qualities that have always been condemned by human nature as ‘evil’.

1.1.2 The Concept of Ad –Deen (Shariah)

Broken down to its bare elements, Islam comprises of Aqidah (a set of beliefs), Shariah (a set of laws) and Akhlak (a code of moralitie).

Aqidah means a set of beliefs. From the Islamic point of view, Aqidah means strong belief in Allah s.w.t, His Prophets and the hereafter, also belief in the angels, the holy books and predestination.

Shariah or Islamic law is also known as Fiqh . Fiqh is Islamic jurisprudence. Fiqh deals with the observance of rituals, morals and social legislation in Islam. Branches of Fiqh includes Ibadat, Muamalat, Munakahat and Jinayat.

Fiqh IbadatThe rules of ritual purification, prayer, pilgrimage, fasting, zakat, jihad and some other forms of worship are dealt under this heading. Most of these rules deal with the rights owed to Allah s.w.t by the individual alone or by the community as a whole.

Fiqh MuamalatThis area deals with property, contracts, business organisation, security of debts and

insolvency, pre-emption, gifts, bequests and waqfs.

Fiqh Munakahat/UsrahThis area deals with marriage, divorce, inheritance, guardianship and related matters. This is similar to conventional version known as personal law.

Fiqh JinayatThis area deals with major offences like illicit sexual (zina), theft (sariqah), robbery, pirate and brigandage (hirabah), and other matters collectively known as hudud laws.

Akhlaq is a term referring to the practice of virtue, morality and manners in Islamic theology and falsafah (philosophy). It refers to one’s disposition, nature, temper, ethics, morals or character (of a person). Akhlaq covers all aspects of Muslim behaviour, attitude and work ethics which influence his acts.

1.1.3 Mandatory Law (Hukm Taklif)

Taklifi law is the law that describes the commands, prohibitions and the option to run or leave an activity / job. According to Islamic terminology, the acts of a Muslim must be guided by these five commandments (al-Ahkam al-Khamsah) classified as follows:

Wajib (obligatory)The term wajib means an act the performance of which is obligatory for the subject. Example: performing solat and fasting in month of Ramadhan. In its technical sense, it is an act whose commission is demanded by the Lawgiver (Allah s.w.t) in certain and binding terms.

Mandub (recommended)Mandub is defined as a demand by the Lawgiver (Allah) for the commission of an act without making it binding and without assigning any blame for its omission. The rule for mandub is that for doing so there is reward (thawab) for the doer, while omitting it entails no penalty such as giving charity to the others.

Haram (prohibited/unlawful)Haram is defined as one which omission is required by the Lawgiver (Allah) in binding and certain terms. An example of prohibited act (Haram) is the misappropriation of another’s wealth.

Makruh (reprehensible or disapproved)Makruh is defined as one which omission is demanded by the Lawgiver (Allah) in non-binding terms. An example of reprehensible act (Makruh) such as debt which is not

documented (unrecorded).

Mubah (permissible)The Mubah or permissible act is one in which the Lawgiver (Allah) has granted a choice of commission and omission, without blame or praise for omission or commission. According to this principle, all contracts and transactions are permissible, unless there is evidence indicating otherwise.

1.1.4 Primary and Secondary Sources of Shariah

Nos. Primary Source Description

i Quran The Quran is the very word of Allah s.w.t revealed to the Holy Prophet (pbuh) for the benefit of all mankind. It is a divine revelation and is the first and main source of Islamic Law and to the Muslims, the absolute authority in deciding the legality and every legal obligation. The Quran is a comprehensive and indivisible guide and must be accepted and implemented in its entirety

ii As-Sunnah The Sunnah, means “method”, that includes all that is from the Holy Prophet (pbuh) comprises what the Prophet (pbuh) said (Qaulan), did/action (Fi’lan) and agreed (Taqiran). Whatever originated from the Holy Prophet does come out from his own desire, but it is an inspiration from Allah s.w.t. 

The word Sunnah should be distinguished from the term Hadith, which is a narration of the saying of the Holy Prophet.

Nos. Secondary Source Description

i. Ijma’ Ijma’ is Juristic consensus of opinion of the imams mujtahid among Muslims in a particular time after the death of the Prophet (s.a.w.) regarding the legal position of a matter or problem. 

In its application, Ijma’ is an agreement of Muslim jurist in the event the ruling being sought is not found in either of the main sources ie the Quran and the Sunnah. All the mujtahidin must reach a consensus on a juridical opinion at the time an issue arises.

ii Qiyas (Analogy) Qiyas means to equate the legal position of a matter that has no ruling from the Quran and the Sunnah to one that has due to the illat (underlying cause or reason) of the ruling. In other words, the mujtahids refer back to the Quran and the Sunnah and make an analogical reasoning between a new matter that has

no ruling with the one that already has a ruling. 

Literally, it is the extension of a Shariah value from the original case to a new case, because the new case has the same effective cause as the original case.

iii Maslahah Maslahah ('public interest') is a concept in traditional Islamic Law, invoked to prohibit or permit something on the basis of whether or not it serves the public's benefit or welfare. The concept is related to that of Istislah. While the meaning of maslahah is 'public interest', the meaning of istislah is 'to seek the best public interest'.

iv ‘Urf ‘Urf is a term referring to the custom or 'knowledge' of a given society, leading to change in the fiqh. `Urf is a source of Shariah rulings where there are no explicit primary texts of the Qur'an and Sunnah specifying the ruling. `Urf can also specify something generally established in the Quran and sunnah.

v Istishab Istishab means presumption of existence or non-existence of facts. It can be used in the absence of other proofs (dalil). Istishab relates to the sense that the past accompanies the present without any interruption or change.

vi Istihsan Istihsan means juristic "preference". Muslims scholars may use it to express their preference for particular judgments in Islamic Law over other possibilities. It is one of the principles of legal thought underlying personal interpretation or ijtihad.

1.1.5 Objectives of Shariah (Maqasid Shariah)

Maqasid is the Arabic word for goals or purposes. In Islamic context, it can refer to the purposes of Islamic faith. In terms of Shariah, there are five Maqasid (foundational goals). The five maqasid are as follows:-

The preservation of: Description/Remarks

Religion Shariah requires the preservation and protection of Deen (religion) under all circumstances for example defending the Islamic faith particularly if it attacked by the enemy of Islam.

Life Shariah requires the preservation and protection of life under all circumstances as an example in order to protect life is enacting a severe punishment for those who kill others. The punishment for those who kill innocent human being is the death penalty in Islam.

Lineage Shariah requires the preservation and protection of descendants and honour under all circumstances like Islam prohibit it followers in committing adultery or other immoral behaviors.

Intellect Shariah requires the preservation and protection of intellect and mind under all circumstances. Protection of mind requires safeguarding it from anything that might harm the ability and functions of the brain, this include the consumption of liquor or

similar substances that will upset the functions of the brain.

Property/Wealth Shariah requires the preservation and protection of property under all circumstances. There are several ways of acquiring the property of others illegitimately. Among these are taking riba, cheating in transactions, breaking the trust in matters related to property, stealing the property of others and other similar means. The Shariah prohibits all these means.

 

A1.2 Basic Muamalat

1.2.1 Introduction to Muamalat

The literal meaning of the term “Muamalat” (plural of Muamalah) is ‘the transactions’ while its technical idea is any form of mutual dealings held between men to solve their everyday needs, especially in matters relating to trade and commerce. Muamalat is a social relationship which consists of various economic and non-economic activities.

Basic Principles of Muamalat

Among the basic principles that play the role in forming Shariah rulings in Muamalat are:

Freedom of contractMuslims are free to put conditions in their agreements except that which prohibits something which is permissible or permits something which is prohibited.

Permissibility as original status of mattersThe status of all matters other than rituals is permissible until evidence is given that a certain matter is prohibited.

Custom is of forceA fiqh legal maxim states that “Custom is of force”. In many Shariah commercial contracts many things become permissible following customs.

1.2.2 Prohibition in Muamalat

All economic activities are legally permissible as long as these activities do not transgress any of the tenets of Shariah. In line with this maxim, it is the unanimous opinion of all four major Islamic Shariah School of thought (Shafii, Hanafi, Hanbali, and Maliki) that all forms of business transactions that transgress any of the tenets of Shariah are considered invalid.

General Principles:

No contract should be made for selling or buying forbidden products such as alcohol or any other forbidden substances.

Likewise, no contract should be made for any financial deal on the basis of usury (riba). Contract involves in gambling (maisir) is forbidden in Islam. Contract that involves major uncertainty (gharar) is also forbidden as gharar may made the

contract voidable

Riba (Usury)The Arabic word 'riba' literally means 'increase in' or 'addition to' anything for example, to the effect made through the following Qur'anic verse:

"O you who believe, devour not usury, doubling and quadrupling, the sum lent. Fear Allah and observe your duty to Him, that you may really prosper." Qur'an (3:130)

The Prophet Muhammad s.a.w. said, 

‘Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt - like for like, equal for equal, payment being made on the spot. If the species differ, sell as you wish provided that payment is made on the spot'. [Reported by Muslim].

From the above hadith, gold and silver represent money while wheat, barley, dates and salts represent fungible item or food stuff. These items are known as ribawi item.

It would appear that the prohibition regarding riba has two dimensions. The first one prohibits increases arising from debts/loans (duyun), known as Riba Duyun, while in barter trades (buyu), unequal exchange of ribawi item of same kind and same basis in is known as Riba Buyu’. This can be summarised as follows: 

Riba Duyun (singular dayn) is formed through financial loan:

i. Riba Qard - where the increase (interest) on the principal sum of the loan is agreed upon at the point of contract;

ii. Riba Jahilliyah - this refers to the increase levied on the borrower for late repayment or failure to repay the financial loan.

Riba Buyu’ (singular Bai’) is formed through exchange contract in barter trade; i.e Riba Fadhl (happen in unequal exchange of its counterpart) and Riba Nasiah.(due to extension of time of delivery).

The following rules of exchange apply in deciding whether the said transactions fall under Riba Fadhl or Nasiah. 

Rule 1: exchange between ribawi materials of the same kind (and of the same basis) must be with equal weight, measurement or number and payment delivery must be made at the same time.

oIf payment and delivery are made at the same time but the weights, measurements or numbers of the materials exchanged are not equal, then Riba Fadhl occurs.

oIf payment and delivery are not made at the same time but the weights, measurements or numbers of the materials exchanged are equal, then Riba Nasiah occurs.

Rule 2:

payment and delivery between ribawi materials of different kinds and of the same basis must be made at the same time, though they may be made at different prices. Equal weights, measurements or numbers of the materials exchanged are not required to be observed here.

oIf payment and delivery are not made at the same time (on spot), then Riba Nasiah occurs

Maisir (Gambling)

Any transaction or activity relating to games of chance or gambling. A contract that involves element of maisir (gambling) is Batil (void). Maisir can be concluded as betting or charging something that will be forfeited if one fails to obtain the greater gain that one hopes for. It is also defined as “zero-sum game” i.e the sum of those who gain and those who lose equal to zero. For a transaction to be equated to gambling, it must involve the devouring and unlawful appropriation of the property of others.

Allah SWT says:

"They will ask thee about intoxicants and games of chance. Say: In both there is great evil as well as some benefit for man; but the evil which they cause is greater than the benefit which they bring." Quran (2: 219)

Gharar (Uncertainty)

Gharar or uncertainty makes a transaction or activity un-Islamic as it will result into an unjust or unfair outcome for the parties involved. It is where the quantity and the quality involve in the transaction is not predetermined and known. Ayub (2007) Gharar means hazard, chance, stake or risk. Gharar occur when there is element of uncertainty in a transaction whose existence or characteristics are not definite, due to the risky nature which may makes the contract void or voidable.

The Messenger of Allah s.w.t also forbade us from Gharar, Al-Baji Al-Andalusi states:

“The Prophet (s.a.w)’s prohibition of the sale of al-gharar render such a sale defective. The meaning of sale of al-gharar refers to sale in which gharar was the major component, leading it to be justifiably described as sale of al-gharar. This is the type of sale which is unanimously forbidden. On the other hand, minor gharar does not render a sale contract defective, since no contract can be entirely free of gharar. Gharar can be divided into Minor Gharar and Major Gharar.

i. Minor (Yaseer) GhararMinor Gharar is forgiven as it does not render a sale contract defective. It is a Gharar which does not affect the principal components (arkan or essential elements) of the contract and necessary conditions of the essential elements (e.g. requirements relating to asset, price, language of the contract etc).

ii. Major (Fahish) Gharar

The Gharar that causes a contract to be invalid is major (excessive) Gharar. In general terms, major Gharar is:

an uncertainty which is so great that it becomes unacceptable; or It is so vague that there is no means of quantifying it.

1.2.3 The Concept of Contract in Muamalat

Barbati defined ‘aqad’ or contract in his kitab “Inayah ‘ala Fath al-Qadri” as follows:

“Legal relationship created by the conjunction of two declarations, from which flow legal consequences with regard to the subject matter.”

The literal meaning of “aqad” is “join” or “tie”. The English word for “aqad” is “contract”. “Contract” can also be defined as being “an expression of the matching between a positive proposal made by one of the contractors and the acceptance of the other contractor in way which has an impact on the subject of the contract. A contract must consist of:

Elements of Aqad Descriptions/Remarks

Aqidan (the parties to the contract) It is a condition of a valid contract that the parties possess capacity. Capacity is a quality which makes a person qualified for acquiring rights and undertaking duties and responsibilities.

Sighah Sighah is the form of the contract consisting of ijab and qabul (offer and acceptance). The offer made by the first party to the contract is called ijab because it gives and confirms the freedom of acceptance to the second party.

Ma’aqud alaih

The subject matter and price. They are conditions to be taken into consideration according to Islamic jurisprudence for subject of contract has to be legal, in existent and identified.

A1.3 Application of Shariah Contract Commonly Used in Takaful Business

Contracts in Islamic law both bilateral as well as unilateral contracts. A contract can be define as the connection of offer and acceptance that result in legal effort on the subject matter of the contract. Any dealing in property needs a relevant underlying contract that is compatible with the purpose of dealing.

A takaful scheme essentially involves two main parties, that is takaful operator and a group of participant which is commonly known as policyholders in conventional insurans. Briefly, the actual contract underlying relationship between takaful operator and participants can be any of the following contracts, that are Kafalah, Tabarru’ Wakalah, Ujrah, Ju’alah, Mudharabah and Musharakah depending on the need or prefence of the parties, the detail of those contract are as follows:

Nos. Underlying Contract Supported Takaful Contract

i. Kafalah In Takaful business, the participant contributes

A contract of guarantee whereby a person adds to himself a responsibility or liability on behalf of another person.

to the Takaful fund by a mutual agreement that the takaful operator is entrusted to undertake in managing the takaful fund prudently and to pay the takaful benefits to the participants in the event a misfortune. The Kafalah contract is prevailing in the takaful operational system in Malaysia and worldwide.

ii. Tabarru’

Means gift or donation which is given by one in favor of someone without seeking any consideration.

In Takaful business, the participants mutually agree to contribute a sum of money to the Takaful fund based on the contract of Tabarru’. Tabarru’ contract is the core element in takaful business and is not only practiced in Malaysia but also the Tabarru’ contract is practiced worldwide.

iii. Wakalah

A contract of agency, in which a person delegates his business to another and substitutes the other in his place. The person delegated is called Wakil. Thus, both the principal and the wakil are equally bound by each other under contract of Wakalah.

In Takaful business, the participants appoint the takaful operator as their wakil and to manage their takaful coverage and the takaful fund. The wakalah contract is practiced by all takaful operators in Malaysia most of the takaful operators worldwide operational under the wakalah model

iv. Ujrah

A contract of hiring whereby one person hires someone for definite services, in which the hirer is under the duty to provide a reward for the services rendered to him.

In Takaful business, the participant contributes to the Takaful fund by a mutual agreement that the takaful operator is entrusted to manage the takaful fund prudently in terms of investment and pay out takaful benefits to the eligible participants in the event of a misfortune. The takaful operator is entitle to a fee for the service rendered. The Ujrah contract is practiced by all takaful operators in Malaysia most of the takaful operators worldwide operational under the wakalah model.

v. Ju'alah 

A contract of hiring for services, in which one party undertakes to pay a specified amount of money for rendering a defined service in accordance with the terms negotiated between them.

In Takaful business, the participants contribute a sum of money to the takaful fund. The takaful operator is entrusted to manage the takaful fund prudently in terms of investment and pay out takaful benefits to the eligible participants in the event of a misfortune. The takaful operator is entitle to a fee for the service rendered. The Ju’alah contract practiced by all takaful operator in Malaysia and most of the takaful operators worldwide operational under

the wakalah model.

vi. Mudharabah

The nature of Mudarabah (profit sharing) practices is that, it is a financial contract whereby one party called Rabbu al-Mal provides fund to the other party called Mudharib who undertakes to manage the fund through investment or trade and generates profits, in which both the Rabbu al-Mal and also the Mudharib shre in the profit in a pre-agreed proportion.

In Takaful business, the participants contribute a sum of money to the Takaful fund in which the participants are like Rabbu al-mal, while the Takaful operator is like Mudharib who agrees to manage the fund in view of making profit in which both, the participants and also the operator share the profit proportionately. Mudharabah contract as practiced by Syarikat Takaful Malaysia when it first started operation. However, for some takaful operators in Malaysia Mudharabah is still practiced only on certain products.

vii. Musharakah

The contract of Shirkah (partnership). Musharakah is an agreement between two or more parties to operate a particular business in which all parties contribute to the capital in view of profit. In al-Musharakah dealing, the parties involved herein share the liability, profit, and also loss according to their agreement.

In Takaful business, the respective shareholders mutually agree to contribute a sum of money to initiate the takaful business. This mutual agreement among the shareholders is called musharakah. Musharakah contract is practiced among all the Shareholders of all takaful operators in Malaysia and most of the takaful operator worldwide.

A13.9 Claims Example

Fazlina participated in a medical and health Takaful plan on February 10, 2010. The plan provides an annual limit of RM 100,000 and a lifetime limit of RM 500,000. She also includes the hospital allowance rider of RM200 per day. The plan provisions also stipulate a 10% co-Takaful requirement.

She was admitted into hospital on August 20, 2011. This was the second time she got admitted. She was admitted for the first time on January 2011 with a bill of RM10,000. She was discharged three days later. His total hospital bill amounted to RM 5,500.

Firstly, the claims department needs to conduct the preliminary investigation to determine the following:

Is the certificate in force? Has contribution been paid? Is the cause of hospitalization included as exclusion in the certificate?

Is the subject matter affected by the loss the same as that insured under the certificate? Is the annual and lifetime been breach?

If everything is cleared, this particular claim may be considered by the Takaful operator for reimbursement. In most cases, the Takaful operator will not reimburse the full amount as there are items in the bill that are not covered under the certificate.

Assuming that, say only RM 5,000 out of the RM 5,500 hospital bill is considered eligible for reimbursement. Taking into consideration the 10% co-Takaful, the reimbursement amount is RM4,500. Fazlina will end up having to pay RM 1,000 out of her own pocket.

A13.8 DisputesA small proportion of many claims settled each year by Takaful operator usually end up in disputes. The disputes between claimants and the Takaful operator generally will involve one of the following two issues:

The question of whether the Takaful operator is liable; The quantum of loss, if the Takaful operator is liable.

When a dispute arises, it may be resolved through the following channels:

1. Negotiation and Compromise Settlement 

In the event of dispute, normally the first step taken by a Takaful operator is meeting the claimant to settle the dispute through discussion. The Takaful operator representative, normally the staff of claims department will explain the reason for the rejection of the claim. 

In the case of dispute on the quantum of loss, the representative may try to negotiate for an amicable compromise, which is acceptable to both parties. This kind of settlement will usually result in the Takaful operator paying something more than its interpretation of the facts would warrant – and the claimant accepting payment for less than that claimed.

2. Litigation 

A claimant may take the Takaful operator to court if he is unhappy with the outcome of his discussion/negotiation with the claim department. However, the Takaful operator normally considers litigation as a last resort. The Takaful operator will use other platform such arbitration or Financial Mediation Bureau unless it involves a huge claim or an important point of principle.

3. Arbitration 

An arbitration clause which provides that all disputes or disputes relating to quantum only will have to be referred for arbitration is normally included in most of general Takaful certificate. 

Arbitration is a well-established and widely used means to end disputes. It provides parties to a controversy with a choice other than litigation. Unlike litigation, arbitration takes place out of court: the two sides select an impartial third party, known as an arbitrator; agree in advance to comply with the arbitrator's award; and then participate in a hearing at which both sides can present evidence and testimony. The arbitrator's decision is usually final, and courts rarely reexamine it.

Mediation

The Financial Mediation Bureau (FMB) is an independent body set up to help settle disputes between the customers and their financial services providers regulated by Bank Negara Malaysia. 

The FMB serves as a centre that provide free, fast, convenient and efficient avenue for the resolution of a broad range of retail consumer complaints. The scope of complaints mediated by FMB includes complaints from individuals, corporate complainants and "third party" claims (property damages only). 

For complaints, disputes or claims involving a financial loss, the limit for cases to be mediated by FMB is set as follow:

RM200,000 for all motor and fire Takaful classes of business RM100,000 for others. Claims by "third party" claimants are limited to RM5,000.

Award or decision of the FMB is binding on the Takaful operator but not the complainant. Complainants who are not satisfied with FMB's decisions may refer the case to a court of law. 

The address for FMB is; Financial Mediation Bureau

Level 25 Darul Takaful4 Jln Sultan Sulaiman50000 Kuala Lumpur

A13.6 Settlement of Medical and Health Takaful Claims

The Takaful claims process ends with settlement. Once the Takaful operator completed the investigation and decided to pay the claim, it will compute the amount payable and issue claim payment to the claimant.

A13.5 Claim Investigation

The next part of the Takaful claims process is the investigation. A thorough investigation will be conducted to determine whether Takaful operator as the insurer is liable for the loss. The extent of the investigation will depend on the complexity and size of the claim.

The claim investigation process involves the following:

1. The claims department will investigate to determine the following:

The loss exists. The loss is caused by a peril insured under the certificate. The loss does not fall within the scope of an exclusion of the certificate. The person making the claim is the rightful claimant.

2. Claims Documentation

Claim forms are designed to assist the Takaful operator to gather information relevant to assessing claims. The layout of the claim form may vary depending on the insurance company, but there is some information that must be provided no matter who the carrier is.

Participant's name Participant's address Phone number Certificate number Reason for the claim

The Takaful operator makes the position very clear by making a remark that the form is issued without prejudice, which means that issuance of the claim form does not mean liability is admitted under the certificate.

 

13.4 Checking Coverage

When a Takaful operator received the claim notification, the claims department will make a preliminary check to see if the claim is valid.

1. The process begins with a determination of whether or not the claim is valid. Among other thing, the claims department may check the following:

Is the certificate in force? Has contribution been paid? Is the loss caused by an insured peril? Is the subject matter affected by the loss the same as that insured under the certificate? Has notice of loss been given without undue delay?

2. Claim Form

Once the claims department completed the preliminary check and found the claim is valid, a claim form will be given to the claimant. A clear instruction on the procedures and required documents will also be given to the claimant. However, if the preliminary check shows that the claim does not exist, the claim department will inform the claimant and stop the process.

3. Claims Register

All claims must be registered into the claim register once it is notified to Takaful operator. Takaful operator must maintain an up-to date register of all Takaful claims as it serves as an official record of claims. Takaful operator cannot remove any of the record from the register as long as they are still liable for the claims.

A13.3 Medical Health and Takaful Claim Form

The Medical and Health Takaful is designed to elicit the information needed to determine the Takaful operator's liability under the certificate. Generally it comprised a claimant's statement and an attending physician statement. Some questions are relatively standard such as:

Name Address Date of birth Takaful certificate number and group number Information regarding if the certificate owner is covered under a group plan through his

employer Description of the injury or sickness that caused the loss

Expect to provide not only the dates of any medical treatments or doctors visits, but also the date of the injury or illness as well as the exact nature. There may be several additional questions or possibly an additional form if an injury is involved because the Takaful operator will need to determine if the

injury is due to another person's negligence.

The claimant also needs to provide the authorization permitting any medical provider, physician, or employer to release records or information concerning the insured’s medical history or employment status. This is to enable the Takaful operator to obtain records for a thorough review of the claim.

A13.2 Proof of Illness/Claim

The claimant is required to submit written proof of loss of claim within a time frame as stipulated in the loss provision. In the case of a claim for hospital or medical expenses benefit, affirmative proof of hospital confinement (original hospitalization bill and claim form) must be furnished within a stipulated timeframe of the date of loss.

The claimant must first register their claims with the Takaful operator within the stipulated time frame and submit all their documents for the easy processing of the claim. The documents that are needed for the making claim are as follows:

Proof of identification, The copy of the certificate document, The original bills of the hospitals in which the insured was admitted, The discharge certificate from the hospital, and The original investigation reports.

Failure to furnish such proof within the time provided shall not invalidate any claim if it can be shown not to have been reasonably possible to furnish such proof and that such proof was furnished as soon as it was reasonably possible.

A13.1 Notification of Claim

The reason why people entered into Takaful contract is to be indemnified when a loss occur. However, once an event of a possible claim occurred, the Takaful operator cannot start the claim process and indemnify the certificate owner unless and until been notified of the claim. Thus, the notification of a claim is fundamental to the Takaful contract.

The two main reasons why the claim notification is important: firstly, the Takaful operator must be given the opportunity to investigate the claim and, secondly, the Takaful operator needs to raise a provision for the cost of the claim.

Takaful certificate requires the certificate owner to notify the Takaful operator in writing of any claim within a reasonable period, is usually between 14 days to 30 days. The claimant need to complete the claim form and submit it to Takaful operator together with all supporting documents such as medical report to substantiate the claim. All these documents are to be provided at the claimant’s own expense. Should an insurer require further investigations, such additional cost of investigation would be at the insurer’s expense.

A10.2 Scope of Cover

1. Medical Expenses 

Medical Expenses is to cover the treatment cost of a sickness and injury, subject to the limits and conditions stipulated in the certificate. Medical expenses plan generally cover amounts above a pre-agreed deductible.

2. Hospitalisation and Surgical 

Hospitalisation and Surgical covers the expenses regarding hospitalization treatment cost. The plan is intended primarily to cover expenses incurred by having surgery and hospital stays. Coverage options and costs vary depending on the specific certificate plan. The plan, however, often is not as comprehensive as major medical health Takaful. 

Generally benefits provided by a hospital and surgical Takaful plan include the following:

Hospital Room and Board Intensive Care Unit Hospital Supplies and Services Anaesthetist's Fees Surgeon's Fees Operating Theatre Fees In-hospital Physician's Visits Pre-Hospitalisation Diagnostic Tests Pre-Hospitalisation Specialist Consultation Post-Hospitalisation Treatment Emergency Accidental Outpatient Treatment Ambulance Fees

Some plan may be extended to cover the following:

Hospital Cash Allowance Outpatient Cancer Treatment Outpatient Kidney Dialysis Organ Transplant

3. Major Medical Expenses 

Major Medical Expenses is a form of medical and health plan that provides benefits for most types of medical expenses that may be incurred. Major medical expenses cover a much broader range of medical expenses - including those incurred both in and out of the hospital - with generally higher individual benefits and certificate maximum limits. 

The coverage for medical care charges is wider with few internal limits and a high overall maximum benefit and may take the following forms:

a. Supplemental Major Medical Expenses 

When a Supplemental Major Medical Expenses plan is used, it typically backs up and enhances a basic plan that usually includes hospital, surgical and medical coverage along with an additional plan covering the broader range of medical expenses. Generally, the basic plan will cover expenses with no deductible, up to the certificate's limit. Above that limit, the supplemental plan kicks in, operating in exactly the same manner as a comprehensive plan that does not provide first ringgit coverage. In simpler terms, after the basic plan's limits are reached, the participant must absorb a deductible, after which the supplemental major medical coverage will accomodate. Since the deductible actually

occurs between the basic and supplemental certificate, it's often referred to as a corridor deductible. Like the Comprehensive Major Medical Plan, a supplemental plan is likely to include a stop-loss limit and a maximum lifetime benefit limit. 

Example:- 

Puan Sakinah participated in both basic medical takaful plan and supplemental major medical takaful plan. She was hospitalized and her medical bill has exceeded the basic medical takaful certificate's limit. 

As she already exhausted the basic plan certificate's limit, the supplemental plan will kick in. The plan will pay the medical bill as per the supplemental plan certificate's limit minus a deductible. For example, the plan will pay 80% of the bill and the remaining 20% will be borne by Pn. Sakinah.

b. Comprehensive Major Medical Expenses 

Comprehensive Major Medical Expenses Plan is a medical and health plan that provides coverage for most types of medical expenses. It is similar to a basic Hospitalization and Surgical Takaful Plan except for the imposition of a substantial deductible. Most major medical plan begins paying benefits after the deductible is satisfied. The certificate's deductible is considered satisfied as long as the participant individual can show evidence of having incurred and paid the necessary covered expense. 

Another important feature of major medical coverage is the concept of co-Takaful which is the sharing between the Takaful operator and the participant of any covered expenses that exceed the deductible amount. The Takaful operator always carries the bulk of these expenses, usually paying 80% while the participant is responsible for the remaining 20%. Other proportions (as stipulated in the particular certificate may also be used, such as 75/25.

c. Excess Major Medical Expenses 

Excess Major Medical Expenses is normally offered as a top-up of a major medical. Once the claim exceeds the limits of primary major medical plan, the excess major medical plan begins coverage.

Basis of Takaful Coverage 

Comprehensive Hospitalisation and Surgical Takaful is also called "As Charged" plan in Malaysia. The certificate normally covers the actual amounts charged by the hospital, on top of the room and board. However, Takaful operator may put a control mechanism by putting a limit of compensation for each benefit. Some of the limits imposed by Takaful operator are Per Disability Limits, Overall Annual Limits and Overall Lifetime Limit.

Group Medical and Health Takaful Plan 

Group Medical and Health Takaful plan is similar in cover to individual medical and health plan. It

is normally employer-sponsored coverage for business owners, employees and often for dependents. The contribution for group medical and health plan is calculated based on the characteristics of the group as a whole, such as average age and degree of occupational hazard, unlike individual plan where each person's risk potential is evaluated. 

There are two types of Group Medical and Health Takaful Plan:

a. Contributory Basis 

Under this type of plan, employees contribute a portion of group Takaful contribution. Normally this kind of plan requires participation of at least seventy-five per cent (75%) of the eligible members of the group.

b. Non-contributory basis 

Under this type of plan, no contributions are required of the employees as all group Takaful contributions are paid by employer. However, this plan requires full participation of all eligible members of the group.

Hospitalization Cash Benefit Takaful Plan 

This plan provides participants with daily cash benefit, should the participant be hospitalized due to all causes, subject to the terms and conditions of the Rider. It can be offered as stand-alone certificate or as riders to Family Takaful or Medical and Health Takaful plan.

Critical Illnesses Takaful Plan 

The plan provides protection against any of the specified critical illnesses. It is also known as dread diseases Takaful. Upon being diagnosed with any of the specified critical illness, the plan will cover the participant a lump benefit. 

This plan is introduce as a stand-alone certificate or as a rider to a Family Takaful certificate.

Disability Income Takaful Plan 

Disability Income Takaful, is a plan that covers the beneficiary's earned income against the risk that a disability will make working, (and therefore earning), impossible. It includes paid sick leave, short-term disability benefits, and long-term disability benefits