An Analysis of Determinants to Choose Family Takaful

An Analysis of Determinants to Choose Family Takaful

Imran Mehboob Shaikh (University of Malaya, Malaysia) and Kamaruzaman Noordin (University of Malaya, Malaysia)
DOI: 10.4018/978-1-7998-0218-1.ch033
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This chapter examines the determinants that influence the customer's adoption towards the use of family Takaful scheme by extending the diffusion of innovation (DOI) theory in the context of Pakistan. The published work allied to Takaful studies and DOI was reviewed. Total of 282 respondents who are non-users of family Takaful product were used for the purpose of primary data collection through convenience sampling. The customer's adoption towards Islamic insurance is determined not only by perceived relative advantage and perceived compatibility but also by awareness and religious belief. Perceived complexity, on the contrary, turns not to be a predictor of family Takaful adoption. Further gender, age and education level do not moderate the family Takaful adoption by the customers. This research like others have limitations in terms of sampling method used and only covers one city of Pakistan, namely, Karachi. Further studies need to be conducted in other cities as well with a large population. Diffusion of innovation theory is not used in the context of Pakistan due to scarcity in the literature on empirical studies. Therefore, the author extends the diffusion theory of innovation in the current work. Further, this chapter will be a useful reference guide for the academicians, operators of Takaful business and future researchers.
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Takaful means “joint guarantee”, which roots from Kafalah an Arabic word (Mohamed & Nor, 2013). In terms of interpretation, Takaful means Islamic insurance and comparatively, it is not as popular as conventional insurance. There are operators of Takaful in more than 20 countries worldwide (Abdul Wahab, Lewis, & Hassan, 2007). Table 1 below depicts that Takaful market is predominantly estimated with the US $14.9 billion industry as of 2015 with a total global Takaful contribution (Ismail et al., 2017).

Table 1.
The performance of general and family Takaful Industry
SectorMarket share %Estimated RevenueGrowth Rate %
General Takaful83US$ 12.3 bn17
Family Takaful17US$ 2.6 bn1
Total Takaful100US$ 14.9 bn14

Source: Milliman analysis of industry data (Ismail et al., 2017)

According to Ismail et al. (2017), most of the Takaful business is dominated by Saudi Arabia, Malaysia and other Middle East countries. Furthermore, Malaysia dominates the family Takaful market globally. When compared to conventional insurance the share of Takaful (Islamic insurance) is lower, which makes up about EUR 3.6 trillion global insurance industry in 2016 (Weimann, 2017).

Moreover, this study focuses on the factors responsible for customer’s participation towards family Takaful product in Pakistan. In a similar vein, this study will use Roger’s DOI theory in order to test the model proposed for customer’s willingness to participate in family Takaful product.



In 2014, the Securities & Exchange Commission of Pakistan (SECP) also allowed other insurance providers to deal in Islamic insurance using specific Takaful windows. Doing so Pakistan is the next country to Indonesia in terms of formally providing Takaful operation permits to conventional insurance operators (Amer Hamzah & Vizcaino, 2014).

On the same note, the key players of Takaful business in Pakistan are; Takaful Pakistan Ltd, Dawood Family Takaful, the Pak-Qatar Family Takaful, the Pak-Kuwait Takaful Company. On the other hand, after SECP permitted conventional insurance companies to operate Islamic insurance window the new Islamic insurance providers given the license to run business were; EFU Life Insurance, United Insurance company, Jubilee Life Insurance Company and IGI Life Insurance.

Key Terms in this Chapter

Perceived Complexity: It specifies how far an innovation is perceived as difficult to understand and use.

Shari’ah: It is related to Islamic rules or laws governing all the aspects of Muslim’s dealing in day to day life.

PERCEIVED COMPATIBILTY: Compatibility as the degree to which the individual perceives innovation is consistent with the present sociocultural values and beliefs on the one hand, and what he experienced and needed in the past.

Takaful: The word Takaful (noun) is an Arabic word meaning joint guarantee and it is also referred to as Islamic Insurance, which is governed by Shari’ah laws.

RELIGIOUS BELIEF: It is a belief that refers to the role that the religion plays to affect what person preferences as well as the activities that an individual performs.

Kafalah: The word Kafalah (noun) and kafal (verb) are Arabic terms, which means guarantee.

DOI: It is acronym for diffusion of innovation theory and also known as Innovation diffusion theory or theory of innovation diffusion.

Perceived Relative Advantage: It relates to those who are willing to adopt innovation and want to know how far the new idea is better than the existing one.

CONSUMER’S AWARENESS: It is a lack of interest articulated by a person with regards to service and products.

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