Consumer preferences for takaful and conventional insurance

Abstract

In recent years, Islamic finance has become one of the most rapidly growing segments of the global financial system. The Islamic banking industry today has assets worth over $900 billion, and Islamic finance has spread to 75 countries from East to West, extending from Muslim to non-Muslim countries. The introduction of an Islamic model of insurance has boosted the Islamic world economy, according to many reports. Insurance has become the biggest industry in Saudi Arabia's economy having overtaken the banking, real estate and manufacturing sectors. The Takaful industry is relatively new as compared with conventional insurance. The world’s first Takaful insurance company was established in Sudan in 1979, and since then Takaful insurance companies have spread around the world. The diversification of insurance models and types has encouraged customers to choose between them according to their needs, perceptions and beliefs. Identification of customers’ reasons for acquiring particular forms of insurance helps to highlight the weaknesses and strengths of the different forms. This paper examines differences between UK and Saudi Muslims who hold insurance policies. Analysis of Takaful and conventional insurance plans is also included. A structured questionnaire based on customer-oriented questions has been used in this study. The chosen research method was designed to investigate factors influencing customers’ choice between the Takaful and conventional insurance models and between the various products offered within each model. Differences in responses between the UK and Saudi Arabia are examined in the paper.