Towards a conceptual understanding of personal accident takaful in Malaysia’s dual financial system

Abstract

The concept of Personal Accident Takaful in Malaysia reflects a unique integration of Islamic financial principles within the framework of risk protection against accidental harm, disability, or death. Rooted in the foundational values of mutual assistance, risk sharing, and ethical investment, Personal Accident Takaful serves as a Shariah-compliant alternative to conventional personal accident insurance. This paper provides a comprehensive analysis of the theoretical underpinnings, operational models, and regulatory dimensions of Personal Accident Takaful as practiced in the Malaysian Takaful industry. Emphasis is placed on the structural differences between Takaful and conventional insurance, particularly in relation to contract elements, risk pooling, and surplus distribution. The study further examines the role of regulatory authorities, especially Bank Negara Malaysia, in overseeing Takaful operations to ensure Shariah compliance and consumer protection. Through a qualitative and doctrinal methodology, the paper identifies current challenges such as limited public awareness, product standardisation, and competitive positioning, while also exploring growth opportunities in Malaysia’s dual financial system. This study contributes to the body of knowledge on Islamic insurance by critically evaluating the viability, effectiveness, and ethical dimensions of Personal Accident Takaful in a modern, pluralistic society.