Nomination and Hibah issues
In Takaful
Azman Ismail
IIFIN Planners Sdn Bhd
What Is Nomination?
• Act of naming a person to receive policy
moneys payable in the event of the
death of the policy owner
Status of Nominee
• Beneficiary
– Spouse and children
and in some such as
Malaysia, includes
parents if there are
no spouse & children
• Not beneficiary
– others
Nomination in perspective
SHARICAH STATUTE
ENGLISH LAW
Issues
• Whether the takaful operator is
obligated to pay the takaful proceeds to
the nominee?
• Status of nomination in takaful
• Can give away the takaful proceeds as
hibah?
• Can nomination be revoked?
• Whom can we nominate?
TO’s obligation
• Section 65(1) of the Takaful Act 1984
– “When a participant, in relation to any family
solidarity certificate or solidarity certificates, dies
and on his death takaful benefits are payable
under the certificate or certificates, the operator
may make payment to a proper claimant such sum
of the solidarity moneys as may be prescribed
without the production of any probate or letters of
administration and the operator shall be
discharged from all liability in respect of the sum
paid
Section 65(4)
• “In this section, “proper claimant” means
a person who claims to be entitled to
the sum in question as executor of the
deceased, or who claims to be entitled
to that sum under the relevant law
Section 44 (1) of the
Insurance Act 1963
• “When a policy owner, in relation to any life
policy or life policies, dies and on his death
policy moneys are payable under the policy or
policies, the insurer may make payment to a
proper claimant such sum of the policy
moneys as may be prescribed without the
production of any probate or letters of
administration and the insurer shall be
discharged from all liability in respect of the
sum paid.
Proper claimant
• “...a person who claims to be entitled to the
sum in question as executor of the deceased,
or who claims to be entitled to that sum
(whether for his own benefit or not) and is the
widower, widow, parent, child, brother, sister,
nephew or niece of the deceased; and in
deducing any relationship for the purposes of
this subsection an illegitimate person shall be
treated as the legitimate child of his actual
parents.”
Insurance Act 1996
• Section 163 of the Insurance Act 1996
gives the policy owner the power to
nominate any person, albeit a “natural”
one, to receive the proceeds.
• Should that be the case, Section 65 of
the Act compels the insurer to pay the
proceeds to the nominee even if it is not
endorsed on the policy
Status of nomination in takaful
• purpose of nomination
– to ensure that the beneficiaries of the
participant have access to the takaful
proceeds as quickly as possible without
going through the lengthy administrative
delays of estate administration as it is not
subjected to the Probate and
Administration Act 1959 and the Will Act
1959
In non Muslim countries
• Family takaful proceeds are treated as life
insurance proceeds and provisions of the
Insurance Act or other relevant enactments
such as the Financial Services Act.
• Where there exists a special legislation for
Muslims
– problems could still arise due to the different
interpretations and opinions of the various the
mazahib let alone of the legislation itself
In Muslim countries
• E.g. Takaful Act 1984
– Muslim participant,
• distributed according to the sharciah
– non-Muslim participant,
• distributed according to the Distribution Act
1959
Proposal
• where there is nomination,
– Takaful operator should pay to the nominee, whether or not
the nominee is the beneficiary and that the takaful operator
should be discharged from all liability in respect of the sum
paid.
– To ensure that the family of the participant has immediate
access to financial assistance in the interim period before
eventual distribution of the estate .
– Therefore, in Malaysia, should there be an amendment or
review of the Insurance Act 1996 or the enactment of
another act to replace it, this matter should be given
consideration.
Can give away the takaful
proceeds as hibah?
• What is the status of the tabarruc portion
of the takaful proceeds?
– Is it the property of the participant?
– Can it be given away as hibah?
Issue
• Takaful proceeds are non existent at the
time when the hibah is executed.
• According to jurists, when the object of
gift is non existent at the time the hibah
is executed, the contract is void
However…
• There are differences between takaful
proceeds and the items that are deemed
invalid to be given as gifts.
• All the invalid items mentioned, such as
unripened fruit, the offspring of a sheep, an
unborn calf, flour in the form of wheat and
butter within milk cannot be quantified
whereas the takaful proceeds is clearly
determined.
Are these the same?
• DNA of humans & chimpanzees 98%
similar, others say 95%
– Humans have 23 pairs of chromosomes while chimpanzees
have 24.
– At the end of each chromosome is a string of repeating DNA
sequences called a telomere. Chimpanzees and other apes
have about 23 kilobases (a kilobase is 1,000 base pairs of
DNA) of repeats. Humans are unique among primates with
much shorter telomeres only 10 kilobases long.
– While 18 pairs of chromosomes are ‘virtually identical’,
chromosomes 4, 9 and 12 show evidence of being
‘remodeled.’
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Nucleotide base comparison
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Therefore
• Are these the same?
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According to Ibn Taimiyyah…
• The corrupting factor in gharar is the
fact that it leads to (kawnuhu matiyyat)
dispute, hatred, and devouring others’
wealth wrongfully and it is known that
this corrupting factor would be overruled
if it is opposed by a greater benefit (almaslahah al-rajihah)
Balancing maslalah & mafsadah
• Giving away takaful proceeds as gifts will
definitely brings greater benefit as the
participant need not pay for a higher
contribution[i] and the possibility of it leading
to dispute, hatred, and devouring others’
wealth wrongfully is very small.
– For example, if the participant has not saved any
money and that he needs to provide a certain
amount for his single daughter who is a minor, he
needs to provide double the amount, hence
double the takaful contribution or the tabarruc
amount.
Opinion of
c
shar iah
advisors
• “Takaful benefit can be used for hibah since it is the
right of the participants. Therefore, the participants
should be allowed to exercise their rights according to
their choice as long as it does not contradict with
sharciah.”
• “It is permissible to distribute the (takaful) death
benefit according to the law of mirath (Islamic law of
succession), as it is also permissible to distribute the
payment to a particular individuals or parties as
specified by the participant on the basis that the
benefit is the contribution of other participants to the
beneficiary as specified by the participant and not his
estate.”
Furthermore…
• Hibah of takaful proceeds is in line with
the objectives of shariah in the context
of risk management
– Prophet Yackub’s advice
– Prophet Yusuf’s advice
– Hijrah
Revocation of hibah
• The context - Ibn Qayyim al-Jawzi
– “Changes in fatwa are evaluated by
changes in time, places, conditions and
customs.”
• al-Jawzi , Ibn al-Qayyim, Iclam al-Muwaqicin
Rabb al-calamin, dar al-Fikr, n.d., 3 : 4
The context
Insurance Act 1996
The Civil Law Act 1956
Law of Property Act 1925
Conveyancing and
Law of Property Act 1909
Married Women Property Act 1882
Policies of Assurances Act 1867
Section 23(1) of the
Civil Law Act 1956
• “A policy of assurance effected by any man on his
own life and expressed to be for the benefit of his
wife or of his children or of his wife and children or
any of them, or by any woman on her own life and
expressed to be for the benefit of her husband or of
her children or of her husband and children or any of
them, shall create a trust in favour of the objects
therein named, and the moneys payable under any
such policy shall not as long as any object of the trust
remains unperformed form part of the estate of the
insured or be subject to his or her debts.”
Section 166 (1) of the
Insurance Act 1996
• A nomination by a policy owner, other than a
Muslim policy owner, shall create a trust in
favour of the nominee of the policy moneys
payable upon the death of the policy owner, if
—
• a) the nominee is his spouse or child; or
• b) where there is no spouse or child living at
the time of nomination, the nominee is his
parent
Section 166 (2) of the
Insurance Act 1996
• “Notwithstanding any written law to the
contrary, a payment under subsection
(1) shall not form part of the estate of
the deceased policy owner or be
subject to his debts.”
Re Fleetwoods Policy
• F insured his life for £500 payable to his wife in the
event of his death but also giving him the option of
taking its cash value and accumulated profit if he is
still living after twenty years. The insured went for this
option and requested for payment amounting to
£288. However, the insurer refused to issue the
payment without the consent of the wife and the
matter was brought to court. The court held that the
policy fell within Section 11 of the Married Woman
Property Act 1882 as being effected by a man on his
own life. The fact that the benefit to the wife is
contingent in character was irrelevant and F is
actually a nominee for the purposes of the trust.
Other cases
• In Cousins v Sun Life Assurance Society, it
was held that it belong to her estate even
though the husband remarried.
• Kishabai v. Jaikishan
• Manomani v. Great Eastern Life Assurance
Co Ltd
• Shunmuga Vadevu S Athimulam & Ors v The
Malaysian Cooperative Insurance Limited &
Anor.
Cases affecting Islamic law
• Sadiq Ali v Zahida Begam,
• Re Man Bin Mihat
• Re Bahadun Bin Haji Hasan
Sadiq Ali v Zahida Begam
• The High Court (Thom C.J. and Ganga Nath J.) in the
course of its judgment said, "It is essential for the
validity of a gift that there should be: (1) a declaration
of the gift by the donor, (2) an acceptance of the gift,
express or implied, by or on behalf of the donee, and
(3) delivery of possession of the subject of the gift by
the donor to the donee.
• Where a person has assigned his right to receive
money under insurance policies and the assignee
has stated on oath that the policies were handed over
to her and she accepted them, the gift is complete as
soon as these conditions were complied with. The
mere fact that the money was to be realised in future
is not enough to make it a gift in futuro. Valid gifts can
be made of actionable claims
Re Man Bin Mihat
• (1) by virtue of section 23 of the Civil Law
Ordinance 1956 as the policy of assurance
was effected by the assured on his own life
and expressed to be for the benefit of his
wife, the moneys payable under the policy did
not form part of the estate of the deceased;
(2) Muslim law does not disentitle the widow
to take beneficially as it is lawful for a Muslim
to dispose off his property during his life time
by way of a gift or through trustees
Re Bahadun Bin Haji Hasan
• There was nothing in Muslim Law to prevent the
deceased from making such a disposition in his
lifetime of the policy money to the respondent on his
death
• There was a completed gift even though the gift was
contingent upon the life assured predeceasing the
respondent before the maturity of the life policy.
• It was also found that the disposition was in the
circumstances a gift by the deceased to the
respondent and such gift does not constitute a
disposition by will and that reason it was in the
court’s judgment that the sum payable under the
policy should be paid to the respondent for her own
benefit and this sum does not form part of the assets
of the estate of the deceased
Controller of Estate Duty v.
Kasturi Lal Jain.
• (1) That the property must be in the power,
possession and control (actual, constructive
or beneficial) of the deceased.
• (2) That the deceased must have an interest,
whether in praesenti or contingent, in the said
property.
• (3) That the property must be in existence
during the lifetime of the deceased or at the
time of his death.
• (4) That the deceased must have a power of
disposition over the property.
Jurists’ opinions
• Some permitted revocation of hibah
whilst others prohibited it
– Ahadith
• “The person who revokes his gift is like the dog
that licks its vomit.”
• “The donor should not revoke his gift except
when the father makes gift to his son.”
The
st
1
hadith
• Some jurists such as Imam an-Nawawi
are of the opinion that it is not haram to
revoke the gift but only makruh.
• According to Imam Malik, Imam Shafici
and Imam Ibn Hanbal and the majority
of culama to revoke the gift after making
over its possession is unlawful
Conclusion on revocation
• In the context of the juristic opinions and the legal
framework in many countries where takaful operates,
it makes more sense to prohibit revocation of takaful
benefits in line with legislation that have been
enacted in these countries, otherwise conflicts may
arise and there will be a greater harm to participants,
their families and ultimately, society.
• Furthermore, the juristic opinion prohibiting
revocation of gifts is the stronger opinion (al qaul al
rajih) as we have seen above. Therefore, takaful
benefits should be allowed either to form part of the
estate or be given as hibah similar to the
conventional life insurance practice in the context of
the overall estate planning
Hibah can be to anyone?
• Quranic verses
• Ahadith
• Opinions of the sahabah, tabicin and the
Imams
Quranic verses
• Eat and drink, but be not prodigal. Lo! He loveth not the
prodigals.
• Give the kinsman his due, and the needy, and the wayfarer, and
squander not (thy wealth) in wantonness.
• Those who, when they spend, are neither prodigal nor grudging;
and there is ever a firm station between the two.
• They ask thee what they ought to spend. Say: That which is
superfluous.
• And spend of that We have bestowed upon them.
• It is not righteousness that ye turn your faces to the East and
the West; but righteous is he who believeth in Allah and the Last
Day and the angels and the Scripture and the Prophets; and
giveth his wealth, for love of Him, to kinsfolk and to orphans and
the needy and the wayfarer and to those who ask, and to set
slaves free
Ahadith
• Nu’man Bin Bashir, Sa’d bin Abi
Waqqas and Jabir
– Hanafis, Shaficis, Shicahs and some of the
Malikis, a Muslim in his lifetime and in
health is entitled to make gift of his entire
or part of his property to whomsoever he
likes but the Zahiris and one version of the
Hanbalis prohibited preferential gifts
Imam
• • • c
Shafi i…
The courtesy demands that no preferential
treatment ought to be accorded to one over the
other of the of the issues so that in the heart of the
one neglected there may not arise a feeling that
may lead him astray from the right path of virtue.
The second rule upholds validity of the gift in favour
of some of the issues. Had it not been so the
Prophet would have directed the donor to retract
from what would be void ab intio.
The third rule is the validity of the father’s revoking
from gifts in favour of his issues.
Conclusion on preferential gifts..
• According to most of the classical jurists is quite valid
although such gifts are undesirable to the degree of
prohibition.
• Companion, Successors, later Imams and jurists
have considered it advisable to put restraint on acts
of expenditure of a major prodigal person exceeding
limits is against the sharicah and is unacceptable.
• Sheikh Shaltut said that the law relating to a person
of weak understanding who wastes his property or
expends the same on such objects which are not in
any worth in the sharicah, is that he shall be stopped
from expending his property.
Conclusion
• There are several issues of nomination
and hibah in takaful but these can be
resolved using the concept of ijtihad
ibda’i insha’i or ijtihad tarjihi intiqa’i
Wassalam�
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