The IFSB Issues Working Paper on Consumer Protection in Takaful


Kuala Lumpur, 17 January 2019 – The Islamic Financial Services Board (IFSB) today issued its ninth research in the Working Paper series which examines regulatory and market practices issues relating to consumer protection in the takaful sector (WP-09).  Supported by the results of industry-wide survey responses from takaful operators and their regulatory and supervisory authorities, this Working Paper explores how an effective and comprehensive consumer protection regime can be designed and implemented throughout different phases of customer engagement with the takaful operators and their intermediaries.

The Secretary-General of the IFSB, Dr. Bello Lawal Danbatta stated, “This Paper is the second issuance in the IFSB’s Working Paper series that addresses issues specifically for takaful industry.” He further added, “This new Working Paper identifies challenges to consumer protection arising from asymmetry of information and difficulties of consumers in evaluating product quality and price, as well as challenges arising from distribution and promotion practices, and from specific features of takaful. Moreover, the Paper also identifies regulatory issues faced in designing and implementing effective and efficient consumer protection regulations and suggests ways to strengthen regulatory oversight of market players. “Given the high expectations of consumers seeking Shariah-compliant solution to their risk coverage through takaful, a well developed consumer protection regime can guide the market operators to provide better products and services to cope with the needs of the public and the economy,” he commented.

A large proportion of takaful sales in the consumer sector are distributed through traditional distribution channels. The analysis and survey results suggest that market practices can deviate significantly from supervisory expectations, particularly with regards to the scope for takaful operators and intermediaries seeking to maximise their own benefit rather than to pursue the consumer’s best interest. The potential conflict of interest is often present in selling practices, and the ability of market players to exploit it, presents a potential for reputational damage in a sector where consumer confidence is an essential attribute.

The Paper emphasises on fair treatment of consumers, to cover the whole products lifecycle from development, to distribution and to claims settlement, in order to reduce the potential risks for mis-selling and other forms of consumer detriments. Further, it recognises that different jurisdictions take different approaches to addressing these issues.

WP-09 also identifies evolving business models and the use of emerging technologies to re-engineer consumers’ experience from the purchase of takaful products to filing of the claim, with benefits and threats that these changes may bring.

Finally, the WP-09 identifies regulatory and supervisory best practises from various jurisdictions on the conduct of business in takaful that could form a basis for a common framework in addition to the existing IFSB Standards and Guiding Principles. Besides, the WP-09 also acknowledges the role of consumer education in creating awareness and uptake of takaful products.

WP-09 is available for download from the IFSB website:

About the Islamic Financial Services Board (IFSB)

The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSB also conducts research and coordinates initiatives on industry-related issues, as well as organises roundtables, seminars and conferences for regulators and industry stakeholders. Towards this end, the IFSB works closely with relevant international, regional and national organisations, research/educational institutions and market players.

The members of the IFSB comprise regulatory and supervisory authorities, international inter-governmental organisations and market players, professional firms and industry associations.

For more information about the IFSB, please visit