(i) the risks and costs were not sufficiently explained.

(i) Undisclosed Relevant Information

The takaful brokers
or agents are not disclosing / withholding the relevant information (regarding
customers / applicants) whether with or without intentions, with regard to
underwriting and risk selection to the company (Takaful Operator) he or she
represents. By not disclosing or withholds that information, it will cause or
affect the company’s consideration on whether to accept or reject the
application from the customers / applicants on buying their takaful products.

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(ii) Highlighting favourable
aspects / terms only

The takaful
brokers or agents are only explaining certain favourable information (for
instance, benefits of the takaful products) only in order to win the
negotiation with the potential customers. They normally mislead by doing lengthy
presentation, with excessive information and use technical jargon that was
difficult to grasp. There was also a bias condition whereby the risks and costs
were not sufficiently explained. Therefore, failure to deliver honest presentation
of takaful product by the brokers or agents is carried weightage in Shari’ah
issues that need to be curbed.


(iii) Inaccuracy of books records and accounts

According to Section 33(1) and 54(1), Takaful Act 1984, the
Governor of Bank Negara Malaysia has power to inspect and require information from
TOs and any of its branch officers pertaining of all records including books,
accounts and transactions of the takaful operations from time to time. Even
though there is a mandatory regulation, the takaful brokers or
agents yet to obey with the rules. This situation arises when the takaful brokers
or agents fail to obtain necessary information from the customers/ applicants and
also fail to assist them in completing the takaful application form properly
and completely. For instance, all mandatory field must be completed by the
applicants themselves and make sure to sign the documents. This is because it
will become part of the legal contracts between Takaful Operator and the takaful
participants/ customers.

In some takaful policy, the takaful brokers and agents also
need to complete the agent report to support the applications. Other than that,
the takaful brokers and agents also not maintaining their accounts (financial
matters) properly. This record keeping issue also related with the next issue
that is failed to submit participant’s contribution promptly. Hence, in reality
the takaful brokers and agents is not
keeping their records properly.


(iv) Failed
to submit participants’ contributions to the Takaful Operator promptly

The takaful brokers
and agents failed to submit contributions received from participants to the Takaful
Operator on time (as per scheduled) and/or misused these funds by using it for
their personal use. This is a violation of the agent’s duties and act of
embezzlement. The takaful brokers and agents must ensure any takaful
contributions collected on behalf of company (by them) must be safe-keeping
under their custody and also must separate from their personal funds.  This condition can also be described as
co-mingling funds (the agent mixes his personal’s funds with the insurer’s or
insured’s funds).


(v) Twisting

One of the important shariah issues occurs when a participant
is persuaded by the takaful brokers and agents to replace an existing takaful
plan / policy with another one that is similar or display almost similar
characteristic. This is because the agents will earn benefits through the
commission fees in the situations where they managed to sell new policy.
According to Code of Ethics for Takaful Agents issued by Malaysian Takaful
Association, twisting is one of the serious misconduct amongst takaful brokers
and agents.