TAKAFUL MEASURING PUBLIC AWARENESS OF

THE TAKAFUL INSURANCE IN KUWAIT

SERVQUAL MODEL APPLIED TO THE FIRST
TAKAFUL COMPANY

BY
Salman Fahad Al Ajmi
(Kuwait)

A thesis submitted in partial fulfilment of the requirements for the degree of

Masters of Business Administration (MBA) of the Maastricht School of
Management (MSM), Maastricht, the Netherlands,
December 2005

Acknowledgment
I am deeply indebted to my advisor, Ahmed Ibrahim, for his constant support. Without his help, this
work would not be possible. I would also like to thank the members of First Takaful Company who
extended their maximum cooperation for my thesis. A special thanks to the Chairman of the
company Mr. Khalil ALshami, who greatly enriched my knowledge with his exceptional insights
into Takaful business. I also thank Dr. Riyadh Alkholifi for his invaluable advice and cooperation. I
would also like to thank Mr. Mohamad Asghar the CFO of the First Takaful Company for his
sincere help and cooperation.

I would also like to thank the Faculty staff at KMBS for their tireless efforts. Dr. Rodrigo The
Academic Director for his patience and support, also I would like to thank The Manager Director
Mrs. Rose Mary and the program Director Mrs. Badia for everything they provided to me and my
colleagues during the program period.

Finally, I would like to express my deepest gratitude for the constant support, understanding and
love that I received from my mother and my wife during the past 2 years.

I dedicate this thesis to my mother and my wife. I also dedicate it to my son Mohammad and
daughters, Shua'a and Maha.

ii

Abstract
The Takaful industry in Kuwait is a relatively new business compared to its conventional
counterparts. The First Takaful Company in Kuwait was established in 1998 under the name of the
First Takaful Insurance Company. It was intended to provide insurance services that comply with
Islamic principles and Sharia law. Today there are four Takaful operators in Kuwait, and five more
companies are under formation. They will be ready to start their activities by the end of 2005.
According to MR. Khalil Alshami, Chairman of the First Takaful Company, Takaful business in
Kuwait is growing.
There is a dearth of literature on this subject matter but this paper will examine the concepts,
principles and mechanisms of the Takaful operations and how they differ from conventional
insurance. Secondary data collected, has provided solid evidence of problems that the Takaful
industry is facing, such as a lack of public awareness. A survey sample of 500 was distributed in
order to obtain a valid measurement of insurance consumers' awareness. The main focus of the
study was to measure and to analyze the awareness of Takaful insurance in Kuwait as an Islamic
alternative to commercial insurance.
A study by Cooper and Frank in 2001, confirmed that beside general ignorance of the insurance
industry itself, major customer dissatisfaction stems from poor service design and delivery.
Ignorance of customers' insurance needs, the inability to match customers' perception with
expectation, and inferior quality of services largely account for this problem. The service quality
provided by the Kuwait First Takaful Company, as the oldest operator in the country, is examined
using the Servqual model. The aim is to assess the gap between customers' expectation and their
perception using the gap analysis technique.
Keywords:
Kuwait, Takaful, Islamic Insurance, Public Awareness, Servqual Model, commercial insurance,
questionnaire, awareness, gap analysis, First Takaful Company

iii

Table of content

1.1
1.2
1.3
1.4
1.5
1.6
1.7

Chapter 1
Overview
Problem Definition
Research Objective
Research question
Research Methodology
Data Analysis Method
Thesis Structure

1
2
3
4
5
5
6

Chapter 2
2.1
2.2.1
2.2.1.1
2.2.1.2
2.2.1.3
2.2.2
2.2.3
2.2.4
2.2.5
2.2.6
2.2.6.1
2.2.6.2
2.3
2.4
2.5
2.6
2.6.1
2.6.2
2.6.3
3.1
3.2
3.3
3.4
3.4.1
3.4.1.1
3.4.1.2
3.4.1.3
3.4.1.4
3.4.1.5
3.4.1.6
3.4.1.7
3.4.2
3.4.2.1
3.4.2.2

Introduction
Insurance Industry
The Emergence of the Insurance Industry
The Concurrent Global Insurance Industry
Insurance Industry in Kuwait
Historical Development and Origins of Takaful
Basic Concepts and Fundamental Guidelines of Takaful
Comparison Between Takaful and Conventional Insurance
Takaful Models
Operational System of Takaful
General Takaful Operation
Life Takaful
The Theoretical Framework of the Study
Case Study
The First Takaful Model
Secondary Data
Statistical Report
Interview
Seed Survey
Chapter 3
Introduction
Problem Statement
Research Objective
Methodology
Testing Public Awareness
Methodological Framework
Research Questions
Hypothesis
Sampling Method
Dependent Variables
Independent Variables
Limitations
The Servqual Model
Methodological Framework
Research Questions
iv

7
7
7
8
9
10
14
14
15
16
16
16
17
19
19
21
21
22
22
24
24
24
25
25
25
29
29
30
30
31
31
31
31
32

3.4.2.3
3.4.2.4
3.4.2.5

5.1
5.2
5.2.1
5.2.2
5.2.3
5.3
5.4

The Sample
Assumptions
Limitation
Chapter 4
Introduction
Awareness Questionnaire
Variables
Main factors (dependant variables)
Questionnaire independent variables
Descriptive Analysis
Descriptive Analysis Dependent variables
Descriptive Analysis Independent variables
Analytical analysis
Mean and Standard Deviation for dependent variables( factors A,B, and C)
Mean and Standard Deviation for the awareness of the Difference and the
Publicity Factors (Factors B and C)
Inference and Statistical Analysis
Test statistics
Correlation Coefficient Between The demographic Variable and Factors
Simple Linear Regression
Service Quality Model
Tangibles
Reliability
Responsiveness
Assurance
Empathy
Chapter 5
Introduction
Conclusion
Research Problem
Research Objectives
Findings
Recommendation
Further Research

Appendix A:
Appendix B:

Questionnaires and Interviews

Policyholders result (annual report) by line of business

4.1
4.2
4.2.1
4.2.1.1
4.2.1.2
4.2.2
4.2.2.1
4.2.2.2
4.2.3
4.2.3.1
4.2.3.2
4.2.4
4.2.4.1
4.2.4.2
4.2.4.3
4.3
4.3.1
4.3.2
4.3.3
4.3.4
4.3.5

32
33
33
34
34
34
34
34
34
34
37
38
38
39
39
39
46
46
47
48
48
49
49
50
51
51
51
51
52
54
55

List of Tables
2-1
2-2
3-1
4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
4-9
4-10
4-11
4-12
4-13
4-14
4-15
4-16
4-17
4-18
4-19
4-20
4-21
4-22
4-23
4-24
4-25
4-26

List of all insurance companies in Kuwait

Takaful business in the Arab Region 1999

Servqual dimensions Parasuraman, Zeithaml and Berry, 1988

Q10
Q11
Q13
Q14
Q15
Q25
Q16
Q21
Awareness of differences
Publicity and Advertisement Factor
Distribution of the sample according to age
Sample distribution according to level of education.
Sample distribution according to yearly spending on insurance.
Mean and standard deviation for the orientation factor (Factor A)
Mean and standard deviation for factors B&C
Gender Variable Vs. Factors B&C
Nationality Variable Vs. Factors B&C
Age Variable Vs. Factors B&C
Marital Status Variable Vs. Factors B&C
Education Variable Vs. Factors B&C
Current Job Variable Vs. Factors B&C
Average Income per Month Variable Vs. Factors B&C
Average Insurance Expenses per Year Variable Vs. Factors B&C
Demographic Variables and Factors B&C
Dependent Variable: Factor B
Dependent Variable: Factor C

vi

9
12
31
35
35
35
35
35
36
36
36
36
37
37
38
38
38
39
40
40
41
42
43
43
45
45
46
47
47

List of Figures
1-1
2-1
2-2
2-3
2-4
2-5
2-6
2-7
3-1
3-2
3-3
4-1
4-2
4-3
4-4
4-5

Direct premium for insurance companies in Kuwait

Worldwide value of insurance and re-insurance business

The market share of each company in Kuwait

SERVQUAL model
First Takaful Company model
The direct premium of life insurance in Kuwait
Premium for the insurance companies in the state of Kuwait, 2004
Results of the initial survey

The research onion process 'onion'

Research approach
Gap number 5
Tangibles
Reliability
Responsiveness
Assurance
Empathy

vii

3
9
10
18
20
21
22
23
25
26
32
48
48
49
49
50

Chapter 1
1.1 Overview
The Takaful brand of insurance is a classic example of a consumer-driven response to need. For
generations, Muslims around the world have grown up with a mind set that insurance, especially
life insurance, is taboo because it contravenes some of the Islamic tenets. Life insurance, as sold in
then conventional way, was declared unacceptable in 1903 by some prominent Islamic scholars in
the Arab countries (Albali,2000). The search has been on for an acceptable alternative ever since,
and not until the 1970's did the debate take sufficient momentum to reach a consensus. In 1985, the
Grand Counsel of Islamic scholars in Makkah, Majma al-Fiqh, Saudi Arabia, approved the Takaful
system as an alternative form of insurance, written in compliance with Islamic Sharia (The Grand
Counsel Letter 2nd, edition,1985). The Grand Counsel approved this system as a system of cooperation and mutual help but the exact method and operation was left to Islamic scholars and
insurance practitioners to resolve, develop and implement. (Mohammad Ajmal Bhatty,2001)
In 1979 the very first Takaful company was established - the Islamic Insurance Company of Sudan,
it was followed by the Islamic Insurance Company of Saudi Arabia later in the same year. Takaful
insurance is also popular in Asian countries with sizable Muslim populations. In 1984, The
Malaysian Government passed an act legitimizing the operation of the Takaful industry within the
country. It was the only country in the world with such a law (Ramin &W.Kwon, 1996). Syarikat
Takaful Malaysia was established in 1984 by the Islamic Bank of Malaysia. This was followed by
the establishment of Takaful IBB Berhad and Takaful Tib Serndirin in Brunei in 1993,PT Syrikat
Takaful Keluarga (life) and PT Syarikat Takaful (non- life) in Indonesia both in 1994, and Syrikat
Takaful began in Singapore in 1995. Surprisingly, Takaful insurance began to operate in
Switzerland and Belgium as early as 1983 (Ramin &W.Kwon, 1996). Presently, there are more than
40 Takaful operators worldwide (Dawood Taylor, 2004) including those in certain non-Islamic
countries such as Luxembourg, UK, USA, Singapore and Australia. Most Takaful operators are
found in Arab countries (Bahrain, Saudi Arabia, Kuwait, Sudan, Tunisia, UAE), whilst Non-Arab
Muslim states, such as Brunei, Bangladesh, Indonesia, Turkey and Malaysia, also have their
respective Takaful businesses (Billah, 2003).
Companies are under formation in the Middle East (Kuwait, UAE and Egypt). Several other
Takaful companies are being contemplated in various countries such as Pakistan, Australia and
Lebanon. It is also understood that interest is shown in Takaful in South Africa, Nigeria and some
of the former states of the Soviet Union. The Takaful industry in the Middle East is underdeveloped compared to other markets such as Malaysia. The more successful companies in the

Middle East have grown at 10% p.a. whereas in Malaysia the rate of growth has been 60% p.a.
(Mohammad Ajmal Bhatty,2001).
Interest in the concepts of Islam, Takaful or co-operative insurance has grown significantly in the
Islamic world over the last ten years. But while a number of Islamic insurance companies have been
established in the Middle East, Arab North Africa and Asia, Islamic insurance still constitutes only
a tiny fraction of the total premium income in these regions (Rasaad Jamie,1996). Although specific
figures are hard to come by, it is also estimated that combined assets and contributions/premiums
attributable to these operators total around $1 billion and $500 million respectively (Dawood
Taylor, 2004). US$ 290 million pertains to the Malysia only. Malaysia is one of the largest markets
outside the Arab region for Takaful, writing 72% of the non-Arab Takaful business (The Economist
Intelligence Unit Ltd, 2005). These figures are negligible by the standards of conventional
insurance, but some industry observers are anticipating that the Takaful industry is about to pick up
speed, with growth rates mirroring those of the Islamic banking industry.
In Kuwait, the Takaful business is relatively new. The first company was incorporated In july,
2000. It was called The First Takaful Company and registered under the insurance companies and
agents law No 24 of 1961 and its subsequent amendments. Its capital is $US 30 million. The
Kuwait Finance House was one of the major underwriters, owning a stake of 30%. It started its
operation in 2001, carrying out all types of insurance, Takaful business and related activities,
including insurance and reinsurance. In the same year the Wethaq Takaful Company commenced its
operation as the second Takaful Company in Kuwait, with less than US$ 15 million of capital only.
In 2003, the Alwatania Takaful Company started its activities as the third Takaful company in
Kuwait.

1.2 Problem Definition

Takaful insurance, although an Islamic alternative to commercial insurance, is still behind its
counterparts after 5 years of operation in the Kuwait market. The annual report, conducted by the
Ministry of Commerce in Kuwait, showed that Takaful companies in Kuwait have the lowest direct
premium among national commercial peers (figure 1.1.) (The Statistical Report For Insurance
Companies, 2004).

Gulf insurance Co.

Kuwait Insurance Co
Al-Ahliah Ins Co.
Warba Medical Ins Co.
First Takaful Co.
Bahrain insurance Co.
wethag Takafal Co.
American Life Ins CO.
Warba Ins Co.
Oriental Ins CO.
New Indian ins. Co.
Al-ittihad Al_watania Ins Co.
Lebanese Ins Co.
Lebano Suisse Ins Co.
National Ins Co of Egypt
Alwatania Takaful Co.
Saudi Aabian Ins Co.
Arabian ins Co.
Gardian ins co
Qatar Ins Co
0

10

15

20

25

30

35

Figure 1-1: Direct premium for insurance companies in Kuwait

In interview, with Dr. Riadh Alkholaifi The Sharia supervisory member of The First Takaful
Company, stressed that there is a broad ignorance of Takaful in both internal and external
customers. "They lack the minimum level of understanding about Takaful" he said. "Although most
of the population in Kuwait is Muslim, people are unaware of the differences between commercial
insurance and Takaful insurance." he added.
A study by Cooper and Frank in 2001 has confirmed that major customer dissatisfaction in the
insurance industry, stemming from poor service design and delivery. Ignorance of the customer's
insurance needs, the inability to match the customer's perception with expectation, and inferior
quality of services largely account for this problem. As a result, this research intends to gauge the
service quality provided by First Takaful Company and highlight the gaps, if found, using the
Servqual model.

1.3 Research Objective

The purpose of this two phase study is firstly to test public awareness of Takaful insurance in
Kuwait; then to investigate the gaps between customer expectation and customer perception in the
service quality provided by the First Takaful Company, using the Servqual model and gap model
analysis.

This study seeks to provide an important analysis that offers new insight into consumer awareness
of the Takaful industry in Kuwait. The aim of this research is to analyze public awareness, within
the State of Kuwait, of Takaful insurance from three different aspects. Firstly, to examine the
insurance customers' orientation in obtaining their insurance policies, secondly, to test the insurance
customers' awareness of the difference between Takaful and commercial insurance; thirdly, to
examine the role played by Takaful companies in propagating Takaful business, from the consumer
point view.
Finally, being the initial operator in Kuwait, the First Takaful Company will be used as a case
study, using the Servqual model to measure services provided. The Servqual instrument is used to
perform gap analysis between customer expectation and customer perception in the service quality
provided by a company. The gap model contains the most commonly occurring gaps affecting
perceptions of services quality. According to Parasurman, the expectation of customers about
service quality is formed in three different ways: word of mouth, communication and need for those
services (1991). This illustrates the relationship between awareness and service quality assessment
from the customer's point of view. The researcher, Therefore believes it's necessary to measure
public awareness of Takaful insurance.

1.4 Research Question

The following questions were developed to measure customer awareness of Takaful insurance, after
5 years of operation within the Kuwait market:

What is the insurance customers' orientation in obtaining their insurance policies? (whether
Takaful or commercial insurance)

Are insurance customers aware of the differences between Takaful insurance and
commercial insurance?

What is public opinion on the role played by Takaful companies in propagating Takaful
business?

Is there a gap between the customers' expectation and perception? (First Takaful Company
as the model)?

1.5 Research Methodology

Surveys of 500 questionnaires were distributed to a random sample from different segments. Only
300 usable questionnaires were received from the original 500, resulting in a 60% response rate.
This survey consisted of 25 questions, a closed- ended type of questionnaire. Also there were some
ranked and multiple questions (see appendix A). The survey focuses on consumers who have
insurance of any type as a minimum to enter the survey. The aim of this survey is to measure the
customer awareness of Takaful insurance in Kuwait.
An interview with the CEO of the First Takaful Company, Mr. Khalil Alshami was conducted
regarding the Takaful industry in Kuwait and how it differs from any other country. The mechanism
of Takaful business that his company is adopting, the issues and challenges that the business is
facing were also discussed with Mr. Alshami, plus his future outlook pertaining to Takaful business.
Finally, the service quality provided by the First Takaful Company is examined using a Servqual
model survey. The survey was conducted on a sample of 100 previous and existing customers. Only
60 responses were received from the above sample. In the Servqual instrument, 22 statements
(Appendix A) measure the performance across five dimensions, using a seven point Likert scale
measuring both customer expectation and perception. The method is administered twice in different
forms; the first form is used to measure expectation and the second, to measure perception. Both
forms are analyzed using the gap analysis technique to determine the gap between customer
expectation and perception.

1.6 Data Analysis Method

In this research, two methods were used to analyze the data. The first survey of this research was a
quantitative method, using the SPSS computing method. The analysis was to examine various
opinions on public awareness. The analysis was divided into three factors; awareness of the
differences between Takaful and commercial insurance; the public opinion on the role of Takaful
companies in publicizing their business; finally, customer orientation in obtaining his/her insurance
policy. The three factors are grouped together to be tested hypothetically, based on the demographic
segment.
The Servqual model survey is analyzed using the gap analysis technique. The analysis is applied to
measure the gap in the five areas of the Servqual model (reliability, tangibility, empathy, assurance,
and responsiveness). The gap analysis calculates the difference between customer perception and

customer expectation for each dimension. Subtracting expectation from perception gives the value
which identifies the gaps.

1.7 Thesis Structure

Chapter

one

of

this

thesis

gives

brief

overview

of

Takaful

insurance

as

an

Islamic alternative to commercial insurance. Then, the problem tackled by this research, is clearly
identified. The research objectives, methodology and data analysis method are briefly discussed.
Chapter two explains, in depth, the historical background of the Takaful industry. The world wide
insurance industry is briefly overviewed. Then, the Takaful industry in Kuwait is considered,
highlighting the mechanism employed by the First Takaful Company as the first Kuwaiti Islamic
insurance operator. Finally, the purpose of choosing the Servqual model as a tool to measure
customer satisfaction and locate gaps between customer expectation and perception is explained.
Chapter three explains the methodology used to study the Takaful industry in Kuwait.

The

secondary data used to produce the problem statement; the research objectives, the methodology,
the research questions, the hypotheses, limitations, as well as assumptions are covered.
Chapter four consists of two main parts. Part one is presents, analyzes, and discusses the analysis
and the findings of the awareness questionnaire. Part two identifies the gaps in the service provided
by the First Takaful Company. Graphical illustrations that highlight the gaps between perception
and expectation of the First Takaful Company are also included.
Chapter five concludes the study conducted on the Takaful business in Kuwait. The theoretical and
managerial implications of the study are summarized. Recommendations are also made as a result
of the study. Finally, improvements and suggested new ideas for further research are presented.

Chapter2
Literature Review
2.1 Introduction
This chapter highlights the historical background of the Takaful industry, its inception, concept and
mechanism. The world wide insurance industry is examined briefly, particularly new issues facing
the global insurance industry. The Takaful industry in Kuwait is also discussed, highlighting the
position of Takaful companies in Kuwait. The mechanism employed by the First Takaful Company
is also presented.
This chapter also explains why the Servqual model is chosen to establish the extent of customer
satisfaction and to reveal gaps in expectations and perceptions within the insurance industry.
Finally, a similar case study from Greece and Kenya is presented.

2.2.1 Insurance Industry

2.2.1.1 The Emergence of the insurance Industry
The roots of insurance can be traced back to the Babylonian era during the 2nd millennium BCE
(Wikipedia). These were early methods of transferring or distributing risk, practiced by Babylonian
traders. The Babylonians developed a system which was recorded in the famous Code of
Hammurabi, 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant
received a loan to fund his shipment, he would pay the lender an amount of interest much higher
than the market average, in exchange for the lender's guarantee. If the shipment was never received,
the lender lost his money and the loan was considered cancelled. By the end of the thirteenth
century, the first marine contract was signed in Genoa, Italy (Albali, 2000). This was a modified
contract that introduced the concept of the 'General Average',ie. any merchants whose goods were
being shipped together, would pay a proportionally divided premium, which would be used to
reimburse any merchant whose goods were jettisoned during storm or sinkage. The Greeks and
Romans introduced the origins of health and life insurance in 600 AD, when they organized guilds
called "Benevolent Societies", which acted to care for the families and funeral expenses of its
members upon death (Wikipedia).
In 1666, the great fire of London catastrophe, which razed out 85% of the city's buildings, resulted
in the establishment of specialized fire insurance companies. Subsequently, in 1849, personal
7

accident insurance emerged in the UK. During the seventeenth century, there were no insurance
companies as we know them today. The practice was for individuals, who became known as
"underwriters," to guarantee commercial ventures on a personal basis. 'Lloyds Coffee House' in
Tower Street, London, owned by Mr. Edward Lloyd, proved to be a favorite venue for them to
conduct their business informally over cups of coffee. Mr. Lloyd promoted the trend towards
business by providing his customers with pen, ink, paper and shipping information. Lloyds Coffee
House thus became recognized as the place for persons wanting insurance cover to find
underwriters. (Greene, M. R. 1962)

2.2.1.2 The Concurrent Global Insurance Industry

Competition in the insurance industry is very fierce nowadays. Consolidation, globalization and the
convergence of services are making it more difficult for insurance companies to survive. Added to
this, are todays challenges of responding to such issues as asbestos, toxic mold and terrorism, The
outlook of the worldwide insurance industry is very gloomy, due to climatic change and natural
catastrophes. A summer heat wave in France killed 15,000 people in 2003; the Asian tsunami at the
end of 2004 killed perhaps 200,000; the 1998 ice storm in Ontario and Quebec killed 35 people; the
2003 SARS outbreak in China resulted in deaths (Wells, MacLeans, 2005). Japan was devastated
in 2004 by the worst typhoon season on record. Ten typhoons created devastation, causing billions
of dollars worth of damage. The General Insurance Association of Japan says its member
companies will receive 2.4 billion dollars worth of claims from Songda, plus over a billion dollars
worth of claims from three other major typhoons (General Insurance Association of Japan, 2004). In
the US, 4 of the 10 biggest ever US hurricane losses ripped through the South-East in as many
weeks. In fact, it was the first time since 1886 that more than three hurricanes made landfall in one
US state. (Benfield, November 2004).
The effect on Florida home owners was devastating, and insurers paid out almost 7 billion dollars as
a result of Hurricane Charley, 6 billion for Ivan, over 4 billion for Frances, and over 3 billion for
Jeanne.( Insurance Information Institute, November 2004). This all adds up to a likely bill for global
insurance losses of around 50 billion dollars (Swiss Res, 2004) .It also makes 2004 a record year
for losses, probably even ranking ahead of 1992, 1999 and 2001 (Swiss Res, 2004). In 2005,
Hurricane Katrina, which has lead to significant underwriting economic losses, is likely to exceed
the US$ 125 billion with insurance companies paying out US$ 40 to US$ 60 billion dollars (USA
Today, SEP 20, 2005).

In the United States the value of the insurance industry in 2004 was US$ 2,838 billion, of which
US$ 1,630 billion was attributable to life business and US$ 1,208 billion to non-life business. The
worldwide market approximately touches US$1.061 trillion for insurance and reinsurance. (Figure
2-1) shows the overall value of the business itself. (Oxford Metrica, 2004)
Global general
reinsures
17%

Domestic general
insurance
22%
$176.8

$ 228.6 b

$365.6 b
$ 287.6 b

Global general
insurers
34%

Life insurance
27%
Demotic general
reinsurance
0%

Fig 2-1: world wide value of insurance and re-insurance business. (oxford Metrica,2004).

2.2.1.3 Insurance Industry in Kuwait

The insurance industry in Kuwait started in 1960, with the Kuwait Insurance Company. The
company operates under conventional insurance methods. Nowadays, there are 19 insurance
companies in Kuwait, divided between national, Arabic and foreign businesses (table 2-1) with a
total value of 446 million dollars in 2004, increased from 330 million dollars in 2003 (The
Statistical Report for Insurance Companies, 2004). Figure 2-2 shows the market share of each
company.
Table 2-1: list of all insurance companies in Kuwait

National Co.

Arabian ins Co.

Foreign Co.

Kuwait Insurrance Co

Al-Ittihad Al_Watania Ins

Co.

New Indian Ins. Co.

Gulf Insurance Co.

Lebanese Ins Co.

Oriental Ins CO.

Al-Ahliah Ins Co.

Lebano Suisse Ins Co.

American Life Ins Co.

Warba Medical Ins Co.

National Ins Co Of Egypt

Gardian Ins Co

Bahrain Insurance Co.

Saudi Arabian Ins Co.

First Takaful Co.

Qatar Ins Co

Wethaq Takaful Co.

Alwatania Takaful Co.
Warba Ins Co.

Gardian ins co
American Life Ins CO.
Oriantal Ins CO.
New Indian ins. Co.
Qatar Ins Co
Saudi Arabian Ins Co.
National Ins Co of Egypt
Lebano Suisse Ins Co.
lebanese Ins Co.
Al-ittihad al_watania Ins Co.
arabian ins Co.
Warba Ins Co.
alwatania takaful Co.
wethag takafal Co.
first takaful Co.
bahrain insurance Co.
Warba Medical Ins Co.
Al-Ahliah Ins Co.
Gulf insurance Co.
Kuwait Insurrance Co
0

10

15

20

25

30

35

IN million K.D

Figure 2-2: The market share of each company in Kuwait.

2.2.2 Historical Development and Origins of Takaful

Historical evidence proves that Takaful practices started before the era of the Holy Prophet
Muhammad S.A.W. A common practice during the Arab tribal system before ISLAM, known as
'AQILAH', was said to resemble insurance practices (Albaly, 2000). In the Aqilah practice, if any
member of a tribe was killed by a member of another tribe, the heir of the victim had the right to
demand compensation, known as 'diyat' or blood money, from the killer tripe. Therefore, the main
idea of Aqilah was that the trips men must be prepared to contribute financially to cover
compensation cost if necessary. The obligation to make regular financial payments to the tribal fund
is similar to the payment of premiums in today's insurance practice, while the compensation paid by
the killer's tribe could be similar to the indemnity or sum insured in present insurance practices. A
Hanafi lawyer Ibu Abidin (1784-1936) is the first Islamic scholar to come up with the meaning,
concept and legal basis of an Islamic insurance contract (Klingmuller,1969).
The formation of the first Islamic Insurance Company occurred two centuries after conventional
insurance emerged. Dr. Alkholifi, a member of the supervisory board of the First Takaful Company,
said during an interview, that the establishment of the Dubai Islamic Bank and the Islamic
10

Development Bank was the starting point of the Islamic Banking movement. H.E. Prince
Mohammed-al-Faisal-Al-Saud of Saudi Arabia took the initiative for the establishment of a number
of Islamic Banks. In one such initiative, in February 1976, he held discussions with H.E. Gafar
Nimeiry, the President of the Democratic Republic of Sudan) and asked for permission to establish
an Islamic Bank to be operated in Sudan, (Alkholifi). Executive and legislative authorities in the
Sudanese Government at all levels encouraged the proposal. In August 1977, Faisal Islamic Bank
was registered as a public limited company under the Sudanese Company Act-1925.
When the Faisal Islamic Bank was established, the bank authorities initiated studies for the
inception of a co-operative insurance company. In this respect, the opinion of the Bank's Sharia
Supervisory Board (SSB) was sought. The SSB studied the scheme at the first meeting. Studies
continued and several steps followed. Then Faisal Islamic Bank authorities prepared the
Memorandum of Association and the Article of Association. The SSB ensured that the scheme was
sound from a Sharia point of view as well as feasible from a practical point of view. Therefore, the
Islamic Insurance Company Ltd. Sudan was incorporated as a Sudanese Public Company, under the
Companies Act 1925, in January, 1979. This was the first insurance company established in the
world to transact business according to the Islamic Sharia. The Faisal Islamic Bank has subscribed
to the entire authorized capital of this company. The company enjoys numerous concessions and
exemptions. All its assets and profits are exempt from all taxation types. Furthermore, the assets of
the company are not subject to confiscation or nationalization etc. The Company is also exempt
from the application of acts regulating insurance in Sudan (Ali, K., 2000).
In the last decade there has been a considerable increase in the number of Takaful companies all
over the world, especially in Islamic countries. The major Takaful companies exist in the following
regions:
A. Gulf Cooperation Council
In the Gulf Cooperation Council (GCC) countries, Bahrain was the first to establish a Takaful
company, Takaful International. It was established as a composite Takaful company in 1999, but
only started writing family Takaful business in the middle of the year 2000. In Saudi Arabia, there
are 12 Takaful operators, some of which are incorporated by conventional banks as window-type
Takaful operators. In Qatar, out of four insurers, two are authorized to write Takaful business and
of the two, one is only authorized to write non-family Takaful business. In UAE, four Takaful
companies are operating within the market. There are currently no Takaful players in Oman.
Looking at the potential of the market, it will be just a matter of time before there are new entrants.

11

Table 2-2: Takaful business in the Arab Region - 1999

US$m

Takaful
Life
General Total
Total Share
Takaful Takaful Takaful Market of
Market

Saudi
Arabia

1.3

60

61

781

* 8%

UAE

1.1

12

13

815

2%

Qatar

153

4%

Bahrain -

134

4%

Sudan

0.4

27

27

33

83%

Jordan

0.3

6.3

141

5%

Total

3.1

116

119

2,057

6%

B. Asian Region
According to Ali M., the Islamic Insurance Company was established in Malaysia as a private
limited company, (in accordance with companies Act 1965) in November, 1984 and it started its
operation in August 1985 as a composite insurance company (1991). This was made possible by the
Malaysian Government who, in 1982, took a positive step by forming a special body known as the
"Task Force" for the study of the establishment of Islamic Insurance in Malaysia. This task force
was formed on the basis of the recommendations of the National Steering Committee on Islamic
Banking, which highlighted, in its report to the Malaysian Government, the need for Islamic
Insurance. The Committee deemed it necessary, to cater for the insurance requirements of the
Islamic Bank which was about to be launched. Members of the task force were drawn from
personalities and groups representing religious scholars, legal experts, economists and insurance
practitioners. The members of the task force visited a number of Islamic countries and also had
discussions with three Islamic Insurance Companies already established or about to be established.
Finally, in its report to the Government, the task force suggested that an Islamic Insurance company
should be established in Malaysia as soon as possible. The Malaysian Government then published
legislation entitled 'the Takaful Act', which regulates Islamic Insurance (Takaful) in Malaysia. It
may be of interest to note that, in Malaysia, the Islamic Insurance Company (known as the Syarikat
Takaful Malaysia) is practically a subsidiary of Bank Islamic Malaysia Berhad, which owns 51% of
the paid up capital of the Takaful Company. The balance, 49% of the shares, is owned by the
various state religious councils and state religious foundations within Malaysia (Bank Negara
Malaysia).
12

The Takaful market in the Asian region, particularly Malaysia, registered credible growth rates in
the last 5 years. Malaysia, with two Takaful operators (one which started writing business in 1985,
and the other in 1994) posted above 50% per annum family Takaful new business growth over the
past 5 years. The business consists of around 60% mortgage, 23% individual and 17% group
business. Four Total Family Takaful new business contributions for the year 2000 were US$73
million, or 15% of the country's life insurance industry premium for the said year. Considering that
Malaysia has about 12 million Muslims, it is not surprising to learn that many insurers in the
country have been interested in writing Takaful business and have approached Bank Negara (the
Regulatory Authority) for permission to write the business on a window type operation basis. In
2004 the Takaful industry increased its aggregate contribution income by 10.8% to M$1.1bn
(US$290m) and its assets by 13.5% to M$5bn. (The Economist Intelligence Unit Ltd, 2005).
Singapore and Indonesia, Bangladesh and Pakistan have also started Takaful business.
C. Takaful In Kuwait
Up until 1998, there was no specific legislation in Kuwait regulating Takaful insurance. because the
majority of Kuwaitis are Muslims, the government here realized that there was an urgent need to
devise a comprehensive system to solve the economic problems facing the Muslim community. The
first Islamic Bank was set up in 1987 and subsequently, in February 1998, the Ministry of
Commerce granted the license for the First Takaful Insurance Company. The First Takaful
Company was incorporated with a paid up capital of 30 million dollars. It has eight major share
holders including the Kuwait Finance House, The International Investor and International Murabaha
(Kuwait Today Official Newspaper, 1998). It started operation in March 2001 with the intention of
offering a full range of Takaful insurance products, in compliance with Sharia principles. By the
end of the year the Wethaq Takaful Company started its operation, followed by the Alwatania
Takaful Company two years later. According statistical report for insurance companies in 2004, the
value of Takaful business in Kuwait is 40 million dollars, representing 9% of the total value of the
insurance industry in Kuwait (The Statistical Report For Insurance Companies, 2004). Fire
insurance constitutes 5%, marine 7%, general accident 20%,medical 4% and life insurance7%.
Based on statistical reports, Takaful premiums total 14.5 million K.D., up from 10,089,785 million
K.D in 2003. Commercial insurance companies made 99.5 million K.D. in 2004, up from 62.2
million K.D. in 2003.

the growth rate Equation is found as follows:

13

Average growth =Current year direct premiums last year premiums / last year premiums (Adel
Munieer, 1997)
The equation shows that the growth rate of the takaful industry in Kuwait is 34.6%, comparing to
62.53% growth rate of non takaful companies.

2.2.3 Basic Concepts and Fundamental Guidelines of Takaful

According to Muhammad Nejatullah Siddiqi (1985), certain concepts are specific to the Takaful
business. They are the concepts of:
i)

Al-Mudharabah - This literally means 'profit sharing'. The Takaful operator accepts and
invests the takaful contributions (premiums) received from Takaful participants. The contract
specifies how the profits to be shared between the participants and the Takaful operator. For
example, the ratio may be on a 60:40 basis.

ii)

AI-Takaful this means 'joint guarantee', whereby the participants jointly guarantee
amongst themselves. Any member faced with a calamity will be financially compensated
from funds contributed by the participants.

iii)

Tabarru - this refers to the element of 'donation', Each participant agrees to relinquish a
portion of the Takaful contribution to a common fund that is used to pay a member that
suffers a loss.

Omar Fisher and Dawood Taylor (2000) noted that when drafting the framework of Takaful, that
Muslim jurists must be aware of certain fundamental guidelines. The guidelines are outlined as
follows:
i)

the practice must adhere strictly to the Islamic principles of business or commerce;

ii)

business must be conducted openly in accordance with utmost good faith, honesty, full
disclosure, truthfulness and fairness in all aspects;

iii)

co-operative risk sharing and mutual assistance amongst the participants in the group; and

iv)

awareness amongst the group members that they are facing similar risks and are willing to
contribute to any unfortunate member.

2.2.4 Comparisons between Takaful and Conventional Insurance

In essence, Islam does not reject the concepts of insurance. Many Muslim jurists agree that
insurance which is based on the concept of pooling of losses does not contradict with the Sharia.
14

Compensation to an unfortunate member and group responsibility is not only accepted but
encouraged in Islam. Although the models operation of Takaful must comply with the Sharia, the
basic elements of a contract as well as insurance principles (utmost good faith, proximate cause,
indemnity and insurable interest) also apply.
According to Muhammad Nejatullah Siddiqi, there are three elements present in conventional
insurance that do not conform to the requirements of the Sharia (1985):
i) Al-Gharar
This refers to 'unknown' or 'uncertain' factors in a conventional insurance contract. In
conventional insurance policyholders are not informed on how profits are distributed and in what
the funds are invested in. In a Takaful operation, which is based on the Mudharabah concept, the
distribution of profits to the operators and the participants are clearly outlined in the contract.
ii) Al-Maisir
This is the 'gambling' element and is said to derive from the 'Gharar' element. In conventional
insurance the policyholder stands to lose all the premiums paid if the risk does not occur. On the
other hand, he stands to get more should a misfortune happen whilst paying a small amount
premium. In Takaful, even though the risk does not occur, the participant is entitled to get back
the contributions that he has paid. Should the risk occur, he will be paid from his premium fund
plus the pool of funds from the 'donation' of other participants.
iii) Riba
This refers to the interest factor present in the investment activities of conventional insurance
companies. The policy loan in conventional life insurance is in fact a Riba based transaction.
Islam prohibits any investment activities which are interest based in alcoholic beverages and
non-Halal products.

2.2.5 Takaful Models

There are basically three types of Takaful models
A. Non-profit model
This refers to social governmental owned enterprises and programs operating on a non-profit
basis.

The contributions paid by the participants are wholly for Tabarru (donation) to

unfortunate members. The Al-Sheikhan Takaful Company in Sudan and SOCSO in Malaysia are
examples of this kind of business. (Billah, 2003)

15

B. Al-Mudharabah Model
This refers to the co-operative risk sharing where participants and operators share in the
distribution profit. (Billah, 2003)
C. Al-Wakala Model
In this model, the co-operative risk sharing occurs among participants with a Takaful operator,
whereby a fee is agreed to be paid to the operators for the services rendered. The operator shall
not participate in the underwriting results. (Billah, 2003).

2.2.6 Operational System of Takaful

Besides the 3 elements of Gharar, Maisir and Riba that separate conventional insurance from
Takaful, most of the activities in both these businesses are very similar (underwriting, claims,
marketing etc.). Two classes of business, the Family Takaful (life insurance) and the General
Takaful are transacted in a Takaful operation. These businesses must first be approved by the Sharia
Council.

2.2.6.1 General Takaful Operation

The General Takaful is for protection on a short-term basis (12 months) The participants'
contribution is wholly on the basis of Tabarru (donation); and the sharing of profits is on the
underwriting surplus and the investment income. Surplus is derived after deducting company
expenses from this fund.

2.2.6.2 LIFE Takaful

The plans available are somewhat similar to the endowment policy in conventional insurance
practice, in which participants may choose a fixed period of coverage (e.g. 10, 15, 20 years). Instead
of deciding on the sum assured, the participant decides how many installments he is willing to pay
either on a monthly, quarterly or yearly basis. The installment payments are up to the participant
although subject to a minimum amount.
Each installment is divided and credited into two separate accounts i.e. the Participants Account
(PA) and the Participants Special Account (PSA). The portion of the installment that goes into the
PA is for savings and investments whilst the balance of the installment is credited to the PSA as the
Tabarru contribution (donation). Should death occur, the money payable will be from both the (PA)
and PSA accounts and the amount of installments would have paid had he survived till the date of
maturity. The sharing of profits is on the investment portion.

16

If a participant survives the duration of the policy he receives the whole amount he has contributed
to the PA accounts, inclusive of his portion of profits from the investment activities of this fund. A
participant who decides to surrender his policy is entitled to receive the installment payments and
any investment profit from his PA account.

2.3 The Theoretical Framework of The Study

In this thesis two techniques were used. Firstly, a survey based questionnaire. The basic idea behind
the survey methodology is to measure variables by asking people questions and then to examine
relationships among the variables. In most instances, surveys attempt to capture attitude or patterns
of past behavior. The only options for developing surveys are whether to ask people questions just
once or over a period of time time. The survey employed in this thesis uses the cross-sectional
design, where questions are asked at one point in time. These kinds of surveys are highly fallible
because the researcher may or may not be able to analyze the direction of causal relationships.
The second technique used is the SERVQUAL model (Fig.2-3). It is a model that is used by
companies to better understand the expectations and perceptions of customers regarding different
aspects of service quality. Zeithaml and Parasuraman developed a survey research instrument
called the SERVQUAL Model (Parasuraman, et.al, 1985). It is applicable to a broad range of
service industries and can be easily modified to take account of the specific requirements of a
company. Studies have been conducted to confirm the importance of service quality as a vital factor
in the success of a firm within the services sector. Many studies have been published on hotels
(Saleh and Ryan, 1992), car servicing (Bouman and van der Wiele, 1992), hospitality ( Johns,
1993), accounting firms (Freeman and Dart, 1993), and banking (Kwon and Lee, 1994). Service
quality has become an important model because of its apparent relationship to costs (Crosby, 1979),
profitability (Rust and Zahorik, 1993) customer satisfaction (Bolton and Drew, 1991), customer
retention (Reichheld and Sasser, 1990), and positive word of mouth is widely regarded as a driver
of corporate marketing and financial performance (Buttle, 1996). In this thesis, the case study to
which the SERVQUAL model was applied, is the First Takaful Company in Kuwait.

17

Service
Service Quality
Quality Model
Model
Word-of-mouth
communication

Personal needs

Past experience

Expected service
Gap 5

Perceived service

CUSTOMER

Service delivery

PROVIDER

Gap 4

Gap 3

External
communications
to clients

Service quality
specifications

Gap 1
Gap 2

Management perceptions
of client expectations

Fig. 2-3: SERVQUAL model (Parasuraman et al., 1988)

More specifically, it identifies 5 gaps where there may be a shortfall between expectation of service
level and perception of actual service delivery.
Gap 1: Gap between consumer expectations and management perceptions
Gap 2: Gap between management perceptions and service quality specification
Gap 3: Gap between service quality specifications and service delivery
Gap 4: Gap between service delivery and external communications
Gap 5: Gap between perceived service and expected service.
The following equation is used to calculate the GAPs in Parasurman model:
PERCEPTION EXPECTATION = GAP
Since 1985, when The Servqual model was first published by its innovators Parasuraman, Zeithaml
and Berry, it has been further developed, promulgated and promoted through a series of
publications in the years 1985, 1986, 1988, 1990, 1991, 1993 and 1994. The ABI/Inform database
Global edition, (September 1994) reports that service quality has been a keyword in some 1,447
articles published in the period from January 1992 to April 1994. These publications incorporate
both theoretical discussions and applications of SERVQUAL in a variety of industrial, commercial
and not profit settings. It is an instrument for assessing customer perception of service quality in
service and retailing organizations (Parasuraman et al., 1988). The research of 'measuring quality'
has been developed in the manufacturing industry. The Japanese philosophy on zero defect concept,
defined as doing it right the first time. Crospy defines quality as conformity to needs (1979).
18

The absence of tangible evidence results in service quality being fundamentally measured through
customer perception.
According to Taylor, Parasuraman failed to define perception in an attitudinal term 1994). Zimbler
criticises the Servqual model as it costs more to improve service quality than the marginal revenue
it would achieve (1983).
Although SERVQUAL has been extensively criticized on both theoretical and operational grounds
(Buttle, 1996), until a better but equally simple model emerges, SERVQUAL will predominate as a
service quality measure.

2.4 CASE STUDY

A Servqual model was conducted by Lancaster University management school to diagnose and
improve service quality in the insurance industries of Greece and Kenya. The researcher (Graham,
2004) used the Servqual model presented by Parasuraman et. al, in 1988 and refined in 1991. The
concept of the Servqual model is to test the difference between customers perception (P) of services
of a specific firm and their expectation (E). The researcher renamed the instrument GIQUAL
because he added 4 statements to the 22 from the revised Servqual scale (Parasurman et.al 1991).
The added 4 items resulted from consultation with a group of 10 branches of three major Greek
insurance companies. In Kenya's case, the Servqual's 22item scale was filtered through a pretest to
yield 19 items. The case concluded that quality gaps obtained in the insurance industry of greece
and Kenya were very similar. The reliability and the empathy dimensions were the most deficient.

2.5 The First Takaful Model

According to Mr. Khalil ALshami, CEO of the First Takaful Company (FTC), the company is
adopting a very unique model that has never been implemented in any country elsewhere. Its pure
Takaful where participant have the priority for distribution of surplus, and shareholders undertake to
finance the deficit with a no interest loan called Qard Hasan. According to Mr. Alshami, if the
company incurs any losses, the shareholders will lend the company a loan with no interest. As a
result that loan must be returned to the shareholders before any dividend distribution to the
participant. According to the annual report of the company the amount of 700 thousand K.D was
repaid to the shareholders in two payments in 2003 and 2004.
In this model, the shareholders account is separated from the participant account finically and
legally. They are different entities linked by the insurance manager which is the First Takaful
Company. The rule of the First Takaful Company has two parallel streams:
19

1- Operational activities (insurance daily activities)

2- Investment activities in compliance with Sharia principle

Shareholders

Participant

1- Provide the capital 10million K.D

1- Pay the Premiums

2- Provide interest free loan if needed by the company

2- Pay the expenses

3- Pay the claims

Figure 2-4: First Takaful Company model.

In the First Takaful Company there are five classes of insurance: Life, Marine, General Insurance,
Motor Vehicle and Fire insurance. The premium surplus will be distributed to the class that is
making surplus net of claims in the same category. Participants will be given the priority for
distribution as long as their category is making a surplus. If one of the above classes incurs a deficit,
the loan will be given from the shareholders as a loan with no interest and will then be returned as
soon as that class is making profit. The loan will be paid back to the shareholders first, before any
distribution of surplus to relevant class policyholders.
In 2005, the First Takaful Company distributed 22.5% percent to life insurance policy holders, as
that class had achieved a surplus of 368,679 K.D., and that was after paying the shareholders loan
of 189,000 thousand K.D., whereas the other classes had incurred losses or made a marginal surplus
that was not worth distribution according to Mr. Alshami. This amount will be accumulated to be
distributed next year if the surplus increases to a level that allows for distribution.
The First Takaful Company work process is divided into life and non- life insurance operations:
A. Takaful Life insurance:
The First Takaful Company is not like other models of insurance which insure people against death,
where the company pays a death benefit to the heir of any insured person who dies prematurely. In
context, life insurance in the First Takaful Company only insures the policyholder against risk of
death and the financial obligation remaining after death. This plan is called Credit Risk Insurance.
For example, if a policyholder of credit insurance dies while he owes a mortgage, loan or any other
20

type of credit, the company will pay off the loan. Also, in the case of any type of unpaid loan under
certain qualified circumstances the credit insurance covers the policy holder even if he is still living
(Mr. ALshami). This type of insurance is the most profitable for the First Takaful Company as it
constitutes 7% of the total Kuwait insurance market. Figure 2-5 below shows the direct premium of
life insurance in Kuwait.

Life Insurnce In Kuwait

12
10
8
In Million K.D 6
4
2
0
Kuwait
Gulf
Insurrance insurance
Co
Co.

Al-Ahliah
Warba
bahrain first takaful American
Ins Co. Medical Ins insurance
Co.
Life Ins CO.
Co.
Co.

Figure 2-5: the direct premium of life insurance in Kuwait.

B. NON Life Takaful:

Takaful insurance offers coverage on a 12 month, renewal basis for four classes of insurance; fire
insurance, motor vehicles insurance, general accident and Marine insurance. The premiums paid by
participants of each class are pooled into a portfolio managed by the company. Each class is
regarded as a separate portfolio. The First Takaful Company acts as trustee. It invests the fund in
compliance with Islamic principles. After deducting the investment expenses, the investment
income goes back to the portfolio. The insurer then settles all outstanding claims, deducts its
operational expenses and transfers part of the fund to the relevant portfolio reserve. If there is a
surplus in the portfolio after all the adjustment, the balance will be shared by the participants and
the shareholders with an agreed ratio basis. The share holders stake shall not exceed 50%, on the
other hand the participants can get as much as 100%. (MR. Alshami)
The policyholders' result (Annual Report) by line of business is attached in appendix B.

2.6 Secondary data

2.6.1 Statistical Reports
Secondary data from the statistical report for insurance companies, 2004, showed that the Takaful
insurance companies in Kuwait are still behind their national counterparts after five years of
21

operation in the Kuwaiti market. The annual report conducted by the Ministry of Commerce in
Kuwait showed the Takaful companies in Kuwait have the lowest premium among their
commercial peers as illustrated in figure 2-6.
35

30

25

20

Series1
15

10

0
Gulf insurance
Kuwait
Al-Ahliah Ins
Co.
Insurrance Co
Co.

Warba
Medical Ins
Co.

first takaful
Co.

wethag takafal
bahrain
Warba Ins Co.
Co.
insurance Co.

alwatania
takaful Co.

Figure 2-6: Premium for the insurance companies in the state of Kuwait, 2004

2.6.2 Interview
An interview with DR. Riadh Alkholaifi (The Sharia supervisory member of the first Takaful
Company) stressed that there is a broad ignorance about Takaful in both internal and external
customers. "They lack the minimum level of understanding about Takaful" he said.

2.6.3 Seed Survey

On that basis the researcher conducted an initial survey with one question to confirm the go ahead
for the research. The question was: "Is there any difference between Takaful insurance and
commercial insurance?"

The participants were given three options: "1. Yes, (Specify:

), 2. I do not know, 3- No, there is no difference". The question was conducted on a

sample of 30 participants at 3 different sites in Kuwait. The results, shown in figure 2 below, reveal
that 53% of the participants don't know the difference between Takaful and commercial insurance,
30% don't believe there is a difference and 17% think there is.
The total number of participants believe "there is no difference between Takaful and commercial
insurance" plus those ignorant of any difference, shows that 83% lack awareness of Takaful as an
Islamic alternative, fundamentally different from commercial insurance operatives.
22

Results of the initial survey

17%

30%

1. Yes

53%

2. I do not know

3- no there is no difference

Figure 2-7: Results of the initial survey.

23

CHAPTER 3
3.1 Introduction
This chapter highlights the methodology used to study the Takaful industry in Kuwait. The
secondary data used to produce the problem statement; the research objectives, the methodology,
the research questions, the hypotheses, as well as the limitations are also covered.

3.2 Problem statement

From all of the above it can be deduced that after 5 years of operation in the Kuwaiti market, the
public still lacks awareness of Takaful insurance. This research intends to analyze and measure, in
depth, the level of public awareness of the Takaful insurance business in Kuwait.

3.3 Research objective

The aim of the researcher is to conduct a detailed study of public awareness in the State of Kuwait
about Takaful insurance from three different aspects
1. Insurance customers' orientation in obtaining their insurance policies
2. Insurance customers' awareness of the difference between Takaful and commercial insurance.
3. The public judgment of the role played by Takaful companies in propagating Takaful
business.
Another intention of the research is to measure the gap between the customers' perception and their
expectation of the service quality provided by the First Takaful Company as the first company
incorporated in this field. A study by Cooper and Frank, in 2001 has confirmed that beside
ignorance of the business, major customer dissatisfaction in the insurance industry stems from poor
service design and delivery. Ignorance of the customer's insurance needs, the inability to match
customer's perception with expectation, and inferior quality of services largely account for this
problem. As a result this research intends to gauge the service quality provided by the First Takaful
Company and highlight the gaps, if found, using the Servqual model.
The purpose of this two phased, sequential, mixed method is firstly to test public awareness in
Kuwait of Takaful insurance, and Secondly to adapt the Parasurman Servqual survey to reflect upon
same of the service concern raised by the First Takaful Company customer group To serve the
above mentioned objectives, two survey questionnaires were developed and conducted. The first
24

questionnaire is the main survey in this research, while the Servqual model is the secondary survey
conducted on the company's customers.

3.4 Methodology
This study was conducted in two phases. Firstly, a survey based questionnaire was chosen as being
appropriate to test public awareness of Takaful in Kuwait. Secondly a Servqual model
questionnaire, derived from Parasurman et. al 1985, was chosen to analyze the gap between
customer expectation and perception of the service provided by the First Takaful Company.

3.4.1 Testing Public Awareness

3.4.1.1 Methodological Framework
The research process 'onion' is used in order to design the study for testing public awareness of
Takaful business in Kuwait. The path followed by the researcher is depicted in "onion" in figure 3-1.

Research
philosophy

Interpretivism

Inductive

Experiment

Research
approaches

Survey
Sampling
Secondary data
Observation
Interviews
Questionnaires

Cross
Sectional

Case
Study
Ground
Theory

Longitudinal

Realism

Time
horizons

Ethnography

Action
research

Research
strategies

Deductive

Positivism

Data
collection
methods

Figure 3-1: The research onion process 'onion' (Mark Saunders et .al, 2003)

The researcher selected the interpretivism philosophy for conducting this study because "The social
world of business and management is too complex to lend itself to theorizing by definite laws in the
same way as physical science" (Mark Saunders et .al, 2003).
This research is studying a socially related subject where people's behavior is changing over time
and where "circumstances of today may not apply in three months' time"(Mark Saunders et .al,
25

2003). Interpretivists deny that humans can be studied using the same philosophical base used in
studying physical objects or other animals.
Starting from specific observations to broader generalizations or theories (it is feature-detecting), this
research was built on an inductive approach. The main reason for selecting an inductive approach
goes back to starting from observations generated from secondary data (interviews with specialists)
to generalizations on these observations. Figure 3-2 shows the path the researcher has adopted.
Example

Inductive
Theory

Conformation
of
the
observation and endorsement
of tested Hypothesis.

Tentative Hypothesis

Pattern

Observation

Tentative Hypothesis of public

awareness about Takaful business in
Kuwait was tested based on dependent
and the independent variables.
A survey over a sample of 500 populations
was conducted to measure the observation
Secondary data showed that there is a lack of
awareness of Takaful in Kuwait.

Fig.3-2: Research approach.(skinner)

The research strategy is based on survey strategy because "it allows the collection of a large amount
of data from a sizable population in a highly economical way, often obtained by using a
questionnaire"(Mark Saunders et .al, 2003). Also the research strategy should give more control
over the research process. The time horizon was a cross- sectional study due to the time constraints
on this thesis. The research was performed over a very short period of time, began in July, 2005,
handed over at the end of October, 2005. Much time was spent however, in designing and piloting
the questionnaire, analyzing the results, even with the aid of an appropriate computer package.
There are two major types of survey research (Kerlinger, 1986). Both, exploratory and explanatory
survey research was used in this thesis. Being one of the two types of exploratory approaches,
descriptive method was applied as indispensable in the early stages of studying a phenomenon
(Dubin, 1978). The objective of the descriptive approach, is to become more familiar with the topic
and to describe the level of people's awareness regardless of any statistical treatment. On the other
hand, explanatory survey deals with variables and the correlation between them, as hypotheses were
explained and tested.
The data collection method of this thesis was quantitative methodology. It was chosen for this study
because of its analytical approach to data generated by the questionnaire. The quantitative research
26

allows us to determine the relationship between one thing (an independent variable) and another (a
dependent or outcome variable) within a population. Quantitative research designs are either
descriptive (subjects usually measured once) or experimental (subjects measured before and after a
treatment). A descriptive study establishes only associations between variables, while, an
experiment establishes causality.
The survey contains three dependent variables: Behavior, Attribute and Opinion, as mentioned in
Mark Saunders et .al, 2003, these were used to develop a questionnaire of 25 questions examining
public awareness of the Takaful business in Kuwait. The developed questionnaire includes three
factors:
Factor A: consumers' orientation in obtaining their insurance (whether Islamic or non-Islamic).
Factor B: awareness of consumers about the difference between Takaful insurance and
commercial insurance,
Factor C: public opinion regarding the propagation of Takaful business by Takaful companies.
The questionnaire is completed as a single closed ended, ranking questions and matrix structure
questionnaire. The aim is to test consumer awareness of Takaful from three different aspects. Under
the main objective, the questionnaire is grouped into three hidden categories, by which the
respondent's awareness is studied and dissected thoroughly. These three dimensions are regrouped
during the data analysis.
The first question is an optional question asking about the respondent's name. Question 2-8 deal
with the 'attributable variables' of the questionnaire, asking about age, gender, nationality, martial
statues, level of education, occupation and average disposable income. The ninth question is about
the average annual spending on insurance. Questions from six to nine are constructed as single
closed ended questions. Questions from numbers 10 to 14 are the 'behavior variables' of the
questionnaire; 10&11 are constructed in a matrix form. Question number 10 is asking about the
method of covering the insurance, whether by the individual or his employer. Question number 11
asks about the type of insurance used by the insured, whether Takaful or non Takaful. Questions 12
to 14 are single closed questions asking about the past experience of the respondents in obtaining
their insurance policies from insurance companies. Question 12 deals with where the respondent
chooses insure (main office, branches, or agents), the method of selecting the insurance company
(self convenience or influenced by agents), and the respondent's preference in insuring his
properties (Islamic or non Islamic). Questions 18, 19, 20, and 23 are testing the opinion of the
respondents about the role of Takaful companies in expanding Takaful business in Kuwait.
27

The study involves analysis of data collected from a sample of 300 insurance customers to address
the hypothesis proposed in this thesis. The intention of the hypothesis is to test public awareness
based on demographic differences. Public awareness was divided into three factors. The first factor
shows

public awareness demographically. The second factor is intended to examine public

awareness of the differences between Takaful and commercial insurance. Finally, the third factor is
tests customer opinion on the role of Takaful companies in propagating Takaful business.
Factor (A) is a descriptive analysis portraying an accurate profile of the consumers orientation in
choosing his insurance company, based on demographic variables. The frequency and percentage of
questions 10, 11, 13, 14, 15, and 25 indicates the consumers orientation in choosing his insurance
company. No statistical treatment was used in this factor, as it is intended to describe the orientation
of the consumer only in descriptive analysis. Secondly, factor (B) is tackling the awareness of the
differences between Takaful insurance and commercial insurance. The intention of this factor is to
test the public knowledge of the Takaful business. It was grouped in single factor as it had similar
scale, except for questions 16, and 21 displayed as standalone questions due to the different scale.
The third factor is factor (C) which tests the publicity of Takaful insurance undertaken by Takaful
companies. Question numbers 12, 19, 20, 23, and 24 are grouped under this factor, however
question number 12 has a unique scale different from other questions related to this factor.
The second and third factor are grouped together and statistically treated in an experimental
method. The analysis of theses two factors consists of two parts. The first part is to show the
frequency, then the mean and standard deviation for factors B and C. The second part of the
analysis is the inference and statistical differences treated using the SPSS computing method to test
the hypothesis of this study. The hypothesis is tested for factor B & C against the gender and
nationality variables with T-tests at 0.05 significance level. Whenever the P-value is less than 0.05
it means there is a significant difference between the demographic variables in the tested factor.
One way ANOVA was used to examine the age, marital status, education variable, current job,
income per month, and average insurance expenses per year with factors B & C. Then the
correlation coefficient between the demographic variables and Factors B & C respectively, is tested
using Spearman's coefficient. Finally, simple linear regression is used to study the effect of the
independent variable (demographic variable) on the dependent variable (factors). The independent
variables that have significant effect on the dependent variables (P-value is less than 0.05) were
tabulated for factor B & C and the results are shown in the next chapter.

28

3.4.1.2 Research Questions

What is the level of public awareness of the Takaful business in Kuwait?
What is the public orientation in obtaining its insurance policies?
What is the level of public awareness of the differences between Takaful and commercial
insurance?
What is consumer opinion on the publicity that Takaful companies are undertaking?

3.4.1.3 HYPOTHESIS
The intention of this research is to examine public awareness of the Takaful industry in Kuwait. The
hypothesis was formulated to test the relationship between the categorical variables as independent
variables (age, gender, , nationality martial status, disposable income, level of education, average
spending on insurance) against the measured variables as dependent variables (the awareness of the
difference between the Takaful and commercial insurance, and consumer opinion of the role of the
Takaful companies in publicizing the Takaful business); And also to establish whether the change in
the demographic variables might affect the result of the measurement and the significance of the
difference itself. In order to test these relationships, sixteen hypotheses are formulated tackling all
categorical variables against measured variables resulting in the following proposed hypotheses:
H1: Awareness of the difference between Takaful insurance and commercial insurance differs
between males and females.
H2: Opinion on the role of Takaful companies in propagating and publicizing Takaful business
differs between males and females.
H3: Awareness of the difference between Takaful insurance and commercial insurance differs
between Kuwaitis and non-Kuwaitis.
H4: Opinion on the role of Takaful companies in propagating and publicizing Takaful business
differs between Kuwaitis and non-Kuwaitis.
H5: Awareness of the difference between Takaful insurance and commercial insurance differs
based on age.
H6: Opinion on the role of Takaful companies in propagating and publicizing Takaful business
differs based on age.
H7: Awareness of the difference between Takaful insurance and commercial insurance differs
based on the marital status
H8: Opinion on the role of Takaful companies in propagating and publicizing Takaful business
differs based on the marital status
H9: Awareness of the difference between Takaful insurance and commercial insurance varies
based on different educational levels
H10:. Opinion on the role of Takaful companies in propagating and publicizing Takaful business
varies based on different educational levels
H11: Awareness of the difference between Takaful insurance and commercial insurance differs
based on job levels.
29

H12: Public opinion on the role of Takaful companies in propagating and publicizing Takaful
business differs based on job level
H13: Awareness of the difference between Takaful insurance and commercial insurance differs
based on income per month
H14: Public opinion on the role of Takaful companies in propagating and publicizing Takaful
business differs based on income per month
H15: Public awareness of the difference between Takaful insurance and commercial insurance
differs based on insurance expenses per year.
H16 : Public opinion on the role of Takaful companies in propagating and publicizing Takaful
business differs based on insurance expenses per year.

3.4.1.4 Sampling method

The data was collected during the summer of 2005. The targeted sample was insurance customers.
The sampling method used in this questionnaire is a non-probability convenience sampling method.
Its the easiest way of collecting answers from large numbers (Mark Saunders et .al, 2003). It was a
face to face collecting method at 13 different sites in Kuwait. 500 questionnaire surveys were
distributed, 349 were returned giving a response rate of 69%. Only 300 were used in this analysis.
The non- response was due to many reasons. The main reason was the incompletion of answers by
the respondent, or refusal to participate in answering the questionnaire. Scale reliability for the
questionnaire items was sought using Cronbachs Alpha. It was found to be 82.75 %. Validity was
done with the aid of Kuwait university instructor and 3 of the KMBS students.
The survey questionnaire was written in Arabic language then translated to English. To confirm
good translation, the questionnaire was then retranslated to Arabic by another professional.
Comparing both of the Arabic versions, it was found that they were almost the same.

3.4.1.5 DEPENDENT VARIABLES

The dependent variables for this research were grouped into three factors. Each factor tests the
awareness from different points of view based on demographic variables. The dependent variables
are:
1- Public orientation in obtaining its insurance policies
2- Public opinion on the role of Takaful companies in propagating the business, as it is
relatively new to its peers.
3- Public awareness of the difference between Takaful insurance and commercial insurance.

30

3.4.1.6 INDEPENDENT VARIABLES

The research was examined for the 8 independent variables; age, gender, nationality marital status,
disposable income, level of education, and average spending on insurance. Most of these are
demographic variables testing the relationship between consumer awareness about Takaful business
and the demographic variables.

3.4.1.7 LIMITATION
The main limitation of the study was the sample. Even though the sample was collected from 13
different sites, the summer period limited the ability to generalize the findings. This can be traced to
the fact that many people leave Kuwait for holidays during the summer. An additional period of
time would assist in strengthening the results of the study and the ability to generalize the findings.
Another limitation was the lack of references about Takaful business. Very limited resources were
found in the libraries due to the recent emergence of this type of business. Also there is little
evidence of past research on Takaful business in Kuwait on which to build on.

3.4.2 The Servqual Model

3.4.2.1 Methodological Framework
The questionnaire used in the survey at the First Takaful Company was based on the SERVQUAL
scale that contains 22 service attributes, grouped together into five dimensions. These dimensions
relate to reliability, assurance, tangibles, empathy and responsiveness as shown in table 3-1.
Table 3-1: Servqual dimensions Parasuraman, Zeithaml and Berry, 1988

Dimension

Definition

Items in scale

Reliability

The ability to perform the promised service dependably 4

and accurately

Assurance

The knowledge and courtesy of employees and their ability 5

to convey trust and confidence

Tangibles

The appearance of physical facilities, equipment, personnel 4

and communication materials

Empathy

The provision of caring, individualized attention to

customers
5

Responsiveness The willingness to help customers and to provide prompt 4

service
31

This type of survey based on SERVQUAL requires respondents to score on a Likert scale, two
different scores on all of the attributes relating to each dimension. The two different scores relate
firstly to what the respondent would expect from an excellent service provider and secondly scoring
on their perception of the service delivery from the First Takaful Company. The difference between
the expectation and perception scores, constitute a quantified measure of service quality.
For the purpose of our survey, the five dimension attributes are adapted to reflect the Takaful
insurance sector. Parasuraman et al comment that, items under each of the dimensions can be
suitably reworded and augmented to make them more germane to the context in which the
instrument is to be used (1988).
A written questionnaire was considered an appropriate data collection instrument because it
permitted a large number of people to be surveyed in a brief period of time. Using a seven point
Likert type scale with designations of strongly disagree to strongly agree, the SERVQUAL
questionnaire paired 22 expectations of excellent Takaful service in the first section, with 22
perceptions of service experienced at the First Takaful Company in the second section. Analyzing
both sheets together results in gap identification.

Gap 5
Customer Expected service
Gap 5
Customer Perceived service

Fig.3-3: Gap number 5

3.4.2.2 Research Question

Is there a gap between the service quality of the First Takaful Company and the perception of its
customers?

3.4.2.3 The Sample

The survey was conducted on a sample of 100 previous and existing customers of the First Takaful
Company. Only 65 were returned from the above sample, only 60 used for their completeness. The
data was collected during July and August of 2005. The targeted sample was the First Takaful
Company customers. The sampling method used in this questionnaire was a face to face collecting
method in 7 branches/agents of the First Takaful Company. The response rate was 60%. The nonresponse was due to customer refusal to participate in answering the questionnaire. Scale reliability

32

for the questionnaire is 63% by Parasurman. The questionnaire Validity was by Parasurman
(Parasuraman, Zeithaml and Berry, 1988).
To confirm good translation, the questionnaire was given to a professional translator to translate the
questionnaire to Arabic. The result came out to match the researcher initial translation.

3.4.2.4 Assumption
A study by Cooper and Frank, in 2001, has confirmed that beside ignorance of the business, major
customer dissatisfaction in the insurance industry stems from poor service design and delivery.
Ignorance in customers' insurance needs, the inability to match customers' perception with
expectation, and inferior quality of services largely account for this problem. As a result it is
assumed that the service quality provided by Takaful companies in Kuwait has a significant impact
on the lack of awareness among insurance customers. The First Takaful company was selected to
measure the Gaps, if found, using the Servqual model.

3.4.2.5 Limitation
Due to the nature of the insurance business, the customers were not cooperating in completing the
survey. Customers often only visit insurance branches in case of accident. Therefore, aggrieved
customers were reluctant to comply.

33

Chapter 4
4.1 Introduction
This chapter consists of two main parts. The first part is presenting, analyzing and discussing the
analysis and the findings of the awareness questionnaire. The other part of this chapter is identifying
the gaps in the service provided by the First Takaful Company. Graphical illustration that highlights
the gaps between the perception and expectation of the First Takaful Company are shown.

4.2 Awareness Questionnaire

4.2.1 Variables
4.2.1.1 Main factors (dependent variables)
The three factors are:
Factor A: consumers' orientation in obtaining their insurance (whether Islamic or non-Islamic).
Factor B: awareness of consumers about the difference between Takaful insurance and
commercial insurance,
Factor C: public opinion regarding the propagation of Takaful business by Takaful companies.

4.2.1.2 Questionnaire independent variables

The questionnaire was designed to test public awareness based on the difference between
demographic variables and its effect on the dependent variables mentioned above. These
independent variables are age, gender, nationality, and marital status, and occupation, level of
education, monthly disposable income, and average spending on insurance.

4.2.2 Descriptive Analysis

In the first part of the study we will expose the frequency and percentage of dependent and
independent variables, explain the distribution of the sample and the response to questions.

4.2.2.1 Descriptive Analysis - Dependent variables

Factor A: Orientation Factor
Q10 : How do you cover your insurances?

34

Table 4-1: Q10

Valid

pay it myself

Frequency
300

Percent
100.0

Q11 : Which of the following insurance tools do you use?

Table 4-2: Q11
Valid

Missing
Total

Takaful insurance
Traditional Insurance
Total
System

Frequency
99
195
294
6
300

Percent
33.7
66.3
100.0

Takaful insurance
Traditional Insurance

Q13: When do you go to an agent or an insurance office?

Table 4-3: Q13
Valid

The employee select

the insurance
company for you
You select by yourself
the insurance company
You do not care about
the name or type of
insurance company
Total

Frequency

Percent

18

6.0

264

88.0

You select by
yourself the insurance
company

18

6.0

You do not care

about the name or type
of insurance company

300

100.0

The employee select

the insurance
company for you

Q14: When you buy insurance, which companies do you use?

Table 4-4: Q14
Valid

Missing
Total

Islamic Insurance
Traditional insurance
either
Total
System

Frequency
114
45
120
279
21
300

Percent
40.9
16.1
43.0
100.0

Islamic Insurance
Traditional insurance
either

Q15: What are your priorities in selecting insurance companies?

Table 4-5: Q15
Valid

Missing
Total

Religious
Cost of the
insurance policy
Easiness of
recovering damages
The nearest
company to my place
Total
System

Frequency
123

Percent
41.4

48

16.2

2.0

120

40.4

297
3
300

100.0

35

Religious
Cost of the insurance
policy
Easiness of
recovering damages
The nearest company
to my place

Q25: Are you going to renew your contract with the Takaful insurance companies?
Table 4-6: Q25

Valid

Yes
No
No difference

Frequency
135
33

Percent
45.0
11.0

132

44.0

300

100.0

Total

Yes
No
No difference

Factor B: Awareness of the difference between Takaful and Commercial Insurance

Q16: Is there any difference between traditional and Takaful insurance?
Table 4-7: Q16

Valid

No difference
Takaful insurance is bette
Traditional insurance is
better
I do not know
Total

Frequency
159
99

Percent
53.0
33.0

27

9.0

15
300

5.0
100.0

No difference
Takaful insurance
is bette
Traditional
insurance is better
I do not know

Q21: As a client of a Takaful insurance company, when do you expect to get back part or full of
your insurance?
Table 4-8: Q21

Valid

Frequency

Percent

270

90.0

1.0

27
300

9.0
100.0

in case of accident
or damages
in case the company
made surplus
I do not know
Total

in case of accident
or damages
in case the
company made
surplus
I do not know

Q17 & 18: awareness of differences

Table 4-9: Awareness of differences
I agree

Questions

I disagree

I do not know

Frequency

Percent

Frequency

Percent

Frequency

Percent

Q17: Does Takaful

insurance provide
innovative addition to its
customers

75

25.0%

135

45.0%

90

30.0%

Q18: The reaction of

Takaful insurance
companies with damages
and compensations

21

7.0%

1.0%

276

92.0%

Q22: Did you read your

insurance contract?

138

46.0%

36

12.0%

126

42.0%

36

Factor C: Publicity and Advertisement Factor

Table 4-10: Publicity and Advertisement Factor

I agree

I disagree

I do not know

Questions

Frequency

Percent

Frequency

Percent

Frequency

Percent

Q19: Awareness provided

by the Takaful insurance
companies for its
customers

21

7.0%

186

62.0%

93

31.0%

Q20: If you are a customer

of a Takaful company, how
do you asses their services

90

30.0%

63

21.0%

147

49.0%

Q23: Do you think that the

communication between
the Takaful companies and
its customers provide the
minimum level of
knowledge about the
concept of Takaful
insurance

171

57.0%

57

19.0%

72

24.0%

Q24: Takaful companies

fulfill all what they
promise to do

33

11.0%

102

34.0%

165

55.0%

4.2.2.2 Descriptive Analysis - Independent variables

Most of the surveyed sample are of working age. 59 percent of the 300 people sampled are between
the of ages 30 and 49. On the other hand, only 6 of the sample were below 21 and 11 above 60. Full
distribution of the sample can be seen in the following table and figure.
Table 4-11: Distribution of the sample according to age
Valid

Less than 21
21 - 29
30 - 39
40 - 49
50 - 59
60 And more
Total

Frequency
6
51
99
78
33
33
300

Percent
2.0
17.0
33.0
26.0
11.0
11.0
100.0

Less than 21
21 - 29
30 - 39
40 - 49
50 - 59
60 And more

The frequency of the sample shows 261 males versus 36 females representing 87.9% and 12.1%
respectively. 252 participants are Kuwaitis, whereas 42 non Kuwaitis are covered by the sample.
The marital status shows that 21 participants are single, 261 married and 12 others, divorced,
widowed, or separated, etc.

37

Out of the surveyed sample, 201 participant are government employees representing 68 % of the
sample. The remaining participants work in the private sector, merchant, or are retired, constituting
14%, 9%, and 8% respectively. Average disposable income per-month for 33 respondents falls
below 400KD, while 81 earn between 400kd and 1000kd; 114 earn between 1000kd and 1500kd,
and 72 receive between 1500kd and 3000 kd/month.
In terms of education, 13 percent of the respondents are illiterate, 24 percent hold high school
degrees, 15 percent finished two years of college, and the remaining 48 percent are university
graduates as (illustrated in Table 4-12).
Table 4-12: Sample distribution according to level of education.

Valid

Frequency
39

Percent
13.0

High School

72

24.0

High School

Two years of college

45

15.0

Two years institute

Graduate

144

48.0

Graduate

Total

300

100.0

illiterate

literate

While 150 participants of the survey spend less than 150 KD per year for their insurance coverage,
96 spend between 100 and 250 KD, and 48 spend between 250 and 1000. The remaining 6
participants spend from1000 KD to 3000 KD per year.
Table 4-13: Sample distribution according to yearly spending on insurance.

Valid

Less than 100 KD

From 100 to 250 KD
From 250 to 1000 KD
From 1000 to 3000 KD
Total

Frequency
150
96
48
6
300

Percent
50.0
32.0
16.0
2.0
100.0

Less than 100 KD

From 100 to 250 KD
From 250 to 1000 KD
From 1000 to 3000 KD

4.2.3 Analytical analysis

4.2.3.1 Mean and Standard Deviation for dependent variables(factors A,B, and C)
The centre of the data based on the scale of the questionnaire is studied in this part of the analysis,
as we calculate the mean and standard deviation for all the questions of factors A, B, and C.

Mean and Standard Deviation for the Orientation Factor - (Factor A):
Table 4-14: Mean and standard deviation for the orientation factor (Factor A)

Questions

Mean

Q10: How do you cover your insurances?

Q11: Which of the following insurance tools do you use?
Q13: When you go to an agent or an insurance office?

300
294
300

1
1.66
2.94

38

Std.
Deviation
0.001
0.473
0.545

Q14: When you buy an insurance, which companies do you use?

Q15: What is your priorities in selecting insurance companies?
Q25: Are you going to renew your contract with the Takaful insurance
companies

279
297

2.02
2.41

0.917
1.373

300

1.99

0.945

From table 4-14, Q10 indicates that all respondents are self insured, which means that they
personally choose their desired insurance company. The mean value of question Q11 is pointing to
commercial insurance as the most used insurance within this sample. Also, the mean value of Q14
shows that most of the clients choose commercial insurance. The first priority, (Q15), for most of
the sample indicates the cost of an insurance policy as per the mean value. Finally, question 25's
mean value shows that customers will not renew their contract with Takaful insurance companies
based on the questionnaire scale.

4.2.3.2 Mean and Standard Deviation for the awareness of the Difference and
the Publicity Factors (Factors B and C)
Table 4-15: Mean and standard deviation for factors B&C

Factors
Factor B
Factor C

N
300
300

Mean
2.36
2.31

Std. Deviation
0.610
0.629

The results of the answers pertaining to factor B group together to indicate a mean value 2.36,
which means the participants disagree with the factor based on the scale of the questionnaire. That
means the respondents don't know the difference between Takaful and commercial insurance.
Similarly, a mean value of 2.31 for Factor C indicates that the participants disagree with the factor
based on the scale. In other words, participants believe that Takaful companies are not undertaking
appropriate measures to publicize Takaful business.

4.2.4 Inference and Statistical Analysis

In this part the hypothesis of this research is tested by inference, statistical analysis. In this study,
the distribution of the data is assumed to be normal.

4.2.4.1 Test statistics

T- Test for gender variable with Factors
Hypothesis 1: Awareness of the difference between Takaful insurance and commercial insurance
differs between males and females.
Hypothesis 2: Opinion on the role of Takaful companies in propagating and publicizing Takaful
business differs between males and females.

39

Table 4-16: Gender Variable Vs. Factors B&C

Factors
Factor B

Factor C

Sex

Mean

Std.
Deviation

T-value

P-value

Result

Male

261

2.32

0.617

-3.903

0.000

Sig

Female

36

2.67

0.478

Male

261

2.28

0.639

-2.771

0.006

Female

36

2.58

0.500

Sig

Significance at level 0.05

From table 4-16 above, it's clear that the p-value of the awareness of the Difference and Publicity of
Takaful Factors are equal to zero, which is less than 0.05. This means that there is a statistical
difference between male and female awareness of the difference between Takaful insurance and
commercial insurance. This difference is in favor of the male sample. The mean value for the male
sample indicates that there is no difference between Takaful insurance and commercial insurance.
However, the mean value for the female sample indicates that they do not know if there is any
difference between the Takaful insurance and commercial insurance.
The results for factor C reveal that there is a statistical difference between male and female opinion
on the role of Takaful insurance companies in propagating the business properly. The male sample
believes there are shortcomings in the role of Takaful companies, whereas the female answer is
"don't know" based on the scale.

T- Test For Nationality variable with Factors

Hypothesis 3: Awareness of the difference between Takaful insurance and commercial insurance
differs between Kuwaitis and non-Kuwaitis.
Hypothesis 4: Opinion about the role of Takaful companies in propagating and publicizing Takaful
business differs between Kuwaitis and non-Kuwaitis.
Table 4-17: Nationality Variable Vs. Factors B&C

Factors
Factor B
Factor C

Nationality

Mean

Std.
Deviation

T-value P-value

Kuwaiti

252

2.30

0.614

-5.178

0.000

Non-Kuwaiti

42

2.71

0.457

Kuwaiti

252

2.32

0.659

1.020

0.309

Non-Kuwaiti

42

2.21

0.415

Result
Sig
Not
Sig

Significance at level 0.05

From table 4-17, it's clear that the p-value of Factor B is less than 0.05. This means there is a
statistical difference between the Kuwaiti and non-Kuwaiti awareness about Factor B. This
difference is in favor of Kuwaitis whose mean value indicates that there is no difference between
40

the Takaful insurance companies and the commercial ones. Whereas the non-Kuwaitis mean value
indicates that they dont know if there is a difference between the two.
On the other hand, the p-value of Factor C is equal 0.309 which is more than 0.05 which means
there is no statistical difference between the Kuwaiti and non-Kuwaitis opinion, as they both
disagree on the role of Takaful companies in propagating and publicizing the Takaful business.

One-way ANOVA for Age variable with Factors

Hypothesis 5:

The awareness of the difference between Takaful insurance and commercial

insurance differs based on age.

Hypothesis 6: The opinion about the role of Takaful companies in propagating and publicizing
Takaful business differs based on age.
Table 4-18: Age Variable Vs. Factors B&C

Factors

Factor B

Factor C

Age

Mean

Std.
Deviation

Less than 21

1.50

0.548

21 29

51

2.12

0.683

30 39

99

2.55

0.558

40 49

78

2.38

0.490

50 59

33

2.55

0.506

60 And more

33

2.09

0.678

Less than 21

1.50

0.548

21 29

51

1.94

0.732

30 39

99

2.52

0.560

40 49

78

2.46

0.574

50 59

33

2.36

0.489

60 And more

33

2.00

0.433

F-value

P-value

Result

8.761

0.000

Sig

12.050

0.000

Sig

Significance at level 0.05

From table 4-18 above, it's clear that the p-value of factor B is less than 0.05 that means there is a
statistical difference between the different ages in terms of their awareness of the difference
between Takaful insurance and commercial insurance.
"Less than 21 years" is the only segment believing there is a difference between the different types
of insurance. On the other hand, the higher age segments reflect less awareness of the difference.

41

The same results go for factor C. There is a statistical difference between ages. The statistical
difference between the ages is in favour of the first segment," less than 21 years", whose mean
value indicates that they agree on the role of the Takaful companies in propagating Takaful
business.

One-way ANOVA for Marital Status variable with Factors

Hypothesis 7: The awareness of the difference between Takaful insurance and commercial
insurance differs based on the marital status.
Hypothesis 8: The opinion about the role of Takaful companies in propagating and publicizing
Takaful business differs based on the marital status.
Table 4-19: Marital Status Variable Vs. Factors B&C

Factors

Factor B

Factor C

Status

Mean

Std.
Deviation

Single

21

2.14

0.655

Married

261

2.37

0.610

Others

12

2.50

0.522

Single

21

1.86

0.854

Married

261

2.33

0.601

Others

12

2.50

0.522

F-value

P-value

Result

1.665

0.191

Not
Sig

6.361

0.002

Sig

Significance at level 0.05

From table 4-19 above, it's clear that the p-value of the awareness Factor is equal 0.191 which is
larger than 0.05; that means there is no statistical difference between married, single and otherwise
based on factor B.
The p-value of Factor C (publicity factor) is equal 0.002 which is less than 0.05 that mean there is a
statistical difference between the married, the single and the others based on factor C and this
difference is in favor of the single segment as their mean value is between "agree" and "disagree"
on the role of the Takaful companies, whereas the married segment mean value is between
"disagree" and "dont know", and the others mean value indicates that they "dont know" about
factor C.

One-way ANOVA for Education variable with Factors

Hypothesis 9: Awareness of the difference between Takaful insurance and commercial insurance
varies based on different educational levels.

42

Hypothesis 10: Opinion on the role of Takaful companies in propagating and publicizing Takaful
business varies based on the difference in educational levels.
Table 4-20: Education Variable Vs. Factors B&C

Factors
B&C

Factor B

Factor C

Education

Mean

Std.
Deviation

Illiterate

39

2.23

0.583

High School

72

2.54

0.580

Two years of
colleges

45

2.40

0.495

Graduate

144

2.29

0.646

illiterate

39

2.46

0.505

High School

72

2.42

0.645

Two years of
college

45

2.67

0.477

Graduate

144

2.10

0.623

F-value

P-value

3.467

0.017

12.768

0.000

Result

Sig

Sig

Significance at level 0.05

From table 4-20 above, it's clear that there is a statistical difference between the different
educational levels and their awareness in the difference between Takaful and others. The difference
is in favor of the illiterate segment, and the graduate segment who all seem relatively more aware
than the other levels.
Factor Cs p-value is equal to 0.000 which means there is a statistical difference in opinion based on
the level of education. From the mean value, the graduate level disagrees on the role of the Takaful
companies whereas others dont know the answer.

One-way ANOVA for Current Job variable with Factors

Hypothesis11: Awareness of the difference between Takaful insurance and commercial insurance
differs based on job levels.
Hypothesis 12: Public opinion on the role of Takaful companies in propagating and publicizing
Takaful business differs based on job levels.
Table 4-21: Current Job Variable Vs. Factors B&C

Factors

Current Job

Mean

Std.
Deviation

F-value

P-value

Result

Private
Factor B

Governmental
Employee

201

2.36

0.617

2.393

0.069

Not
Sig

Private Sector

42

2.57

0.501

43

Private
Factor C

Merchant

27

2.22

0.641

Retired

24

2.25

0.676

Governmental
Employee

201

2.25

0.633

Private Sector

42

2.29

0.596

Merchant

27

2.56

0.506

Retired

24

2.63

0.711

3.988

0.008

Sig

Significance at level 0.05

As it shown in table 4-21, hypothesis 10 is not significant as the p-value is larger than 0.05.
From the table above, it's clear that the p-value of Factor C is equal to 0.008 which means there is a
statistical difference in the opinion of the employees based on the incurrent. Based on the scale, all
the segments disagree on the role of the Takaful companies.

One-way ANOVA for Average Income per month variable with Factors
Hypothesis 13: Awareness of the difference between Takaful insurance and commercial insurance
differs based on income per month.
Hypothesis 14: Public opinion about the role of Takaful companies in propagating and publicizing
Takaful business differs based on income per month.
Table 4-22: Average Income per Month Variable Vs. Factors B&C

Mean

Std.
Deviation

Less than 400 KD

33.000

1.82

0.584

From 400 to 1000

KD

81.000

2.59

0.565

From 1000 to 1500

KD

114.000 2.32

0.614

From 1500 to 3000

KD

72.000

2.42

0.496

Less than 400 KD

33.000

2.18

0.846

From 400 to 1000

KD

81.000

2.44

0.570

From 1000 to 1500

KD

114.000 2.24

0.628

From 1500 to 3000

KD

72.000

0.557

Factors Income per month

Factor
B

Factor
C

2.33

Significance at level 0.05

44

F-value

P-value Result

14.835

0.000

Sig

2.268

0.081

Not
Sig

 Significance at level 0.05

From table 4-22, it's clear that the p-value of Factor B is equal to 0.000 which is less than 0.05; that
means there is a statistical difference in public awareness of the dissimilarities between Takaful and
commercial insurance based on their incomes per month. This difference is in favor of the lowest
category income (400 or less) that seem relatively aware of the differences than the others.
Factor C shows no significant difference since the p-value is larger than 0.05.

One-way ANOVA for Average insurance expenses per year variable with Factors
Hypothesis 15: Public awareness of the difference between takaful insurance and commercial
insurance differs based on insurance expenses per year.
Hypothesis 16: Public opinion on the role of Takaful companies in propagating and publicizing
Takaful business differs based on insurance expenses per year.
Table 4-23: Average Insurance Expenses per Year Variable Vs. Factors B&C

Factors

Mean

Std.
Deviation

150

2.46

0.609

From 100 to 250 KD

96

2.38

0.603

From 250 to 1000 KD

48

2.13

0.489

From 1000 to 3000 KD

1.50

0.548

Less than 100 KD

150

2.24

0.587

From 100 to 250 KD

96

2.34

0.693

From 250 to 1000 KD

48

2.56

0.501

From 1000 to 3000 KD

1.50

0.548

Average insurance
Less than 100 KD

Factor
B

Factor
C

F-value

P-value

Result

8.287

0.000

Sig

7.012

0.000

Sig

Significance at level 0.05

From table 4-23, it's clear that the p-value of Factor B is equal to 0.000; that means there is a
statistical difference in public awareness of the difference between Takaful insurance and
commercial insurance based on their insurance expenses per year. This difference is in favor of the
highest category expenses (1000 t0 3000 KD) indicating that those who spend more seem to know
more about Takaful than others, as per the scale.
Factor C also shows significant statistical differences since the p-value is less than 0.05. This
difference is in favor of the highest category expenses (1000 t0 3000 KD) indicating that they agree
on the role that Takaful companies are undertaking in publicizing the business.

45

4.2.4.2 Correlation Coefficient Between The demographic Variable and Factors

The Spearman's Coefficient t is calculated to study the correlation between the factors and
demographic variable, with the following results:
Table 4-24: Demographic Variables and Factors B&C

Age

0.055

0.343

Sex

0.156

0.007*

Nationality

0.088

0.132

Marital Status

0.162

0.005*

Education

0.255

0.000*

Current Job

0.177

0.002*

Income Average

0.038

0.511

Average Insurance

0.127

0.027*

Factor B

Factor C

Corr.
effect

Corr. type
+
+
+
+
+
-

0.445
0.001*
0.000*
0.094
0.243
0.920
0.300
0.000*

Weak

Correlation

Weak

Age
Sex
Nationality
Marital Status
Education
Current Job
Income Average
Average Insurance

Spearman's
Corr.
Coefficient
0.044
0.184
0.243
0.089
0.068
0.006
0.060
0.228

Sig.
(2-tailed)

* Significance at level 0.05

As per table 4-24, the calculated Spearman's correlation coefficient shows a weak relationship
between Factors B and C and the demographic variables. Having calculated the significance level
(2-tailed) it can be deduce that factor B has a significantly positive relationship with gender and
nationality, but a significantly negative relationship with Average Insurance.
As for factor C, the relationship is significantly positive with sex, marital status, current Job and
average insurance, however it is significantly negative with education.

4.2.4.3 Simple Linear Regression

In this part of the analysis simple linear regression is used to study the effect of the independent
variable (demographic variable) on the dependent variable (factors).

Simple Linear Regression for demographic variable with Difference Factor (word
of mouth)
46

Table 4-25: Dependent Variable: Factor B

Model
(Constant)
Nationality
Sex
Average Income per month

B
1.306
0.358
0.387
0.078

Std. Error
0.199
0.101
0.108
0.039

T-Value
6.566
3.563
3.593
1.971

P-Value
0.000
0.000
0.000
0.050

R2
0.10

We conclude from the table above that the nationality; sex and average income per month have pvalues less than 0.05; that means the three independent variables have an effect on factor B, and the
equation is as follows:
Difference = 1.306+0.358*(Nationality) + 0.387(Sex) + 0.078(Average Income)

Simple Linear Regression for demographic variable with Publicity Factor

(communication)
Table 4-26: Dependent Variable: Factor C

Model
(Constant)
Education
Marital Status
Current Job

B
1.671
-0.122
0.437
0.099

Std. Error
0.266
0.033
0.111
0.038

T-Value
6.289
-3.682
3.946
2.615

P-Value
0.000
0.000
0.000
0.009

R2
0.127

It is concluded from table 4-26 above that education, marital status and current job have p-values
less than 0.05; that means the three independent variables have an effect on the publicity factor (C),
and the equation is as follows:
Publicity = 1.671-0.122*(Education) + 0.437(Marital Status) + 0.099(Current Job)

4.3 Service Quality Model

The Service Quality model data is analyzed based on the main five dimensions; tangibles,
reliability, assurance, empathy and responsiveness.

Each dimension consists of four to five

questions. Answers collected for the questions of each dimension are averaged for both expected
and perceived services. Finally, the difference between perception and expectation is calculated to
show the satisfaction gap for each dimension of the Servqual model and are plotted against the
questionnaire scale (from 1 to 7) to present the level of importance. The Service Quality Gap is
calculated by subtracting Perception minus Expectation (Gap= P-E); that means the service quality
gap is identified only when the calculated value is negative.

47

4.3.1 Tangibles
tangibles
Not Important

10
5
0
7

Very Important

-5

Figure 4-1: Tangibles

Figure 4-1 shows that the gap in the service quality provided by the First Takaful Company is found
in numbers 2, 3, and 4 of the scale. This means that the customer expectation was higher than the
perceived services. However the gap appears to be unimportant since it is found on the lower part of
the scale.

4.3.2 Reliability
Reliability

Not Important

10
5
0
-5

-10
-15

Very Important

Figure 4-2: Reliability

Figure 4-2 shows that the gap in the service quality provided by the First Takaful Company is found
in numbers 7, 6, and 5 of the scale. This means that customer expectation of company reliability is
higher than perceived services. From the graph it is obvious that the gap is in the high rank of the
scale, i.e. it is critical to the company, as most of the customers think it is very important. It also
reflects that the reliability dimension is a potential area of improvement for the company to take
into consideration.

48

4.3.3 Responsiveness
Rasponsiveness
Not Important

20
10
0
7

-10
-20

Very Important

Figure 4-3: Responsiveness

Figure 4-3 reflects that the First Takaful Company responsiveness was much lower than customer
expectation. Customers evaluated responsiveness dimension as a very important aspect in the
insurance business. The resulting responsiveness gap is a serious problem for the First Takaful
Company.

4.3.4 Assurance
Assurance
10

Not Important

5
0
-5
-10

Very Important

Figure 4-4: Assurance

The assurance dimension is depicted in figure 4-4. The gap in the service quality provided by the
First Takaful Company is found in numbers 5 and 6 of the scale which means that customer
expectation of the company is higher than perceived services. The gap is moderately highly ranked
on the scale. It also reflects that the Assurance dimension is a potential area of improvement for the
company to consider.

49

4.3.5 Empathy
Empathy
Not Important

10
5
0
-5

-10
-15

Very Important

Figure 4-5: Empathy

Figure 4-5 illustrates the customer's idea of the Empathy dimension. A gap can be seen from the
above figure. The gap in the service quality provided by the First Takaful Company is found in
numbers 6 and 7 of the scale, which means that customer expectation of the company is higher than
perceived services. The gap is extremely highly ranked on the scale. This shows that the existing
"Empathy gap" perceived by customers could be a serious problems for the First Takaful Company
in this area.

50

Chapter 5
5.1 Introduction
This chapter concludes of the study conducted on Takaful business in Kuwait. The theoretical and
managerial implications of the study are summarized. Recommendations are also made as a result
of the study. Finally, suggested new ideas and improvements for further research are presented.

5.2 Conclusion
The annual report of the Ministry of Commerce in Kuwait showed that Takaful companies have the
lowest premiums and number of policies for general insurance in Kuwait for the year 2004 (The
Statistical Report For Insurance Companies, 2004). Although Takaful insurance is an Islamic
alternative to commercial insurance, it's still behind its counterparts after 5 years of operation in the
Kuwait market.
In an interview with a Takaful Insurance expert, he stressed that there is a broad ignorance about
Takaful in both internal and external customers. "They lack the minimum level of understanding
about Takaful" he said.
In a seed survey conducted by the researcher, only 17% of the surveyed sample claimed that they
know the difference between Takaful and commercial insurance. The remainder of the sample
either "do not know the difference" or believe "there is no difference".

5.2.1 Research Problem

From all of the above it can be deduced that, after 5 years of operation in the Kuwaiti market,
people still lack awareness of Takaful insurance. This research intends to measure and analyze, in
depth, the level of public awareness of the Takaful insurance business in Kuwait.

5.2.2 Research Objectives

The objective of this research is to conduct a detailed study of public awareness in the State of
Kuwait about Takaful insurance from three aspects:
1. To identify the insurance customers orientation in obtaining their insurance policies whether
Takaful or commercial
2. Insurance customers' awareness of the difference between Takaful and commercial insurance.
3. The public judgment of the role played by Takaful companies in propagating Takaful
business.

51

Another objective of the research is to measure the gap between the customers' perception and their
expectation of the service quality provided by one of the Takaful Insurance companies. In this
instance, the First Takaful Company, as it is the first company incorporated in this field. As a
result, this research intends to gauge the service quality provided by the First Takaful Company and
highlight the gaps using the Servqual model.
To serve the above mentioned objectives, two survey questionnaires were developed and conducted.
The first questionnaire is the main survey in this research, while the Servqual model is the
secondary survey conducted on the customers of the First Takaful Company.

5.2.3 Findings
All respondents to the awareness questionnaire are self insured, which means that they personally
choose their desired insurance company. It was found however, that commercial insurance is the
most used insurance within the sample. It was also found that the first priority for a customer is the
cost of the insurance policy regardless of the type of insurance. Finally, it was found that customers
preferring not to renew their contracts with Takaful insurance companies. Most of those sampled
were not Takaful insured and along with the above, this clearly shows no clear orientation towards
Takaful insurance in Kuwait.
Having analyzed the awareness questionnaire for this research; it was found that the level of
awareness differs with gender. Whereas males think there is no difference between Takaful and
commercial insurance, females do not know if there is a difference or not.
As for the role played by Takaful companies in propagating their business, males think that Takaful
companies are not doing their best in this regard, females however appeared to have no clue about
the role undertaken by Takaful companies in publicizing their business.
The difference in awareness reflected by nationality showed that most of the Kuwaitis think there is
no difference between Takaful and commercial insurance, whereas non-Kuwaitis do not know if
there is a difference or not.
The age variable was found to have an inverse relationship with the level of awareness. Younger
segments were found to have a better understanding of the differences between types of insurance.
Similarly, it was found that they also agree to the role of Takaful companies in publicizing their
business. This might be due to the wider exposure of the youth segment to various types of media
which lead to their higher level of awareness.
Marital status has no significance when analyzed with Factor B "awareness of the difference
between Takaful and commercial insurance". However the, "single" segment was satisfied with the
role of Takaful companies in proliferating Takaful business.
52

Level of education was found to be significant in the awareness of differences between the two
types of insurance. The 'graduate' and 'illiterate' segments give a common answer, in which they
both think there is no difference between the two types of insurance. The other segments lack the
knowledge to give a precise answer.
As disposable income increases, it's found that awareness level decreases. More worried about lack
of money, lower income segments tend to give more thought on how to spend it, leading to a higher
level of awareness.
Public awareness was found to have a direct relationship with average insurance spending. As a
person spends more money on insurance, he seeks more insurance alternatives; hence he builds
more understanding about the different types. The same results apply for factor C, as those who
spend more on insurance advocate the measures that Takaful companies are undertaking to
publicize the business.
The correlation coefficient analysis shows a weak relationship between the independent variables
and the tested factors. However, population awareness was found to be in positive relation to gender
and nationality, and in negative relation to average income. On the other hand, the publicity factor
was found to be in positive relation to gender, marital status, occupation and average insurance
spending, but in negative relationship with level of education.
Simple linear regression is used to study the effect of the independent variable (demographic
variable) on the dependent variable (factors). The following equations were developed to help
identify Public awareness of both differences between Takaful and commercial insurance (Factor B)
and the effectiveness of Takaful publicity by showing its relationship with demographic variables.
Difference = 1.306+0.358*(Nationality) + 0.387*(Sex) + 0.078*(Average Income)
Publicity = 1.671-0.122*(Education) + 0.437*(Marital Status) + 0.099*(Current Job)
The results of the awareness questionnaire revealed a lack of awareness among insurance
consumers. Part of the population's ignorance about the Takaful industry is traced back to Takaful
operators not trying to understand customer need. To further investigate the roots of this problem,
the researcher decided to apply the Parasurman Servqual model on the First Takaful Company, as it
is the fist Islamic insurance operator in Kuwait.
For the Servqual questionnaire, which was applied to the First Takaful Company, five dimensions
were studied in which gaps identified and analyzed.
Tangibles Dimension: respondents were found to be satisfied with the level of this dimension. No
critical gaps were identified.
53

Reliability Dimension: a critical gap was identified in this dimension. This dimension is very
important to customers, and customers' expectations were much higher than the perceived service
from the First Takaful Company. It also shows that the Reliability dimension is a potential area of
improvement that the company might consider.
Responsiveness Dimension: The First Takaful Company responsiveness showed a very critical gap.
Customers evaluated responsiveness as s very important dimension in the insurance business. The
identified responsiveness gap is considered a potential area of improvement for the First Takaful
Company.
Assurance Dimension: A gap in the service quality provided by the First Takaful Company is found
in this dimension. The gap is moderately critical.
Empathy Dimension: Customer expectation of the service quality provided by the First Takaful
Company is higher than the perceived services. This creates a gap in a very important area for
customers. This gap is classified as a very 'critical' gap. Therefore, it is a very important area to be
revisited and improved.
In summary, the insurance customers' orientation in obtaining their insurance policies appears to be
controlled by the cost of the policy. Simply, company providing cost efficient service would garner
more customers, since there is no decisive orientation in whether to take up Takaful or commercial
insurance.
Customers are not aware of the differences between Takaful insurance and commercial insurance.
The value added by the Takaful concept is not fully utilized since most of the customers are not
aware of the advantages given by Takaful.
Public opinion on the role played by Takaful companies in propagating Takaful business points the
finger of blame on the Takaful companies them selves.
Reliability, Responsiveness, Assurance and Empathy were the four service gaps identified for the
First Takaful Company. Reliability, Responsiveness and Empathy are possible areas of
improvement for the company.

5.3 Recommendation
Takaful companies should form a lobby to have a common goal congruent in publicizing Takaful.
The lobby should work to increase people's awareness about Takaful business through different
means such as:
1- An Intensive advertising campaign to explain the pros of Takaful insurance in order to increase
the level of awareness.
54

2- The Sponsoring of major events within the country (sports, economic forums, exposes etc.)
3- To Present seminars about Takaful insurance at different gatherings and conferences.
4- To use the findings of this research to target age levels with law awareness of Takaful principle.
5- To inspire non- Kuwaitis awareness of Takaful, as they represent nearly half the population in
Kuwait.
6- To vigorously attract and educate the female customer who is seemingly less aware of Takaful
principles.
7- To develop a cost leadership strategy, since customers were found to be very price sensitive.
Since the total sample showed a very low level of awareness, it is recommended that Takaful
presents itself in booths installed in public areas as airports.etc, to increase its visibility.
There is a strong recommendation for the First Takaful Company to close the gaps found in the
areas of reliability, assurance, and empathy, as this would increase customer satisfaction with the
service quality provided.
The areas of 'tangibles' actually impacts least on service quality, yet customers tend to associate it as
a positive sign. Insurance should guard against investing in "show" and concentrate on substance.

5.4 Further Research

Further research should be carried out into the level of awareness of Takaful companies' employees
and their understanding of the differences between Takaful and commercial insurance.
Further research is necessary to investigate the impact of the three factors (word of mouth, need for
service and past experience) that foster customer expectation as per Parasurman model.
More research could be conducted to identify possible areas of improvement for other Takaful
companies.
A detail study is required to formulate a strategy for increasing the public awareness of Takaful in
Kuwait.
Further research could be carried out on each of the Takaful companies in Kuwait to identify and
close the gaps between the Takaful operators and their customers thereby attracting new customers.
Standardizing Takaful models requires enormous effort, especially in the coordination needed
between different Takaful companies operating in different parts of the world.

55

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Ref. 3

APPENDIX A

Appendix A-1

SEED SURVEY
INSURANCE INDUSTRY
Is there any difference between Takaful insurance and commercial insurance?
1. Yes, (Specify: )

2. I do not know

3- No, there is no difference

Appendix A-2

:



.
.
Insuring humans against unpredicted risks and securing trade activities have always been
a goal of all communities. Insurance business has a vital role in solving this issue. The aim
of this survey is to measure people's understanding of insurance in Kuwait.

.)(:

)Name (optional

Age:

.:
.:

Female

Male

.:
. :

Marital Status

. :
O
O
O
O
O

Education

literate
High School
Two years institute
Graduate
Post Graduate Education

.:
O
O
O
O
O
O

Sex:
Nationality

Current Job
Governmental Employee
Privet Sector

Retired

House wife
) ( Others

. :
O
O
O
O
O
O

Average Income per month

Less than 400 KD
From 400 to 1000 KD
From 1000 to 1500 KD
From 1500 to 3000 KD
From 3000 to 5000 KD
More than 5000 KD

Appendix A-3

 .
What is your Average insurance expenses per year
Less than 100 KD


From 100 to 250 KD

From 250 to 1000 KD

From 1000 to 3000 KD

More than 3000 KD

O
O
O
O
O

(Marine)

(Travel)

(Building & fire)

(Health)

(Life)

(car)

Others

(Loans)

How do you cover your insurances?

Personal coverage

My employer pay it

I do not insure

(Marine)

(Travel)

(Life)

(car)

Building & )
(fire

(Health)

(Loans)

Others

Which of the following insurance tools do you use?

Takaful insurance

Traditional Insurance

I do not insure

: .
If you want to insure you use

O Insurance companies and its branches

O Agents

Appendix A-4

O
O Both

 .
When you go to an agent or an insurance office

O
The employee select the insurance company for you

O
The employee advise you to insure in a certain company

O
You select by yourself the insurance company

O
You do not care about the name or type of insurance company

.
When you buy insurance, which companies do you use?

O
O
O
O Islamic Insurance
O No differnce
O Traditional insurance
( ) ( ) .
Rank the following form 1 to 5 according to your priorities in selecting insurance
companies
Religious

Cost of the insurance policy

( )
Easiness of recovering damages

The nearest company to my place

(............................................................ : )
Others ()

:( )
Answer the following questions if you have previous experience with
Takaful Insurance:
( ) .
Is there any difference between traditional and Takaful insurance?
Takaful insurance is better
O
I do not know
O
Traditional insurance is better O
O
No difference
.
Does Takaful insurance provide innovative addition to its customers

( : )O
Yes (Specify: ..)
I do not know

No it does not add anything new

Appendix A-5

O
O

 .
The reaction of Takaful insurance companies with damages and compensations

O
Faster than tradition insurance companies

O
Slower than traditional insurance companies
No difference

.
Awareness provided by the Takaful insurance companies for its customers
I agree
O
I do not know
O
I disagree
O

.
If you are a customer of a Takaful company, how do you asses their services
I agree
O
I do not know
O
I disagree
O

.
As a client of a Takaful insurance company, when do you expect to get back part or full of
your insurance?

( ) - O
a- in case of accident or damages

- O
b- in case the company achieve good profit

- O
c- in case the company made surplus

)( )( - O
d- in cases (a) and (c)

)( )( - O
e- in cases (a) and (b)

- O
f- I do not know

.
Did you read your insurance contract?

- O
a- I read it fully and in details

- O
d- I do not read it

( )- O
b- I read the important part only (price, amount of
insurance, cases of damage)

Appendix A-6

Do you think that the communication between the Takaful companies and its customers
provide the minimum level of knowledge about the concept of Takaful insurance
I agree
O
I do not know
O
I disagree
O

.
Takaful companies fulfill all what they promise to do
I agree
I do not know
I disagree

O
O
O

.
Are you going to renew your contract with the Takaful insurance companies
I agree
O
I do not know
O
I disagree
O

Appendix A-7

Appendix A-8

Appendix A-9

Interview
Takaful insurance in Kuwait
1. A Brief history about the Takaful in Kuwait.
2. What is the insurance for an Islamic point of view?
3. How many Takaful companies in Kuwait?
4. How do Takaful companies differ from commercial insurance companies? i.e. in what
areas?
5. Is the Takaful market large? Is it growing? Or both?
6. Is the Takaful market attractive new competitor?
7. when did the idea of this insurance company start
8. Mission / Goal of your company.
9. How does your company differ from the other Takaful ones?
10. How good do you think you are doing
11. What is your philosophy for pricing?
12. Can we get some reports representing company performance in the Kuwaiti market?
13. Do you have a Share'a committee or you get your fatwa from outside the company?
14. Do you distribute dividends to the insured parties?
15. Reinsurance
16. How can we make our survey and research useful for you?
17. Do you have a library or a source of articles?

Appendix A-10

APPENDIX B

Appendix B-1

Appendix B-2

Appendix B-3

Autobiography
I was born in Kuwait, on February 23, 1973, the youngest of 22 children. I was received the
Bachelors of since in mechanical engineering from University of Toledo in Ohio, US. I joined The
Petrochemical Industries Company In 2000, as a project engineer. I contributed in completing two
major projects from the prequalification until the start up of the plants. Currently I'm working on a
Petrochemical mega project, US$ 1.7 billion in Kuwait. I started my MBA studies in 2003, the aim
is to boost my career path, and to help me think globally and act locally.
My family:
I am married since 1997, and I have 3 children. Mohammad is my oldest son, Shua'a and Maha are
the daughters.
Future plan:
I'm very much interested in continuing my education to receive PhD in

management studies.