ISLAMIC FINANCE

PFS2253

GROUP 4

HONG LEONG MSIG TAKAFUL BERHAD

GROUP NAME: GENUINE

GROUP MEMBERS:

NO. NAME MATRIC ID

1. JANNATUL AINI BT MOHD HEIKEL 4233007232D
2. SITI ZULAIKHA BT ABDULLAH 4233005741
3. EILYA SOFEA BT MUHAMMAD SAIFUDDIN 4233003691
4. THIBASRI A/P DEEPAKARAN 4233004781D
5. NORFARHANA BALKHIS BT JUMAZI 4231000331

DUE DATE: 6th OCTOBER 2024

PREPARED FOR:

EN. NOR EFFUANDY PFORDTEN MD SALEH

 TABLE OF CONTENTS
Introduction ..................................................................................................................................... 1

Products Of Hong Leong MSIG Takaful Berhad ........................................................................... 2

Home Financing: Mortgage Reducing Term Takaful (MRTT) .................................................. 2

The Key features of Mortgage Reducing Term Takaful (MRTT)........................................... 2

The Shariah Concept of Mortgage Reducing Term Takaful (MRTT) .................................... 4

Example of Death for Mortgage Reducing Term Takaful (MRTT) (Refer to Figure B2) ...... 5

Example of Total Permanent and Disability (TPD) for Mortgage Reducing Term Takaful
(MRTT) (Refer to Figure B2) .................................................................................................. 6

The Covers and Benefits provided of Mortgage Reducing Term Takaful (MRTT) ............... 6

Personal Financing: Group Credit Takaful (GCT) .................................................................... 10

Example Case of Death for Group Credit Takaful (Refer to Figure A2): ............................. 11

Example Case of Total and Permanent Disability (TPD) for Group Credit Takaful (Refer to
Figure A2): ............................................................................................................................ 12

Example Case of Maturity Value of GCT (Look at Figure A2):........................................... 12

Conclusion .................................................................................................................................... 14

Pros and Cons of Mortgage Reducing Term Takaful (MRTT) ................................................. 14

Pros and Cons of Group Credit Takaful (GCT) ........................................................................ 15

Recommendations for the Takaful Products ............................................................................. 17

References ..................................................................................................................................... 21

Appendix A ................................................................................................................................... 23

Appendix B ................................................................................................................................... 27
Introduction
Hong Leong MSIG Takaful Berhad, also known as HLMT is a licensed takaful operator
since 2006, is an essential part of the Islamic financial services offered by Hong Leong Financial
Group (Hong Leong MSIG Takaful Berhad, 2024a). The business strives for excellence by
providing the best family takaful solutions that are competitive, adaptable and leading-edge to
satisfy their client’s changing needs. They embrace a solid set of values with Malaysians, including
trust, legacy and dedication, as the preferred takaful provider, which is the company’s vision.
Meanwhile, its mission is to reach out to more Malaysians by offering attractive takaful products
(Hong Leong MSIG Takaful Berhad, 2024g). Using their multi-distribution channels and their
devoted partners, Hong Leong MSIG Takaful Berhad is determined to help the people realise there
is a possibility of a more promising and financially secure future.

Based on Hong Leong MSIG Takaful Berhad (2024f), in 1963, Hong Leong Group started
out as a trade company for building materials before becoming a takaful company. Since Hong
Leong Group has contributed honour, honesty, quality, and abilities to satisfy the needs of a rising
country, it has become a well-known firm and will continue to grow through major stock
exchanges worldwide. Hong Leong MSIG Takaful Berhad was subsequently incorporated on June
19, 2006, under the name Hong Leong Tokio Marine Takaful Berhad. Thanks to a strategic
alliance, Mitsui Sumitomo Insurance Company, Ltd. (MSI) and Hong Leong Financial Group
Malaysia (HLFG) are able to provide the takaful company with more Shariah expertise, customers,
scalability, distribution channels, and branch networks. Additionally, the takaful company gains
knowledge of MSIG's extensive international experience in technical know-how and creative
solutions. The firm change its name to Hong Leong MSIG Takaful Berhad, as of April 5, 2011.

In addition, the company provides instruments for risk management, protection and
investment. They promise to support takaful for everyone as an equitable, accessible and
worldwide tool for risk management, investment, and protection. This led Hong Leong MSIG
Takaful Berhad to ensure their commitment aligned with Maqasid Shariah; protection of faith,
protection of life, protection and preservation of lineage, protection of intellectual needs and well-
being of mind and lastly, protection and enrichment of wealth.
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 As a group in one of the biggest corporations in Southeast Asia, Hong Leong MSIG
Takaful Berhad is extremely dedicated to a customer-first approach, placing your requirements at
the bottom of the heart of all they do because your life is their passion. Being an intelligent and
tech-enabled takaful operator, they understand how technology is changing the business day by
day and are committed to meticulously and swiftly embracing digital improvements to make sure
the clients get the most out of the newest developments. Through a strong emphasis on
sustainability and resilience, HLTM, a proudly Malaysian company aims to create a brighter future
for the customers and their loved ones, now and future generations.

Products Of Hong Leong MSIG Takaful Berhad

Two main products will be explained: Mortgage Reducing Term Takaful (MRTT) and Group
Credit Takaful.

Home Financing: Mortgage Reducing Term Takaful (MRTT)

Takaful or mutual assurance is compliant with Shariah law. Contributions collected from
participants are pooled together to compensate for the benefits in the case of losses experienced
by any of its members or participants. It is the responsibility of Hong Leong MSIG Takaful (HLM
Takaful), a Takaful operator, to invest and oversee this mutual fund appropriately.

Mortgage Reducing Term Takaful (MRTT) Heong Leong Bank is a group Family Takaful
protection plan designed to provide us with lump sum benefit payment upon death or Total
Permanent Disability (TPD) within the term of coverage. In the event of the death or Total
Permanent Disability (TPD) of the house owner, the family members may have to continue
servicing the outstanding financing of the house. With the MRTT plan, the financial burden arising
from this death or TPD is covered on a long-term basis.

The Key features of Mortgage Reducing Term Takaful (MRTT)

Mortgage Reducing Term Takaful (MRTT) is a Shariah-compliant insurance product
offered by banks like Hong Leong Bank in Malaysia. It is designed to provide coverage for the

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outstanding balance of a mortgage in the event of the borrower’s death or Total Permanent
Disability (TPD).

This is how Mortgage Reducing Term Takaful (MRTT) works and its benefits. First, the
product is Shariah-compliant. MRTT operates under Islamic principles, ensuring that it adheres to
the rules of takaful, which involves cooperation and shared responsibility. For example, MRTT
operates under Islamic finance principles, where it prohibits rate of interest (Riba) and uncertainty
in contracts (Gharar). Instead, participants contribute to a mutual fund that provides coverage
based on shared risk, ensuring compliance with Shariah law.

The second is decreasing coverage. This feature works like as we make mortgage
payments, the coverage amount decreases in line with the outstanding loan balance. This means
that the premium typically remains affordable throughout the term. For example, if we take out a
mortgage of RM 500,000, the MRTT coverage might start at RM 500,000. As we pay down our
mortgage, the coverage reduces accordingly, perhaps dropping to RM 300,000 after five years,
reflecting the outstanding loan balance.

Third, they also use a Single Premium Payment which means MRTT often requires a one-
time premium payment that covers the entire mortgage term, simplifying budgeting for
policyholders. For example, instead of paying monthly premiums, you might pay a one-time
premium of RM 10,000 at the start of the policy. This premium makes financial planning easier
because it covers you for the whole mortgage term.

Finally, they can make the payment immediately payout. In the event of the policyholder’s
death or Total Permanent Disability (TPD), the takaful fund pays the outstanding mortgage balance
directly to the bank, relieving the family of financial burden. For example, if the policyholder
passes away with an outstanding mortgage balance of RM 200,000, the MRTT will pay that
amount directly to the bank. This ensures the family does not have to worry about continuing
mortgage payments.
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The Shariah Concept of Mortgage Reducing Term Takaful (MRTT)
The Shariah concept applicable in the Mortgage Reducing Term Takaful (MRTT) is
tabarru’ which means a certain portion of the contribution that the participant agrees to donate
upon occurrence of events approved by Shariah Committee of the Takaful Operator, thus enabling
the participant to fulfil his or her obligation of mutual help and joint guarantee should any of the
fellow participants suffer a defined loss where his or her donation is meant to help others and
others’ donations are meant to help him or her.

Second is Iltizam bi Al Tabarru’ which means the commitment to make Tabarru’. For
example, joining the takaful plan means getting our family members to decide to participate in a
takaful scheme together. We can discuss the importance of supporting each other in times of need.

Third is Ju’alah. It is an agreement in which the participant agrees to reward the Takaful
Operator for its achievement or good performance in managing the Participants' Risk Fund (PRF)
that leads to surplus. For example, understanding how Ju’alah works so that it can reward us with
an additional payment or percentage of that surplus.

Fourth is Mudarabah. It is a contract between the participant and the Takaful Operator
whereby the participant provides the contribution to be managed by the Takaful Operator for
investment purposes. The participant and Takaful Operator shall split any investment profits from
the Participant’s Account (PA) investment in the ratio of 90:10. If there is a loss on the investment,
the participant will bear the loss if it is not due to the misbehaviour (ta`addi), carelessness (taqsir),
or violation of terms (mukhalafah al-shurut) of the Takaful Operator.

Fifth is Wakalah. It is essentially an agent-principal relationship, where the Takaful

Operator acts as an agent on behalf of the Participant to manage the Participants' Risk Fund (PRF)
and the Participant's Account (PA) on the participant's behalf and the Takaful Operator earns
wakalah fee for services rendered. For example, when signing up for the wakalah agreement, they

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enter a wakalah agreement. This means the Takaful Operator will act as their agent, managing the
Participants’ Risk Fund (PRF) and the Participants' Accounts (PA) on their behalf.

Finally, is Qard. Qard is an interest-free loan provided by the Takaful Operator in the event
of a deficit in the PRF. For example, repayment terms. The Takaful Operator establishes a plan for
the PRF to repay the Qard amount over the next year through contributions collected from the
participants. For instance, the operator may decide to deduct an additional RM250 from each
participant's contribution in the following year until the Qard is repaid.

Example of Death for Mortgage Reducing Term Takaful (MRTT) (Refer to Figure B2)
Ahmad, who is 35 years old, has a mortgage amount of RM 500,000 with Hong Leong
Islamic Bank. He also enrolled himself in the MRTT on his next birthday with Hong Leong MSIG
Takaful. The policy term is 30 years. Unfortunately, he passed away after 10 years of his MRTT
policy. Therefore, his outstanding mortgage balance at the time of death is RM 400,000.

Due to this incident, his family informed the Takaful Operator regarding his death and
provided crucial documents, such as his death certificate and the policy number. Therefore, after
the verification process of the documents, the Takaful Operator confirms that the balance of the
mortgage is RM 400,000. Then, the Takaful Operator pays RM 400,000 to the Master Certificate
Holder. Thus, if there is any remaining amount in the Participant’s Account, the amount should be
paid to Ahmad’s specified beneficiaries after deducting the Takaful operator’s administration fees,
such as wakalah fees for managing the process.

As an outcome, Ahmad’s family is not obligated by the mortgage so they can stay at their
home without any debts. If there is any extra amount in Ahmad’s account, the family may receive
the money and can ensure the financial stability of the family after the loss of the breadwinner of
the house.

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 Example of Total Permanent and Disability (TPD) for Mortgage Reducing Term Takaful
(MRTT) (Refer to Figure B2)
Fatimah, who is 40 years old, is a Hong Leong MSIG Takaful MRTT participant who takes
out a mortgage loan of RM 300,000 from Hong Leong Islamic Bank. The policy term is 25 years.
However, on the 15th year of the policy Fatimah suffered a serious injury when her workplace
burned to pieces which resulted in her having Total and Permanent Disability (TPD) that limits
her ability to find an income. The balance of the mortgage loan at the time of her TPD is RM
200,000.

Therefore, her family contacts the Takaful Family Operator to inform her about her TPD.
They also submit the required documents, including the medical reports confirming her TPD
status. Hence, the Takaful Operator verifies the claim and confirms that the balance of the
mortgage is RM 200,000. Due to this, the Takaful Operator paid directly to the Hong Leong
Islamic Bank and settled the remaining mortgage balance. Any surplus in Fatimah’s Participant’s
Account (PA) may be distributed to her to provide financial stability for her and her family
regarding her current situation. As a result, she can focus on her recovery and well-being without
the stress of home debts.

The Covers and Benefits provided of Mortgage Reducing Term Takaful (MRTT)
Takaful
Initial Sum
No Benefits Description Certificate
Covered
Term
In the event of Death of the Participant before
the Expiry Date as stated in the Takaful
Certificate, the Reducing Sum Covered
1 Death RM** Years **
payable from the PRF and the Account Value
(if any) shall be payable to the holder of the
Master Certificate first to balance the

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 outstanding finance with the holder of the
master certificate and any excess, if any, will
be paid to the participant or their authorized
executor, and administrator or legitimate
claimant, if applicable, following subtraction
of the administration fees charged by the
Takaful Operator (a fixed usual, current, and
appropriate quantity) required for the specific
protocols (if any).
In the event of TPD of the Participant before
the Expiry Date as stated in the Takaful
Certificate, the Reducing Sum Covered
payable from the PRF and the Account Value
(if any) shall be payable to the Master
Total Certificate Holder firstly to offset the
Permanent RM** outstanding financing with the Master
2 Disability (subject to Certificate Holder and the amount in excess, if Years**
(TPD) before TPD limit*) any, shall be payable to the Participant or
attaining age 65 lawful executor and administrator or proper
claimant (as the case may be), after deduction
of the Takaful Operator’s administration
charges (a fixed customary, prevailing and
reasonable amount) necessary for the
particular procedures (if any).

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Table 1: First six (6) months of provisional Takaful coverage

A. Benefit Payable
• Same benefits as stated in the Master Certificate and Sum Covered as stated in the Letter
of Acceptance or Letter of Offer signed by the Participant.
• Subject to the relevant benefits' maximum limit specified in the Master Certificate
• No Account Value shall be payable
B. Period of cover
• Benefits payable under Table 1, Item A will automatically end on the Entry Date
specified in the Takaful Certificate or six (6) months after the Provisional Takaful
Coverage Commencement Date, whichever comes first ("First Half Provisional Takaful
Coverage").
• The waiting period is applicable.

Table 2: Second six (6) months of Provisional Takaful Coverage

A. Benefit Payable
1. Letter of Acceptance
• The Master Certificate's specified accident benefits and the Letter of Acceptance's
stated Sum Covered benefits are the same, but only if they come from those
definitions.
• Up to RM 250,000 or Sum Covered, as stated in the Letter of Acceptance, whichever
is lower.
• No Account Value shall be payable.

2. Letter of Offer
• Subject to the Participant satisfying all terms of the Letter of Offer and the written
approval of the Takaful Operator.

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 • Same benefits as stated in the Master Certificate, but only because of Accident as
defined in the Master Certificate and Sum Covered as stated in the Letter of Offer
signed by the Participant.
• • Up to RM 250,000 or Sum Covered, as stated in the Letter of Offer signed by the
Participant, whichever is lower.
• No Account Value shall be payable.
B. Period of cover
• This Benefits Payable under Table 2, Item A shall automatically cease six (6) months
from the expiry date of the First Half Provisional Takaful Coverage or on the Entry Date,
as stated in the Takaful Certificate, whichever occurs first.

The fees and charges

Type Amount
Wakalah Fee (inclusive in the single 30.00 % of Single Contribution (inclusive of
contribution amount) 10.00% Commission)
Surrender Charge (upon surrender of your
RM 50.00
Takaful Certificate)
RM 10.00 (borne by Master Certificate
Stamp Duty
Holder)
Sales & Service Tax (SST) 6.00% of Single Contribution

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Personal Financing: Group Credit Takaful (GCT)

Hong Leong MSIG takaful for credit group is a financial product designed to protect
against borrowing risk. It caters primarily to financial institutions and their borrowers, offering a
Shariah-compliant solution that reduces the financial burden on families in the event of unexpected
circumstances, such as death or Total Permanent Disability (TPD). There is also a benefit upon
the maturity value of the participant’s certificate.

At its core, Group Credit Takaful protects financial institutions from the risk of borrower
default for personal financing. When a person is taking personal financing, there will be a risk that
the person cannot pay back the loan amount within the loan tenure due to either death or Total
Permanent Disability (TPD). Group Credit Takaful mitigates this risk by ensuring that, in the event
of the borrower's death or disability, the outstanding loan amount is settled. This arrangement not
only provides peace of mind to borrowers, knowing their families will not be burdened with debt
but also protects financial institutions from potential financial losses.

When signing up for the Group Credit Takaful product, the borrower is required to make a
one-time contribution that provides coverage for the entire loan term. This product will
automatically be included by the financial institution when the borrower signs the letter of offer
(LO) for personal financing. Financial institutions will automatically deduct the takaful
contribution and disburse the remaining balance of loan amount to the borrower’s bank account.
In other words, enrolling in the takaful plan is mandatory for the borrower to receive the loan

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Example Case of Death for Group Credit Takaful (Refer to Figure A2):
Pak Ali was recently approved for RM 50,000 in personal financing from Hong Leong
Islamic Bank. Upon visiting the bank to finalize the agreement, the banker provided him with a
letter of offer for the funding and the details of a takaful for Islamic insurance products. The banker
explained that the takaful product was a mandatory condition for the loan approval.

The takaful policy required a one-time contribution of RM 5,550 which would be deducted
from the total loan amount. Pak Ali was informed that the financing would only be disbursed after
signing the letter of offer (LO) and the takaful agreement.

After reviewing the documents, Pak Ali signed both documents and accepted the terms and
conditions of the takaful policy. Upon completion of the paperwork, the bank disbursed the
remaining RM 44,450 to his bank account after deducting RM 5,550 takaful contribution from the
original loan amount of RM 50,000.

The coverage amount is linked to the outstanding balance of the loan, which means that as
the borrower makes repayments, the coverage amount may decrease accordingly. The money will
be paid lump sum to the beneficiary which is the financial institution. As an example, if Pak Ali
passed away at the tenure of five years due to a car accident, the outstanding considered RM 22,505
will be paid fully by the Takaful Operator to the Master Certificate Holder, which is Hong Leong
Islamic Bank Berhad (Refer to Figure A3).

The benefit is claimed when the Master Certificate Holder submit a claim that includes
relevant documents such as the death certificate of Pak Ali, and loan repayment details that are
received from Pak Ali’s family to the Takaful Operator. After the verification process, Hong Leong
MSIG Takaful pays the Reducing Sum Covered directly to the Master Certificate Holder to settle
the outstanding loan after deducting the Takaful Operator’s administration fees, such as wakalah
fees. Hence, the family members are free from the financial burden of the personal loan made by
Pak Ali.

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Example Case of Total and Permanent Disability (TPD) for Group Credit Takaful (Refer to
Figure A2):
Siti, who is 40 years old, has a personal loan of RM 250,000 form Hong Leong Islamic
Bank. Therefore, she enrolled in the Group Credit Takaful on her next birthday, with a policy term
of 15 years, to cover the loan. During the third year of her loan term, she suffered a fatal accident
that made her Total and Permanent Disability (TPD) and this condition did not allow her to work
to gain income. So, Siti informs the bank of her situation, including giving proofs and letters from
her healthcare institution.

Then, the bank immediately submits a claim including her medical reports acknowledging
that Siti suffers from Total and Permanent Disability (TPD) to Hong Leong MSIG Takaful. After
that, the Takaful Operator reviews the evidence and ensures that all conditions are true. Lastly, the
Takaful Operator pays the outstanding loan balance directly to the bank, which is based on the
Reduced Based Sum on the loan repayment schedule.

As a result, Siti does not need to pay the loan anymore since it is already covered by the
Takaful Operator. This allows her to focus on her recovery and adapting to the new circumstances
with her TPD without the stress of repaying her loan. The product ensures her financial stability
during this challenging time. Siti's family is also relieved from the burden of the loan which lets
them focus on facilitating her daily tasks.

Example Case of Maturity Value of GCT (Look at Figure A2):

Farah, a 30-year-old woman, takes out a personal loan of RM 200,000 and joins a GCT on
her next birthday to ensure that the loan can be covered due to this risky world. The takaful policy
duration is for 15 years.

At the end of the 15-year term, the Group Credit Takaful (GCT) matures. So, the total
contribution after 15 years including the assumption that the Takaful Operator has invested the
contribution according to Shariah principles and has achieved an average annual investment return.
The total amount includes her contributions and the returns on the investments made with those
contributions.
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 Therefore, the money can be used to pay off her outstanding debts, make savings or
investments and do other things that can benefit her. So, she not only had coverage during the term
policy but also gained an extra income that ensured her financial stability upon maturity.

In terms of benefits, Group Credit Takaful offers a mutual advantage to both borrowers
and lenders. For borrowers, the primary benefit lies in financial security. In the unfortunate event
of death or disability, the takaful pay-out clears the outstanding loan balance, preventing families
from inheriting debt. This financial safety net is crucial for families already facing emotional
distress during difficult times. For lenders, Group Credit Takaful minimizes the risk of default,
ensuring that loans can be recovered even if the borrower is unable to fulfil their obligations and
preventing the financial institutions from losses.

The claims process for Group Credit Takaful is typically straightforward. When a borrower
experiences a covered event, the lender submits a claim to the takaful provider. The provider then
assesses the claim and pays out the necessary amount to cover the outstanding loan balance. This
efficiency is beneficial for both parties, as it simplifies the administrative aspects of handling
claims and facilitates a quicker resolution.

In conclusion, Group Credit Takaful is a crucial lending practice in the financial sector. By
providing coverage linked to loans, it effectively addresses the inherent risks of borrowing while
offering protection to families and financial institutions alike. This Shariah-compliant solution
fosters a sense of security and stability, ensuring that financial obligations can be met even in
challenging circumstances. As the demand for ethical and inclusive financial products continues
to grow, Group Credit Takaful stands out as a meaningful option for borrowers and lenders in the
modern economy.

Group Credit Takaful uses the same Shariah Concept as Mortgage Loan Reducing Term (MRTT)
(Refer to Figure A1).

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Fee and charges that need to be paid:
Type Amount
x% of Single Contribution or XXX
Wakalah fee
(Inclusive of 10.00% Commission or XXX payable to the Bank)
Surrender Charge RM 50.00
Stamp Duty RM 10.00 (borne by Master Certificate Holder)

Conclusion
Pros and Cons of Mortgage Reducing Term Takaful (MRTT)
Foremost, affordability and premium flexibility. Hong Leong MSIG Takaful’s (HLMT)
Mortgage Reducing Term Takaful (MRTT) tends to be more affordable for long-term policies due
to its decreasing coverage structure. It also offers flexible premium payment options, such as a
single payment plan, depending on the customer’s financial needs. Other takaful companies may
not provide diverse payment options, making HLM Takaful MRTT more attractive for individuals
seeking customizable contributions.

In addition, additional benefits for refinancing mean that if a customer refinances their loan
midway through their MRTT policy, they can potentially claim back part of the remaining
coverage from HLMT. This flexibility in reclaiming is not a standard feature in many takaful firms,
giving HLM Takaful a slight advantage. Besides, HLMT provides coverage without the need for
a medical examination up to a specified age and sum assured. This feature is particularly beneficial
for older applicants or those with pre-existing health conditions, whereas other banks might require
stringent health assessments.

While the advantages are clear, some downsides must be addressed. Firstly, HLM Takaful
MRTT may include premium financing, which can lead to a higher monthly repayment if the
contribution is spread over the loan term. This makes it slightly less competitive for users who are
under budget compared to takaful firms that offer a more straightforward premium structure. As a
matter of fact, unlike some other takaful firms that offer Mortgage Level Term Takaful (MLTT)
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products, which provide a fixed benefit throughout the term, HLM Takaful MRTT follows a
reducing benefit structure. This means the coverage amount decreases over time, which might not
be ideal for those looking for consistent protection throughout the loan period.

Last but not least, while the overall premiums might be lower due to the reduced sum
assured, the initial single premium payment option can be a significant upfront expense. This might
not be feasible for participants who prefer lower entry costs, making other brands’ regular premium
options more appealing.

In summary, Hong Leong MSIG Takaful MRTT stands out for its flexibility and coverage
cap, but it may not be the best choice for borrowers looking for static coverage or those who are
sensitive to upfront costs. Other banks might offer better-fixed coverage options or lower initial
premiums depending on the applicant’s needs and financial plans.

Pros and Cons of Group Credit Takaful (GCT)

A comparison between Hong Leong MSIG Takaful (HLMT) Group Credit Takaful (GCT)
and similar products offered by other firms shows that it has some peculiarities. One unique feature
is the company’s non-medical limit, which is RM100,000 for participants who are not more than
60 years of age at entry and who do not require any medical examination. This makes it available
to certain categories of borrowers who may not qualify for other insurance systems that include
demanding health tests. Also, HLMT came up with GCT where payment modes are flexible, and
it has provisions for a single bulk payment and the borrower is shielded throughout the period and
has no chance of default with the contributions.

One of the key components of the GCT by HLMT is the option to include premium
financing that enables the clients to include takaful contributions towards the loan repayment. This
makes it more convenient for participants, as the cost is borne and incorporated into their loan
servicing cost and, therefore, there is no need for participant budgeting. In addition, the GCT of
HLMT offers full coverage even if the property being borrowed is yet to be constructed, enabling
the borrowers to have more comfort during the property developmental stage.
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 Another aspect which Hong Leong MSIG Takaful provides and which the other firms do
not, is a cash surrender value which means that even if the policy is paid off before the agreed
time, one will be able to get some form of a return. This option is not standard with other GCT
plans from its competitors, thus making Hong Leong MSIG Takaful’s plan even more enticing for
borrowers.

Thus, while all the banks provide similar protection plans, the GCT in Hong Leong MSIG
Takaful is notable for having higher non-medical limits, more freedom to pay for premiums, and
added features such as the cash surrender value, which makes it a superior choice for borrowers
who want general but extremely adaptable loan protection.

When comparing HLM Takaful Group Credit Takaful (GCT) with other institutions, there
are a few cons to consider. One of the main disadvantages is its higher dependency on premium
financing which might result in higher monthly repayments compared to other banks that offer
more flexible contribution options. While HLMT does provide some unique features such as cash
surrender value, this is not a standard inclusion in all takaful plans and may vary based on specific
terms which makes it less advantageous for certain borrowers.

Additionally, Hong Leong MSIG Takaful had a relatively higher non-medical limit, which
could be a limitation for borrowers seeking higher coverage without medical underwriting. This
differs from other banks like Public Bank, which might offer more customized solutions depending
on the borrower's profile. Finally, Hong Leong Islamic Bank scores high in defensiveness against
credit risks, other institutions may offer a wider range of optional benefits and features, making
them more attractive depending on the borrower’s needs. In conclusion, while HLM Takaful GCT
offered by Hong Leong Islamic Bank is competitive, some customers might find better options in
other banks’ takaful products offerings that provide greater flexibility or lower overall cost
depending on the loan structure.

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Recommendations for the Takaful Products
After considering the pros and cons of those products, the first recommendation is that
Hong Leong MSIG Takaful Berhad must provide an online portal or create a mobile app for the
policyholders to stay updated with their takaful policy, pay their instalments promptly, and check
the accounts’ values in real-time. This innovation is crucial, as it would make it convenient for the
customers to access information regarding the recent status of their takaful product. This idea can
reduce the customer’s hassle to contact the company, through either a phone call, email, or visiting
the branch itself. These days, not all people have free time. Therefore, this is a remarkable step in
decreasing the burden on the customers and the staff. Moreover, it would also be beneficial for the
employees since they could collect accurate data from the app to identify the customers’ needs,
while the customers are always at ease since the products are accessible through their smartphones
and other smart devices that are compatible with the app, which allows them to monitor their
policies and easily make informed decisions. As a result, the company can remain competitive in
the industry with innovation since it displays that it always stays up to date with the current
technologies and recent shifts in customers’ habits.

Besides that, the company must provide a review section of both products to let potential
clients know further about the products without any hesitation. The review section must include
honest feedback directly from the current policyholders to ensure the benefits of the products to
the new clients. For example, when there is positive feedback from the current users of those
products, these reviews can guarantee the potential customers that the products are good and there
will be no hesitation in buying the mentioned products. However, if there were bad reviews, the
potential customer may read and understand the reason the reviews said that. Nevertheless, if there
are more good reviews than bad ones, then it will ease the customer to make a decision. This is
because good reviews reflect the employees’ effort to provide a quality service to the other clients,
which is known as al-itqan. Another thing is that the reviews can guide the potential clients in the
process of applying for takaful products since the reviewers have more experience with the
operation style of the company since there are probably some reviews regarding this matter.

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 Other than that, the firm should offer a loyalty reward programme for the policyholders
who are loyal to the company’s products and have used the product for a long time. The current
products do not offer any rewards for the current users who follow the policy for a specified period.
By providing rewards, the company can retain customers in the long term and ensure more users
will be interested in using the takaful product (Symon, 2024). For example, when the company
announces that it will offer discounts on the next payment of the clients’ contributions, this can
motivate them to pay the monthly contribution since they will receive a discount. They will
probably be loyal to this company until their takaful certificate ends. The rewards will also intrigue
other people since people tend to compare similar products between different companies and will
choose the best offer. Thus, it denotes that the loyalty rewards programme can make the products
reach more people, so the company will receive more clients and increase its reputation since the
business has spread among society. At the same time, this initiative can foster a loyal relationship
between the company and the participants, which helps the company to established loyal-based
customers.

Furthermore, the takaful can improve their products by offering comprehensive critical
illness coverage. This is due to illnesses only limited by Total and Permanent Disability (TPD)
(Refer to Figure A2 and Figure B2), while it should also involve mental illnesses This is said since
mental health can influence one’s actions and behaviour in their life which can have a big impact.
For instance, if one has depression, then one will have a hard time finishing simple tasks including
waking up and eating. The situation shows how bad mental illness can impact one’s life, even to
the point of one consider quitting their job due to chronic stress and untreated underlying mental
health conditions according to a study by Censuswide (WPI Economics & Unum, 2023). If the
takaful products can cover when one is diagnosed with a mental illness, it can help decrease the
burden of one and can also help their innocent family who did not apply for any loan. This will
also reflect on how Hong Leong MSIG Takaful Berhad takes mental health issues seriously and is
an example to other takaful companies. This significant change can help the company to reach
more people and there is a big chance that more people want to invest in this company since it is

18
for the good cause of society regarding their current bad situation that not everyone understands.
Thus, the offer can attract customers who are looking for holistic protection.

Last but not least, on the takaful website, it is suggested for the company to provide an
anticipation section. It includes two categories. The first one is to predict the single contribution
amount that one has to pay, the Participant’s Account (PA) value, and the value of the Participants'
Risk Funds (PRF) when the participant just started to contribute to the product. The potential client
can obtain useful information by providing their loan types, such as personal financing-i and
property financing-i, the total loan amount, the monthly instalments of the loan, the downpayment
of the loan, their monthly income and the loan's tenure or the payment’s period. This system is
beneficial since it allows one to prepare enough money beforehand and ensures that the takaful
products are affordable for them. Plus, they will know the amount in those accounts when they
just started and will appreciate the shariah-compliant system that applies tabarru’ and iltizam bi
al-tabarru’ since the system fosters helping each other genuinely which is taught in Islam.

On the other hand, the second category is to predict on what will happen if they claim any
benefits offered by the products. The system can oversee the information when the user inputs
their single contribution to their respective takaful product, the specific period, such as one year,
six months or seven days and chooses the claims they need to make, either Total and Permanent
Disability (TPD) or death. An example is that when a customer wants to know what will happen
during their death, they can use the anticipation section beforehand to know prior the total amount
the takaful covers for their loans and if there is any balance of a loan amount that the family needs
to bear, the amount that the Participants’ Risk Funds can bear for the participant, the wakalah fees
charged by the Takaful Operator, and if there is any excess amount from the Participant’s Account
(PA) that the participant will be suggested to do a will with the assistance of recommended lawyers
to give it to their family or donate to do other good deeds. The system will also automatically
recommend to the client the contacts of the lawyers who are specialised in this situation to guide
the client on what action to take next. The recommended lawyers are to encourage the participant
to deal with the delegation of the balance from the contributions that are managed by the Takaful
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Operator according to Shariah. This can make Hong Leong MSIG Takaful Berhad stand out from
others with its comprehensive system that provides future insights and a clear demo for the
participants and also potential customers.

By embracing these improvements, Hong Leong MSIG Takaful Berhad enhances the
products’ features to be more attractive and customer-friendly, which will probably lead to an
increase in customer satisfaction, boost enrolment and ensure that the products maintain their
competitiveness in the market that increase the chance for the company to achieve its organization
goals.

All in all, Hong Leong MSIG Takaful Berhad must sustain operations under Shariah
compliance and provide clients with the products that they need to ease the process of obtaining
them and ease their lives in the future in case anything happens. To ensure happy customers a
satisfied experience, they must work in a team to provide a quality service which leads to achieving
the organization's goals to boost the company’s reputation, and therefore reach out to more
audience that can increase the market share within this industry. The company will also be more
competitive and stable with the uncertain economic situation in Malaysia.

20
 References
Hong Leong Islamic Bank. (2024a). Islamic personal financing. Hong Leong Islamic Bank.
https://www.hlisb.com.my/en/personal-i/consumer-financing-i/personal-financing-i.html
Hong Leong Islamic Bank. (2024b). Islamic property financing. Hong Leong Islamic Bank.
https://www.hlisb.com.my/en/personal-i/consumer-financing-i/property-financing-
i.html?icp=hlisb-en-all-menu-txt-propertyloani
Hong Leong MSIG Takaful Berhad. (2024a). A brief info about the company.
Hlmtakaful.com.my. https://www.hlmtakaful.com.my/en/know-us/at-a-glance.html
Hong Leong MSIG Takaful Berhad. (2024b). Discovering the core purpose and principles of the
firm. Hlmtakaful.com.my. https://www.hlmtakaful.com.my/en/know-us/at-a-glance/our-
brand.html
Hong Leong MSIG Takaful Berhad. (2024c). Group credit takaful on HLMT.
Hlmtakaful.com.my. https://www.hlmtakaful.com.my/en/business/group-credit-
takaful.html
Hong Leong MSIG Takaful Berhad. (2024d). Mortgage reducing term takaful (MRTT) on
HLMT. Hlmtakaful.com.my. https://www.hlmtakaful.com.my/en/business/mortgage-
reducing-term-takaful.html
Hong Leong MSIG Takaful Berhad. (2024e). Mortgage reducing term takaful (MRTT) product
disclosure sheet. Hong Leong Islamic Bank; Hong Leong MSIG Takaful.
https://www.hlisb.com.my/content/dam/hlisb-new/my/docs/PropertyFinancing-i/hlisb-
mrtt-pds.pdf
Hong Leong MSIG Takaful Berhad. (2024f). The history of Hong Leong MSIG Takaful Berhad.
Hlmtakaful.com.my. https://www.hlmtakaful.com.my/en/know-us/at-a-glance/our-
history.html
Hong Leong MSIG Takaful Berhad. (2024g). The vision, mission and the core values of the
takaful company. Hlmtakaful.com.my. https://www.hlmtakaful.com.my/en/know-us/at-a-
glance/our-vision-mission-and-values.html
Hong Leong MSIG Takaful Berhad. (2024h, May 20). Group Credit Takaful (GCT) product
disclosure sheet. Hong Leong Islamic Bank; Hong Leong MSIG Takaful.
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 https://www.hlisb.com.my/content/dam/hlisb-new/my/docs/PersonalFinancing-i/hlm-
takaful-gct.pdf
Symon, N. (2024, March 6). Conduct loyalty programs to increase customer’s retention.
Constant Contact. https://www.constantcontact.com/blog/loyalty-programs/
WPI Economics, & Unum. (2023, November). Well-being, joy, and efficiency promoting the
economic expansion and well-being of UK workers. Wpieconomics.com; WPI
Economics and Unum. https://www.unum.co.uk/docs/Health-Happiness-Productivity.pd

22
 Appendix A
Group Credit Takaful (GCT) Product Disclosure Sheet

Figure A1.

23
Figure A2.

24
Figure A3.

25
Figure A4.

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 Appendix B
Mortgage Reducing Term Takaful (MRTT) Product Disclosure Sheet

Figure B1.

27
Figure B2.

28
Figure B3.
29
Figure B4.
30
Figure B5.
31
Figure B6.

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Figure B7.

33