The first difference lies in the akadnya. In the Sharia bank, all transactions must be based on the contract that allowed by the sharia. Thus, all transactions must follow the rules and regulations that apply to the contract-contract muamalah sharia. In a conventional bank, the opening of the account transactions, both giro, savings and time deposits, based on the agreement points, but the principle points are not in accordance with the rules of sharia, for example wadi'ah, because the gyro products, savings and time deposits, promising benefits to the level of fixed interest the money paid.
Second, there are differences in the benefits provided. The Bank uses the concept of conventional costs (the cost concept) to calculate benefits. This means that the interest promised in advance to the depositor is a customer fee or fees must be paid by the bank. Therefore, the bank must "sell" to other customers (borrowers) with the cost of higher interest rates. The differences between them called the indicative spreads whether the company is fortunately or loss. If it spreads positive, in which the burden of interest charged to borrowers from higher interest rates given to depositors, it can be said that the bank's benefit. Conversely also true.
Meanwhile, the bank sharia use the profit-sharing approach, meaning that the funds received will be distributed to bank financing. The benefits of financing is split into two, to the bank and to customers, based on profit sharing agreement in advance.
The third difference is the target credit / financing. The depositors in the bank is not a conventional aware that saved money loaned to various businesses, regardless of halal-illicit business.
Meanwhile, the sharia banks, savings and the distribution of the community are limited by basic principles, namely the principles of sharia means that the loan can not be to such illicit business, gambling, drink underway, pornography and other businesses that are not in accordance with sharia.
Tuesday 18 November 2008
Your Life Insurance Company: How Good Is It?
Insurance companies keep tabs on you, and it is important that you keep tabs on them. If you see your insurance company in the news, be sure to find out why. It's important not only to concentrate on the policy you have, but also the company that provides it. The strength and stability of the company are important factors. To evaluate a company, you can use different tools offered by financial rating firms, industry associations like the Insurance Marketplace Standards Association (IMSA), or even your own state's insurance department.
What to look for
When you evaluate a life insurance company, remember these key points:
1. State licensing and complaints
Make sure the company is legally licensed to provide insurance in your city and state. You can check the Company's website for its license status or contact your state's insurance department to verify this information.
Each state has a different way of dealing with insurance companies and with complaints consumers file against them. Many compile a complaint report every year by tallying the total number of complaints and ranking them in relation to each company's market share. If you notice that many policyholders filed complaints against a certain life insurance company, you can check with your state insurance department to see why. Complaints can range from minor, such as a bad experience with an agent, to something more serious, like misrepresentation of a policy or problems with a claim. Keep in mind that a complaint may only prove that a customer was unhappy, not that the company did something wrong.
2. Financial strength ratings
Review your life insurance company's financial strength and stability ratings. Check with major rating companies, but remember that not all life insurance companies are rated by every service. There are five different ratings firms that issue financial strength ratings for insurance companies. They are Standard & Poor's, Fitch Ratings, A.M. Best, Moody's Investors Service, and TheStreet.com Ratings (formerly Weiss Ratings).
When a life insurance company is rated, the rating gauges its probable financial future. For example, if it receives a low rating, it generally means the company doesn't have many assets and/or financial reserves available. This could affect payment of claims or the life of the company. A financially troubled company could have trouble paying claims, or be sold or closed. It is a good idea to keep an eye on your life insurance company's ratings, because they can fluctuate at any time due to any number of circumstances. The typical fluctuations occur from bad financial decisions and investments, the loss of money, mergers, and even the news of a possible merger.
3. "Seal of Approval"
Throughout their history, life insurance industry officials have received great scrutiny from the press. As a way of strengthening public trust and support, a seal of approval called the Insurance Marketplace Standards Association (IMSA) designation was created.
IMSA membership shows that a company has passed a tough review of its practices and ethics. The assessment focuses mainly on marketing, sales, and customer service. To continue membership, a company must complete this test every three years. It should be noted that IMSA membership is a plus, not a reason to ignore other factors when considering a life insurance company.
Taken From : http://www.insurance.com/article.aspx/Your_Life_Insurance_Company_How_Good_Is_It/artid/228
Miami Clinic Owner Sentenced to 30 Months in Prison for $10.9 Million Medicare Fraud
WASHINGTON, Nov. 12 /PRNewswire-USNewswire/ -- Miami clinic owner Nayda Freire, 61, was sentenced today to 30 months in prison for defrauding the Medicare program in connection with a $10.9 million HIV infusion fraud scheme, Acting Assistant Attorney General Matthew Friedrich of the Criminal Division and U.S. Attorney R. Alexander Acosta of the Southern District of Florida announced.
In addition to the prison term, U.S. District Judge Adalberto Jordan also sentenced Freire to two years of supervised release following her release from prison and ordered her to pay $7,992,391 in restitution to the Medicare program. Freire pleaded guilty to one count of conspiracy to commit health care fraud in connection with her role as the owner of Global Med-Care Corp. Inc. (Global), a Miami-area HIV clinic that purported to provide HIV infusion services to Medicare beneficiaries.
In her plea, Freire acknowledged that between April 2003 and November 2003, she and others conspired to file $10.9 million in false claims to the Medicare program for HIV infusion services that were not provided and were not medically necessary. In addition, court documents explain how the patients at Global were paid cash kickbacks in return for agreeing to allow Global to bill Medicare for the unneeded services.
After payments from Medicare were made into the bank accounts of Global, Freire admitted that she and others transferred $6 million of the fraud proceeds to sham management, marketing and investment companies owned and operated by co-conspirators Carlos, Luis and Jose Benitez. Co-conspirators Carlos and Luis Benitez and Thomas McKenzie were charged separately with health care fraud and money laundering crimes in an indictment unsealed on June 11, 2008. According to the separate indictment, these co-conspirators allegedly provided the money and staff necessary to open Global, the Medicare patients who the clinic would bill to the Medicare program, and transportation for the HIV patients who visited the clinic. The indictment also alleges that Carlos and Luis Benitez were the true owners of Global. The Benitez brothers and McKenzie were charged with participating in the commission of approximately $109 million in HIV infusion fraud and money laundering through Global and 10 other HIV infusion clinics. On Sept. 18, 2008, McKenzie pleaded guilty to one count of conspiracy to commit health care fraud and one count of submitting false claims to the Medicare program, and also admitted his role in a $119 million HIV infusion fraud scheme. The Benitez brothers remain fugitives.
The Global case was prosecuted by Assistant Chief Hank Bond Walther and Trial Attorney N. Nathan Dimock of the Criminal Division's Fraud Section, and investigated by the FBI and the Department of Health and Human Services' Office of Inspector General. The case was brought as part of the Medicare Fraud Strike Force, supervised by Deputy Chief Kirk Ogrosky of the Criminal Division's Fraud Section and U.S. Attorney Acosta of the Southern District of Florida. Since the inception of Strike Force operations in 2007, federal prosecutors have indicted 104 cases with 185 defendants in Los Angeles and Miami. Collectively, these defendants fraudulently billed the Medicare program for more than half a billion dollars.
Source: U.S. Department of Justice
Requirements for term life insurance
Like with many types of insurance, a medical exam may be required when applying for a term life insurance policy. The exam will cover your height, weight, medical history, and include a blood and urine test—which are taken to look for specific medical problems. The results of the tests may hinder you from getting approved for the insurance, or increase your rates, depending on the outcome.
If you’re a smoker, you will pay more for insurance. No matter what you smoke, if it’s cigarettes, cigars or marijuana, you must attest to that on your policy application.
Insurance premiums increase as you age, but with some term life insurance policies, you may be able to renew your policy at the end of the term without having to take another medical exam. Also, if you would like your insurance premium locked in at a certain rate, you can request a “level premium” policy. Your premium rates will only increase after your term expires.
Guaranteed issue term life insurance coverage, also known as “quick issue” or “simplified issues,” are ideal if you are having difficulty finding life insurance due to a medical condition or illness. A higher premium is paid, because no medical exam is required—so the insurance company is taking a big risk in insuring you. When it comes to guaranteed life insurance coverage, there may be a waiting period before coverage takes effect, and a chance of a yearly fee is possible.
If you’re a smoker, you will pay more for insurance. No matter what you smoke, if it’s cigarettes, cigars or marijuana, you must attest to that on your policy application.
Insurance premiums increase as you age, but with some term life insurance policies, you may be able to renew your policy at the end of the term without having to take another medical exam. Also, if you would like your insurance premium locked in at a certain rate, you can request a “level premium” policy. Your premium rates will only increase after your term expires.
Guaranteed issue term life insurance coverage, also known as “quick issue” or “simplified issues,” are ideal if you are having difficulty finding life insurance due to a medical condition or illness. A higher premium is paid, because no medical exam is required—so the insurance company is taking a big risk in insuring you. When it comes to guaranteed life insurance coverage, there may be a waiting period before coverage takes effect, and a chance of a yearly fee is possible.
Product and Solution on Allianz Insurance
Life & Demographic Changes
As a result of overburdened social security systems, people will have to increasingly provide for themselves. Pension system financing is threatened by increasing life expectancies, declining birth rates and high unemployment.Health Assistance Services
What if: A tourist on vacation in Botswana has just been attacked by a hippopotamus. The animal broke his leg and bit him six times, inflicting wounds with severe bleeding. His wife doesn´t know how to help, and there’s no sign of a competent doctor in the area. What is he supposed to do now?Being there
Phuket, Koh Phi Phi, Khao Lak – for many globetrotters these were synonyms for paradise on earth. At least they were until December 26, 2004, when a gigantic tsunami crashed ashore, triggered by a seaquake off the coast of Sumatra.
How to save on travel insurance
As life expectancy increases, so has the age at which 'life begins' – with many people supporting the idea that 'life begins at 50'. Unfortunately, travel insurance companies disagree. Or at least that is how it seems, considering how rapidly premiums rocket for those who are 50 or over. And as for those who are over 70, many "are shocked to find travel insurers unwilling to provide cover at prices they can afford", says Kara Gammell in The Daily Telegraph. So how do you find affordable travel insurance that won't leave you high and dry if you fall ill on holiday?
Consumers need to think of travel insurance as something they should tailor to their own needs, rather than an off-the-shelf product, says The Daily Telegraph. So one of the simplest ways of reducing the premium is to look carefully at the levelof cover you are being offered and then decide whether you actually need it all within the policy. For example, if you are travelling to Europe, opt for European cover rather than worldwide cover, as the latter includes America, where litigation and medical costs can push up the cost of cover. Also, consider covering personal possessions under your home insurance – and, as always, shop around for the best deal.
Consumers need to think of travel insurance as something they should tailor to their own needs, rather than an off-the-shelf product, says The Daily Telegraph. So one of the simplest ways of reducing the premium is to look carefully at the levelof cover you are being offered and then decide whether you actually need it all within the policy. For example, if you are travelling to Europe, opt for European cover rather than worldwide cover, as the latter includes America, where litigation and medical costs can push up the cost of cover. Also, consider covering personal possessions under your home insurance – and, as always, shop around for the best deal.
Financial economics
Financial economics is the branch of economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. Financial economics concentrates on influences of real economic variables on financial ones, in contrast to pure finance.
It studies:
- Valuation - Determination of the fair value of an asset
- How risky is the asset? (identification of the asset appropriate discount rate)
- What cash flows will it produce? (discounting of relevant cash flows)
- How does the market price compare to similar assets? (relative valuation)
- Are the cash flows dependent on some other asset or event? (derivatives, contingent claim valuation)
Financial Econometrics is the branch of Financial Economics that uses econometric techniques to parameterise the relationships.
Taken From : http://en.wikipedia.org/wiki/FinanceInternational Individual Life Insurance
Expat Financialsm is one of the few independent international life insurance brokerage sources in the world. We cater to individuals living outside the country that they hold a passport in, who want to buy life and accidental death and dismemberment (AD&D) plans. But we also cover certain local nationals where conditions and regulations permit, especially if they live outside North America and Western Europe. Coverage is available from $100,000 to $1Million in USD & up to 5 Million in Pounds Sterling. Click here if you are a UK expatriate and if you want a UK denominated plan.
We search the marketplace to provide quotations on a no-charge and no-obligation basis from well known, financially secure and reputable insurance companies headquartered in Europe and the United States. We can also help expatriates decide on the right amount of protection based on their unique circumstances. Not sure how much coverage you need? Click here for a free online life insurance needs analysis.
Once the customer is ready to proceed with the protection, we forward the necessary forms and arrange for the necessary medical tests and examinations, if required. Premiums are payable directly to the insurance company of your choice for your protection, which you can pay by check, wire or credit card.
Global Insurance Industry
Global insurance premiums grew by 8.0% in 2006 (or 5% in real terms) to reach $3.7 trillion due to improved profitability and a benign economic environment characterised by solid economic growth, moderate inflation and strong equity markets. Profitability improved in both life and non-life insurance in 2006 compared to the previous year. Life insurance premiums grew by 10.2% in 2006 as demand for annuity and pension products rose. Non-life insurance premiums grew by 5.0% due to growth in premium rates. Over the past decade, global insurance premiums rose by more than a half as annual growth fluctuated between 2% and 11%.
Advanced economies account for the bulk of global insurance. With premium income of $1,485bn, Europe was the most important region, followed by North America ($1,258bn) and Asia ($801bn). The top four countries accounted for nearly two-thirds of premiums in 2006. The U.S. and Japan alone accounted for 43% of world insurance, much higher than their 7% share of the global population. Emerging markets accounted for over 85% of the world’s population but generated only around 10% of premiums. The volume of UK insurance business totalled $418bn in 2006 or 11.2% of global premiums.Human resources in the Bank Syariah Mandiri Indonesia
Employees are assets the company. For the management of PT Bank Syariah Mandiri, it is not just a slogan. With the vision of "Becoming Bank Syariah Trusted Partners Options", the management of PT Bank Syariah Mandiri aware and very concerned to ensure the sustainability of Syariah business of Bank Mandiri, Bank Syariah Mandiri building to achieve the vision. One important key to achieving Vision is the employees.
To be able to achieve sustainable profitability and growth and become a sharia bank in Indonesia to increase value for our shareholders and provide improvement for the public, Bank Syariah Mandiri, which employs professional staff and fully understand the operational bank. As a bank that operates on the basic principles of Islamic sharia, Bank Syariah Mandiri set a company culture that refers to the attitudes "akhlaqul karimah" (Behavior noble)
Development Resources Humanities have a mission, namely:
"Giving full support to the Bank Syariah Mandiri Bank to become a Sharia Options for the Employee Options."
Development Resources Humanities, in accordance with the mission will support and enhance the active support through a system that makes every employee of Bank Syariah Mandiri proud to be part of Bank Syariah Mandiri.
Number of employees of Bank Syariah Mandiri at the time of the 2139 people in the Office, Branch Office and the Office.
To be able to achieve sustainable profitability and growth and become a sharia bank in Indonesia to increase value for our shareholders and provide improvement for the public, Bank Syariah Mandiri, which employs professional staff and fully understand the operational bank. As a bank that operates on the basic principles of Islamic sharia, Bank Syariah Mandiri set a company culture that refers to the attitudes "akhlaqul karimah" (Behavior noble)
Development Resources Humanities have a mission, namely:
"Giving full support to the Bank Syariah Mandiri Bank to become a Sharia Options for the Employee Options."
Development Resources Humanities, in accordance with the mission will support and enhance the active support through a system that makes every employee of Bank Syariah Mandiri proud to be part of Bank Syariah Mandiri.
Number of employees of Bank Syariah Mandiri at the time of the 2139 people in the Office, Branch Office and the Office.
Islamic Laws on Trading
The Qur'an prohibits gambling (games of chance involving money). The hadith, in addition to prohibiting gambling (games of chance), also prohibits bayu al-gharar (trading in risk, where the Arabic word gharar is taken to mean "risk").
The Hanafi madhab (legal school) in Islam defines gharar as "that whose consequences are hidden." The Shafi legal school defined gharar as "that whose nature and consequences are hidden" or "that which admits two possibilities, with the less desirable one being more likely." The Hanbali school defined it as "that whose consequences are unknown" or "that which is undeliverable, whether it exists or not." Ibn Hazm of the Zahiri school wrote "Gharar is where the buyer does not know what he bought, or the seller does not know what he sold." The modern scholar of Islam, Professor Mustafa Al-Zarqa, wrote that "Gharar is the sale of probable items whose existence or characteristics are not certain, due to the risky nature that makes the trade similar to gambling." There are a number of hadith who forbid trading in gharar, often giving specific examples of gharhar transactions (e.g., selling the birds in the sky or the fish in the water, the catch of the diver, an unborn calf in its mother's womb etc.). Jurists have sought many complete definitions of the term. They also came up with the concept of yasir (minor risk); a financial transaction with a minor risk is deemed to be halal (permissible) while trading in non-minor risk (bayu al-ghasar) is deemed to be haram.
What gharar is, exactly, was never fully decided upon by the Muslim jurists. This was mainly due to the complication of having to decide what is and is not a minor risk. Derivatives instruments (such as stock options) have only become common relatively recently. Some Islamic banks do provide brokerage services for stock trading.
Life Insurance Basics for New Parents
January 18, 2005
Last year, there were over 4 million babies born across the United States, and by 2017 the birth rate is projected to reach 4.5 million, a rise of more than 12 percent. As a result, an increasing number of parents will face a host of important decisions that come with the responsibility of caring for a family, including how they will provide for their loved ones if something should happen to them.
Gather Information
New parents should evaluate their existing life insurance policies to determine whether they offer suitable types of protection at competitive rates, the appropriate amount of coverage and the correct beneficiary designations. Regularly reviewing this information can reduce the cost of life insurance for families. For instance, term life insurance rates can vary considerably over time and it may be worthwhile for parents to get new quotes for their current policies, as rates have declined steadily since 1996.
After assessing their additional insurance needs, parents can begin researching and comparison-shopping online or through an insurance representative. Those seeking information online can go to Insurance.com to get quotes, compare providers, learn about the different types of coverage available, and request an application to purchase a policy from a variety of providers.
Determine Coverage
Life insurance policies can vary significantly in exactly what is covered, and how much is covered. When reviewing their policies, parents should consider:
Type of Coverage - Term life insurance policies provide protection for a specific period of time and generally provide life insurance only, with no accumulating cash value. In contrast, permanent policies can provide protection for an individual's entire life as long as adequate premiums are paid, and generally allow owners to accumulate cash value over the long term. New parents should keep in mind that the cost and availability of life insurance is influenced by a person's health, age and type of coverage requested.
Amount of Coverage - Whether it is a single or dual-income family, both parents should always carry enough life insurance to guarantee that one of them would be in a position to carry on financially in the event that something happened to the other. Even a stay-at-home parent not earning an outside income should be insured to make it possible for the family to cover expenses, such as additional childcare costs.
Designating a Beneficiary
New parents should update their beneficiary designations after the birth of a child, or the people who are named to receive the benefit of their life insurance policies. Beneficiaries should be chosen carefully, since changing the designation to another person later can be difficult. Both a primary and a contingent beneficiary should be named to ensure funds would be available immediately to the family, rather than flowing to the estate, which could result in delays and additional expenses.
In preparing for the birth of a new baby, parents may spend hours painting the nursery and searching for just the right name. Along with those activities, they should consider their life insurance needs as the due date approaches. Having children can be overwhelming at times, but knowing that their family is financially protected can bring parents peace of mind as they celebrate their new arrival.
*The VARDS [Variable Annuity and Research Data Service] Report, Marietta, GA as of 12/31/2001
Last year, there were over 4 million babies born across the United States, and by 2017 the birth rate is projected to reach 4.5 million, a rise of more than 12 percent. As a result, an increasing number of parents will face a host of important decisions that come with the responsibility of caring for a family, including how they will provide for their loved ones if something should happen to them.
Gather Information
New parents should evaluate their existing life insurance policies to determine whether they offer suitable types of protection at competitive rates, the appropriate amount of coverage and the correct beneficiary designations. Regularly reviewing this information can reduce the cost of life insurance for families. For instance, term life insurance rates can vary considerably over time and it may be worthwhile for parents to get new quotes for their current policies, as rates have declined steadily since 1996.
After assessing their additional insurance needs, parents can begin researching and comparison-shopping online or through an insurance representative. Those seeking information online can go to Insurance.com to get quotes, compare providers, learn about the different types of coverage available, and request an application to purchase a policy from a variety of providers.
Determine Coverage
Life insurance policies can vary significantly in exactly what is covered, and how much is covered. When reviewing their policies, parents should consider:
Type of Coverage - Term life insurance policies provide protection for a specific period of time and generally provide life insurance only, with no accumulating cash value. In contrast, permanent policies can provide protection for an individual's entire life as long as adequate premiums are paid, and generally allow owners to accumulate cash value over the long term. New parents should keep in mind that the cost and availability of life insurance is influenced by a person's health, age and type of coverage requested.
Amount of Coverage - Whether it is a single or dual-income family, both parents should always carry enough life insurance to guarantee that one of them would be in a position to carry on financially in the event that something happened to the other. Even a stay-at-home parent not earning an outside income should be insured to make it possible for the family to cover expenses, such as additional childcare costs.
Designating a Beneficiary
New parents should update their beneficiary designations after the birth of a child, or the people who are named to receive the benefit of their life insurance policies. Beneficiaries should be chosen carefully, since changing the designation to another person later can be difficult. Both a primary and a contingent beneficiary should be named to ensure funds would be available immediately to the family, rather than flowing to the estate, which could result in delays and additional expenses.
In preparing for the birth of a new baby, parents may spend hours painting the nursery and searching for just the right name. Along with those activities, they should consider their life insurance needs as the due date approaches. Having children can be overwhelming at times, but knowing that their family is financially protected can bring parents peace of mind as they celebrate their new arrival.
*The VARDS [Variable Annuity and Research Data Service] Report, Marietta, GA as of 12/31/2001
Life Insurance Medical Exam
When applying for a life insurance policy, you may be asked to take a medical exam. Generally, if you’re under age 40 and applying for life insurance coverage of less than $100,000, you probably won't have to take a medical exam. However, the older you are, the less life insurance you can buy without a medical exam. Of course, these figures also depend on your health history and the underwriting guidelines of the insurance company you choose.
A typical medical exam may include a basic physical, blood work, and urine tests. Some insurance companies also require EKGs and/or treadmill EKGs (stress tests), especially for large life insurance policies. You'll also have to provide information on your medical history, including the names of doctors you've seen, dates you saw them, and any treatment recommended. A nurse or doctor (often an independent contractor) who is paid by the insurance company will normally conduct the exam.
If you have a medical condition, there's really nothing you can do to hide it. In fact, you shouldn't even try. Insurance companies have access to an amazing amount of medical information through the Medical Information Bureau, so even if you attempt to obscure the facts, there's a good chance an insurance company will find the information it needs. In addition, if the insurance company discovers you have withheld information, it will look at everything else much more closely. And if you died as a result of the illness, your insurance company may opt not to pay your death benefit.
There are a number of simple steps you can take to make sure you get the best possible results at your medical exam:
- Get a good night's sleep the night before the exam
- Fast for eight hours before the exam if possible to ensure the most accurate results
- Don't smoke for at least one hour before the exam
- Avoid caffeine for at least one hour before the exam
- Avoid alcohol for at least eight hours before the exam
- Don't engage in strenuous exercise for 24 hours before the exam
- Limit your consumption of salt and cholesterol for 24 hours before the exam
- Cancel the exam if you get sick – even a minor infection can distort the results
A typical medical exam may include a basic physical, blood work, and urine tests. Some insurance companies also require EKGs and/or treadmill EKGs (stress tests), especially for large life insurance policies. You'll also have to provide information on your medical history, including the names of doctors you've seen, dates you saw them, and any treatment recommended. A nurse or doctor (often an independent contractor) who is paid by the insurance company will normally conduct the exam.
If you have a medical condition, there's really nothing you can do to hide it. In fact, you shouldn't even try. Insurance companies have access to an amazing amount of medical information through the Medical Information Bureau, so even if you attempt to obscure the facts, there's a good chance an insurance company will find the information it needs. In addition, if the insurance company discovers you have withheld information, it will look at everything else much more closely. And if you died as a result of the illness, your insurance company may opt not to pay your death benefit.
There are a number of simple steps you can take to make sure you get the best possible results at your medical exam:
- Get a good night's sleep the night before the exam
- Fast for eight hours before the exam if possible to ensure the most accurate results
- Don't smoke for at least one hour before the exam
- Avoid caffeine for at least one hour before the exam
- Avoid alcohol for at least eight hours before the exam
- Don't engage in strenuous exercise for 24 hours before the exam
- Limit your consumption of salt and cholesterol for 24 hours before the exam
- Cancel the exam if you get sick – even a minor infection can distort the results
About Syariah Banking (HSBC)
he emergence of Islamic banking (or also known as Syariah banking) in recent decades is one of the most important trends in the financial world. There has always been a demand among Muslims for financial products and services that conform to the Syariah (Islamic law).
HSBC Amanah applies a variety of Islamic financial instruments to develop its products. Often the same instrument is used in a variety of products, each product meeting the needs of a different type of customer. This section presents the three most common Islamic financial instruments and illustrates their uses in representative products offered by HSBC Amanah. Each instrument is explained with a definition, an overview of the transaction process and its illustration in a representative HSBC Amanah product.
HSBC Amanah applies a variety of Islamic financial instruments to develop its products. Often the same instrument is used in a variety of products, each product meeting the needs of a different type of customer. This section presents the three most common Islamic financial instruments and illustrates their uses in representative products offered by HSBC Amanah. Each instrument is explained with a definition, an overview of the transaction process and its illustration in a representative HSBC Amanah product.
Mudarabah
A Mudarabah transaction is an investment partnership. In a Mudarabah arrangement, the contract is between an investor (or financier) and an entrepreneur or investment manager known as the mudarib.Murabahah
A Murabahah transaction is a sale at a stated profit. In a Murabahah transaction, the bank purchases something from a third party and sells it to the client at a stated profit on a deferred payment basis.Ijarah
An Ijarah is an Islamic lease. The bank purchases an asset and leases it to a client for fixed monthly payments.About Accidental Death and Dismemberment Insurance
Life insurance provides a monetary benefit to a descedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.
Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.
In many countries, such as the U.S. and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.
In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.
Life Insurance
Life insurance provides a monetary benefit to a descedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.
Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.
In many countries, such as the U.S. and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.
In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.
Principles of insurance
Commercially insurable risks typically share seven common characteristics.[1]
- A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.[2] The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
- Definite Loss. The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
- Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
- Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.
- Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S. Financial Accounting Standards Board standard number 113)
- Calculable Loss. There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
- Limited risk of catastrophically large losses. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer's appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.
History of insurance
In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread (for example countries in the territory of the former Soviet Union).
Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.
Achaemenian monarchs of Iran were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.
The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."[1]
A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'. 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 c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.
Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.
Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.
Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.
The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional Federal Charter (OFC)) for insurance similar to that which oversees state banks and national banks.
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