COMPARATIVE STUDY BETWEEN AUTO TAKAFUL AND AUTO INSURANCE PURCHASING BEHAVIOUR AMONG MALAYSIAN UNDERGRADUATES

Abstract

In 1984, the Malaysian insurance industry was liberalized to allow
for the introduction of Islamically accepted insurance products known
as takaful. Among the popular products was the Islamic auto
insurance more commonly known as Islamic auto takaful. Given a
choice of conventional and Islamic auto insurance the paper attempts
to look at the purchasing behaviour of Malaysian undergraduates
including the choice of takaful/insurance operator and the
purchasing decision-maker. To understand their choices, their
perception towards the determinants of selection is also investigated.
Undergraduates are chosen because the size and wealth of their
market provides excellent opportunities for takaful companies. Based
on a survey of 537 respondents in a local university, we found that
parents were primarily responsible for the premium payment and,
among those who pay themselves, the majority chose conventional

auto insurance. Overall, the undergraduates are of the opinion that
auto insurance is better than auto takaful in all factors that influence
selection – services delivery, services provision, reputation, electronic
services and convenience. But, when religiosity was factored in, the
Muslim undergraduates ranked it as the top item that makes a
difference between auto takaful and insurance, thus showing their
possible shift to takaful in the future. Furthermore, this study also
shows that there is a tendency among the students to choose auto
takaful for their next renewal.