Part 5: PIDM’s Takaful Benefits Protection System
As we have shared with you in Part 1 of this series, PIDM was established in 2005 with the mandate of protecting depositors in Malaysia against the loss of their deposits in the unlikely event a PIDM member bank fails, or in other words, becomes bankrupt. At the end of 2010, PIDM’s mandate was expanded to include the administration of the Takaful and Insurance Benefits Protection System (“TIPS”). Under TIPS, PIDM provides protection to takaful certificate and insurance policy owners against the loss of their eligible takaful or insurance benefits in the unlikely event that an insurer member (i.e., a takaful operator (“TO”) or insurance company) fails and is unable to honour its obligation to pay the takaful or insurance benefits.
Takaful benefits are benefits that a certificate owner or beneficiary would receive from a takaful operator upon the occurrence of specified events (such as claim events, maturity or surrender of takaful certificates), subject to the relevant terms and conditions. These benefits, along with the terms and conditions, are set out in the takaful agreement entered into between the certificate owners and the TO.
The protection of takaful benefits is administered by PIDM under its Takaful Benefits Protection System (“TBPS”), which operates alongside the Insurance Benefits Protection System. When a TO fails, PIDM will ensure that protected takaful certificate owners or beneficiaries will have continued access to their takaful benefits.
To give a simple illustration, let’s say Lisa has made a claim to a TO after being involved in a car accident. While waiting for her claim to be paid, the TO becomes bankrupt. In this situation, if her claim is an eligible benefit under TBPS, Lisa does not need to worry since she will continue to have access to her takaful benefits.
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