A research on participation insurance and the reasons of individual preferences to participation insurance

Islamic financial products began to spread rapidly in the middle of the twentieth century. These products, approved by Islamic lawyers, have become attractive in the Muslim geography as an alternative to traditional financial products. As the rapid rise of participation banking, alternative Islamic insurance system have been developed essential and participation insurance (takaful) system as an alternative to the traditional insurance system. After the formation of participation insurance companies in Sudan in 1979 and in Malaysia in 1984, the participation insurance market was formed in the Islamic geography, such as Saudi Arabia and Middle East countries. There are more than 200 participation insurance companies in different 33 countries globally and the market share of these companies is approximately 40 billion dollars. The first participation insurance company started to operate in Turkey, in 2009. By the end of 2019, 12 companies are actively operating their market share reached up 3.5 billion TL, corresponding to 5% of the total market share of the insurance industry. One of the main reasons of this study is the lack of sufficient academic studies in this field, despite the increasing importance of participation insurance. This study aims to investigate the reasons why individuals prefer participation insurance. In this context, in the first part of the study, the meaning of participation insurance was explained and the conceptual framework was introduced. Addition to the conceptual framework of the participation insurance, the needs for participation insurance, the basic working principles of participation insurance, the history and models of participation insurance, the differences between traditional insurance and participation insurance, and the current trend of participation insurance in our country and in the world was explained in details. In the second part of the study, the reasons for individuals to prefer participation insurance are tried to be elaborated. In this context, general information about AHP technique was given, which is one of the multi-criteria decision making methods used in the study, and how AHP technique works, its advantages, why this technique was used in this study was emphasized as well. In line with the purpose of the study, randomly selected existing and potential participation insurance customers were included by using the AHP technique in order to investigate the reasons preferences of participation insurance in the study. The data obtained from this research were analysed using the AHP technique. According to the result of the research, the majority of current and potential participation insurance customers (63.2%) prefer participation insurance due to the Islamic sensitivities. As the proximity to the sales channel and the reliability of the company showed similar results, the price of the policy was observed as the secondary parameter impacts on purchasing of policy of participation insurance customers. Keywords: Participation Insurance, Takaful, Islamic Insurance, Insurance