AN EXPLORATORY STUDY ON SWITCHING COSTS IN FAMILY TAKAFUL

Takaful company has been in Malaysia since 1984. Syarikat Takaful Malaysia is the first Takaful company established. There are two types of Takaful businesses; General Takaful and Family Takaful. General Takaful is a contract of joint-guarantee on a short-term basis (normally one year). It is designed to meet the needs for protection of individuals and corporate bodies in relation to material loss or damage to their properties. Whereas, Family Takaful plan is a long term in nature. A family takaful is life insurance protection provided to the Muslim as the conventional life insurance is unlawful to the Muslim scholars. However, despite the unlawful elements of conventional life insurance, most Muslims in Malaysia still do not participate in Family Takaful. Previous studies indicate that one of the reasons is already having life insurance. The gap between the conventional life insurance is very huge with the penetration rate of Family Takaful of only ten percent as compared to conventional life insurance of forty two percent in year 2010. In view of the large gap, this study was conducted with the objective to explore the switching costs elements that influence the policyholders from participating in Family Takaful. Interviews were conducted with few professionals using convenience sampling. The results of the interview revealed that some switching costs dimensions have more impact on Takaful participation readiness than the others.