Allocation Charges / Wakalah Structure

[Mikhqail Nasrat]

Hi all!

I have a question regarding wakalah fee structure – for Takaful product. I’m aware that this topic is not really under life insurance since it falls under islamic life insurance but i believe the concept is almost the same as allocation charges (if i’m not mistaken).

When pricing for a takaful product, is it possible to charge different wakalah fee structure based on different ages? For example, for those under the age of 40, we charge a wakalah fee of:

• Year 1: 20% of contribution amount
• Year 2: 15% of contribution amount
• Year 3: 10% of contribution amount etc.

while for those age 40 and above, we charge a wakalah fee of:

• Year 1: 15% of contribution amount
• Year 2: 10% of contribution amount
• Year 3: 5% of contribution amount etc.

The reason for doing this is to increase the amount accumulated in the participant’s investment fund so that participants can receive more at maturity. Is it possible to take this approach? Or maybe is there a smarter approach to increase accumulated amount in investment fund while maintaining the same wakalah structure?

Appreciate your assistance on this!

[Author]

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