In March 23, 2006, Sharia Supervisory Board of Indonesia (Dewan Syariah Nasional MUI Indonesia) issued one of the Islamic contract (aqd) for Takaful operation namely “Wakalah bil Ujrah” which can be implemented by life insurance, general insurance, and reinsurance companies. 

The definition of Wakalah bil Ujrah comes from “special authority given from participant (the insured) to insurance companies in managing participant’s funds and or doing other business activities”. This type of contract in commercial business requires fee or incentive (ujrah) for insurance companies as an operator, so this contract also more known as “wakalah bil ujrah”. In the contract provision it should be written at least 3 (three) points  : (1) rights and obligations of the participants and the insurance companies. (2) the nominal charge, the method, and the time of fee deduction on premium (3) other requirements agreed related to each of insurance product.

In this contract, insurance companies act as operator or agent which get authority from participants. Each participant as individual in saving product acts as muwakkil (authority giver). Participants as a community in tabarru (donation) account act as muwakkil (authorized companies) which can not transfer such authority obtained to other parties except got approval before from muwakkil (participants). With this type of contract, insurance companies will not bear the investment risk except this condition is mainly caused by insurance company default.

Insurance companies as trusted holder must invest collected funds in the investment instruments which not contravene with sharia principles. In the investment management, both tabarru (donation) fund and saving fund can use one of the following contracts : wakalah bil ujrah, mudharabah (profit sharing) or mudharabah musytarakah.

One question in relation with above contract is the validity of other types of contract in investment management activity which used together with wakalah bil ujrah contract. It mean that there are likely two or more aqd in one transaction which prohibited in Islamic view. According to Omar Fisher and Dawood Y.Taylor in “Prospects for Evolution of Takaful in the 21st Century”, with Wakalah model, Takaful operator earns a fee for services as a Wakeel or Agent and does not participate or share in any underwriting results as these belong to participants as surplus or deficit. Under Wakala Model, the operator may also charge a funds management fee and a performance incentive fee (as Bank Aljazira does).

To prevent debating among Islamic insurance practitioners while practicing this type of contract, Sharia Supervisory Board of Indonesia should review this contract in the future time and furthermore issues the most appropiate fatwas which compliant to sharia rules.