Efficiency comparisons of takaful insurance and conventional insurance in Pakistan

Purpose The efficiency of Takaful insurance compared to conventional insurance in Pakistan is an important topic for individuals and businesses seeking optimal insurance solutions. This study aims to investigate how effectively Takaful and conventional insurance organizations operate in Pakistan from 2017 to 2023. The analysis considers factors such as the total number of employees, assets, capital income, net insurance revenue and other sources of income. Design/methodology/approach Data was collected from four Takaful and four conventional and three Islamic insurance companies. Using data envelopment analysis (DEA), the authors evaluated the efficiency of both insurance models based on their labor and asset expenses. Findings The results show that conventional insurance organizations outperform Takaful organizations in terms of overall effectiveness, with conventional insurers achieving a higher efficiency score (0.899) compared to Takaful insurers (0.753). Especially, Pak-Qatar Family Takaful emerged as the most efficient Takaful provider. Furthermore, factors like organizational size, total assets, total employees and income sources were significant contributors to efficiency levels. Originality/value This study highlights that while Takaful insurance has made significant progress, conventional insurance organizations currently lead in terms of overall efficiency. These findings can guide industry stakeholders in improving their operational strategies and inform consumers looking to make more informed choices regarding insurance models.