Balancing Compliance and Transparency: A Comparative Analysis of Takaful and Conventional Insurance in Pakistan

Abstract

This research undertakes a comparative analysis of governance practices, transparency, ethical compliance, and consumer protection in both conventional insurance and Islamic insurance (Takaful) within the context of Pakistan from 2016 to 2022 both theoretical frameworks and empirical data for comparative evaluation. Employing a mixed-methods approach, the study evaluates 20 insurance companies, comprising 10 conventional insurers and 10 Takaful operators by analyzing dimensions such as board governance, disclosure transparency, consumer protection mechanisms, and ethical investment practices, through qualitative thematic analysis and quantitative disclosure scoring. The findings indicate that Takaful firms demonstrate stronger performance in governance (e.g., board independence), Shariah compliance (e.g., investment screening), and ethical consumer practices (e.g., dispute resolution and product disclosure), whereas conventional insurers excel in financial transparency, particularly in areas such as profit reporting and financial statement standardization. Despite these strengths, ethical disclosure remains limited within conventional insurance models, while Takaful operators face challenges related to inconsistent surplus distribution reporting. The study recommends policy-level reforms, organizational strategies, and further academic inquiry to promote ethical and inclusive insurance practices in Pakistan. It also underscores the need for standardized regulatory frameworks and enhanced stakeholder stewardship to ensure a balanced and accountable insurance sector.