Insurance in the Light of Islam
Prior to shed some light on Insurance in Islam; it is always becomes necessary to elaborate a bit about conventional insurance, which includes interest (Riba in Islam). In conventional insurance, there is a sum of fixed money to be paid to bearer in return of large amount of money; however, cumulative interest and total amount received earlier; is paid after a fixed period (Ajani, 2013). Moreover, the interest involved in a conventional insurance is such an amount which receiver gets without accompanying any risk or any physical effort. Therefore, such amount, i.e. Interest (Riba) is prohibited in Islam at many verses in Quran, and also labeled as Haram. Hence, conventional insurance is called as a gamble; where an amount appreciates automatically without putting an effort; below verse can be referred (Maysami and Kwon, 1999):
“O you who believe! Intoxicants (all kinds of alcoholic drinks), and gambling, and Al Ansaab (stone altars for sacrifice to idols etc.) and Al Azlaam (arrows for seeking luck or decision) are an abomination of Shaytaan’s (Satan’s) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful” (al-Maa’idah 5:90).
Furthermore, different scholars and religious leaders have opined differently; some have argued that insurance is completely prohibited in Islam as Allah Himself protects His people; therefore, there is no need of any sort of Insurance(Ajani, 2013). However, it is also one of the widest accepted principles that Takaful (Islamic Insurance) concept exists too; which is openly practiced in Malaysia. Under Takaful, responsibility of resources is shared and sometimes also referred as mutual insurance. Moreover, there is a Kafala (to support) in mutual insurance, where different policy holders help each other at the time of need (Life Insurance International, 2006).
Similarly, Islam teaches one to protect the well-being of others, protect the peaceful existence of others (Yamani, 2002). Moreover, Insurance in Islam focus on protection of one’s life, religion, property, mind, dignity and honor (Life Insurance International, 2006). Additionally, Insurance concept was coined as a mutual assistance after second century of Muslim Era, when they used to lose much amount of money during long distant travelling, where everyone out there help each other to protect one’s healthy well being (Ajani, 2013). Therefore, today it is widely accepted principle that Insurance do exist in Islam; which means to be shared responsibility, common interest, mutual assistance, and joint indemnity; where each policy holder gives his/her portion of resources to the person in need. However, Insurance in the light of Islam will further be discussed, ahead in this research (Maysami and Kwon, 1999).
Objectives of the Study
The research is aiming to know the background information about Insurance in the light of Islam. The study will discuss the different opinions about insurance by different scholars, and measuring each opinion critically under the referring of Quranic Verses. Moreover, conventional insurance will also be made part of the research, so that readers can have a contrast view of the both. Furthermore, the study also aims to discover whether insurance is permissible in Islam or not; if permissible then what are the classifications and structure of the Islamic Insurance.
Importance of the Study
The research is being conducted on “Insurance in the Light of Islam”; which is one of the highlighted issues among several scholars; who have been witnessed to differ in their opinions. Some Islamic religious leaders argue that Insurance in Islam is prohibited, as others argue that it is permissible under few clauses. Therefore, it becomes really necessary and interesting too, to learn about the Insurance concept in Islam. Moreover, the research findings will provide a clear view of the Insurance with respect to Islam; where by a practical decision can be taken. Similarly, the research findings will also enrich readers’ knowledge regarding insurance concept in Islam.
Hypothesis of the Study
H1: Insurance is permissible in Islam
H0: Insurance is not permissible in Islam
The study is exploratory and descriptive in nature; where the findings will be based on analyzing of literature review. The research objectives will be served through identifying authentic, reliable and updated article journals, along with other relevant papers, i.e. conference proceeding, newspaper articles, books, or magazine articles. The process for the literature gathering will be based on analyzing the research method and respective findings of the paper; however, each literature will be rephrased in a simple and understandable manner.
Structure of the Research
The research would contain the four chapters, which may be titling as; introduction, literature review, results and discussions, and conclusion. However, each chapter would contain distinct information that would perfectly serve the research objectives. In introduction, a background study of the research topic will be explained along with the problem statement, research objectives, importance of the study, hypothesis of the study and limitations of the research will be discussed. In literature review, different authors’ material would take place, which will be analyzed as per the research objectives. Moreover in results and discussions, literature review data will be analyzed which would further lead the research to identify its findings. In conclusion, the research will be summed up; where a brief summary of the each chapter will be elaborated.
The debate on the view of Insurance in Islam is much extensive; where different scholars tend to form different opinions. However, some argue that insurance is prohibited because it includes a kind of risk or gamble in it; while others opine that insurance mean to mutual assistance in which one person can assist other through utilization of resources. Therefore, to bind different opinions as one; it is necessary to identify the real principle behind insurance in Islam. This research may have an ability to clear many prevailing doubts and can serve a fruitful part in the literature world.
Ajani, S. T. (2013) The Concept and Operation of Life Insurance in the Light of Sharia, International Journal of Humanities and Social Science, 3(2), pp. 254–262.
Life Insurance International (2006) DEVELOPING MARKETS – ISLAM: Takaful insurance takes off, Life Insurance International, [online] Available from: http://search.proquest.com.v-ezproxy.brunel.ac.uk:2048/docview/199565059.
Maysami, R. C. and Kwon, W. J. (1999) An Analysis of Islamic Takaful Insurance, Journal of Insurance Regulation, 18(1), p. 109.
Yamani, A. Z. (2002) Social Justice in Islam, Islamic Studies.