In this modern world, it is almost impossible to live without being affected by insurance. The house and the car that people rent have got insurance cover. The bus that they board has insurance. Insurance is all around them whether they like it or not. However, what is the status of insurance according to the scholars?
The scholars are not in agreement whether insurance is permissible or prohibited. Since the kind of insurance as it is being practiced now did not exist during the Prophet's time and there is no clear injunction in Holy Qur'an and Hadith regarding it. Then, ijtihad[1] is used to determine its status.
As the scholars are not in agreement as to whether insurance is permissible or prohibited, they are also not in agreement as to reasons for its prohibition. And the followings are the ideas of them and their reasons.
1. The Objections
Many scholars deemed insurance to be prohibited, their resistance commonly undertook beneath the existence of forbidden elements in the insurance contract. For instance, Syekh Muhammad Abu Zahrah said that life insurance is a kind of gambling because there is no justification for a person, giving a part only of a sum, to be entitled to get the whole in case he dies and to take what he has paid with the profit in case he survives in the period of insurance. This is but riba[2].
Syekh Ahmed al-Sharbasi, Director of Young Men’s Muslim Association said that the system of insurance is unlawful if it is based on riba and undoubtedly there is an element of uncertainty and chaos in insurance which often results in a loss to the individual and considerable gain to the insurance companies[3].
Furthermore, Mahdi Hasan, the Jurisconsult, Deoband, Saharanpur , India
Syeh ‘Uruj Ahmad Qadri, Editor Zindagi, Rampur India
Muzaffar Hussain Mazaheri, Mazhar al-‘Ulum (Islamic Institution) Saharanpur , India Deoband , India
There are many others scholars also deemed insurance as above; some of them are Sayid Sabiq, the author of Fiqhus Sunnah, Abdullah Al-Qolqili, the Jurisconsult of Jordanian, Muhammad Yusuf Al-Qordhawi the author of Al-Halal Wal-Haram fil Islam, Muhammad Bakhit al-Muth’I, the Jurisconsult of Egypt, etc.[7]. The objections of those ‘Ulama, in the main, are:
a. Insurance draws on the contract of mu’awadhah[8] maaliyyah which comprises gharar.
b. The insurance is truly based on mere chance as in gambling, wagering or betting;
c. The insurance engages the uncertain matters;
d. In case of life insurance, the total obligations of how many times the premium installment paid by insured are not known;
e. The insurance contains element of exploitation, i.e. if the policy-holder fails to continue the policy because of their inability to recover even part of the premium, he shall get nothing from this contract;
f. The shareholder invests the accumulated funds in fixed-earning (interest) and;
g. There is no matching ‘aqd in Islam can be regarded as the insurance contract.
The 'Ulama, thus, wage a relentless war against insurance and emphatically argue that the insurance contract is diametrically opposed to the ethical standards set by Islamic law. It is hazardous, unfair and uncertain.
2. The Rejoinder
On the other hand, the scholars who opined that insurance is permissible, i.e. Muhammad Abduh, Abdul Wahab Khalaf, Mustofa Ahmad Zarqa, the professor of Islamic Law in Shari’a Faculty, Damascus University, Muhammad Yusuf Musa[9], the professor of Islamic Law in Cairo University, Egypt, and Abdurrahman Isa, the author of Al-Muamamalat al-Haditsah wa Ahkamuna, said that insurance is a modern contract and there is no injunction (nass) regarding it. If there is no injunction, then it is allowed. They based their argument on the established legal maxim that "originally, that any matter is permissible until there is evidence prohibiting it"[10]. This legal maxim is based on the Qur'an of which some of the related verses are as follows:
وَسَخَّرَ لَكُمْ مَا فِي السَّموَاتِ وَمَا فِي الأَرْضِ جَمِيْعًا مِنْهُ، إِنَّ فِي ذلِكَ لآيتٍ لِقَوْمٍ يَتَفَكَّرُوْنَ [11]
"And He has subjected to you, as from Him, all that is in the heavens and on earth: behold, in that are signs indeed for those who reflect".
According to the scholars, in principle, human beings are permitted to use the resources of the universe. This implies that all acts are necessary to facilitate this usage, including transactions, are permissible. To reinforce this, the Qur'an lays down the principle that Allah Almighty has clearly explained His prohibitions. Furthermore, the universe is described as an adornment of Allah. This is stated in the Qur'an:
قُلْ مَنْ حَرَّمَ زِيْنَةَ اللهِ الَّتِي أَخْرَجَ لِعِبَادِهِ وَالطَّيِّبَاتِ مِنَ الرِّزْقِ قُلْ هِيَ لِلَّذِينَ آمَنُوا فِي الْحَيَاةِ الدُّنْيَا خَالِصَةً يَوْمَ الْقِيَامَةِ كَذَلِكَ نُفَصِّلُ الْآيَاتِ لِقَوْمٍ يَعْلَمُونَ [12]
"Say: who has forbidden the adornment of God, which He has produced for His servants, and the things, clean and pure, (which he has provided) for sustenance? Say: They are, in the life of this world, for those who believe, (and) purely for them on the Day of Judgment. Thus do We explain the Signs in detail for those who understand".
Therefore, a mere presumption is not enough to declare something unlawful. Muslim scholars have held any injunction that overrules this principle of permissibility must be decisive in meaning and transmission.
The scholars further claimed that insurance is a contract which brings maslahah 'amah (public welfare, commonweal) to the insured. According to them, the insurance contract is not a contract of mu’awadhah maaliyyah but falls under the concept of tabarru' and as assistance and guarantee by the insurer to the insured. The accumulated premium paid by insured will be considered as the savings fund and managed by insurer under the legal law. In this respect the insurer's position is that of a middleman whose collects money from insured and collectively arranges a form of assistance to them in facing collective losses[13]. Hence, if it does so, the forbidden elements fail to destroy the contract of insurance because they fall under the concept of tabarru’ and ta’awun and the forbidden elements just occur in muawadhah maaliyyah transactions[14].
They further judged that insurance is perfectly legal form of business from which both the parties benefit; the insurance company and the insured. The former gains the huge profit from the accumulated premium and the latter gets the guarantee of the further loss.
Accordingly, Muhammad Yusuf Musa stressed that insurance in all its kind is an example of cooperation and helpful to society. Life insurance is beneficial to the insured as well as to the insurance company and as such there is no harm according to Islamic law if it is free from interest, that is, the insured taking only what he has paid without any increase if he survives the period of insurance and, in case he dies, his heirs getting the compensation. This is lawful under Islamic law[15]. Again, they do this business contract by mutual good-will as mentioned in Holy Qur’an:
يآ أَيُّهَا الَّذِيْنَ أمَنُوا لاَ تَأْكُلُوا أَمْوَالَكُمْ بَيْنَكُمْ بِالبَاطِلِ إِلاَّ أَنْ تَكُوْنَ تِجَارَةً عَنْ تَرَاضٍ مِنْكُمْ [16]
“O ye who believe! Eat not up your property among yourselves in vanities: but let there be amongst you traffic and trade by mutual good-will”.
And also the insurance contract is like the ‘aqd of mudharabah which performed by a separate department of insurance under interest free bank wherein the insured invests his capital to gain the yield with the basis of profit and loss-sharing[17], it will absolutely eliminate riba. Legally, scholars analogize the concept of insurance with the concept of ‘aqila (those who have to pay blood-wit) practiced in the time of Prophet -peace be upon him-.
3. The Middle Idea
Such is the conflict between the views of the two schools of thought. Clearly, it can be seen that the source of conflict is the forbidden elements of the business in Islam. Implicitly, it can be understood that the sort of forbidden insurance in the hand of the first thought is the commercial insurance (conventional) and whereas the sort of allowable insurance in the sight of the latter is social insurance with the basis of mutual and cooperative concept. Thus, this third thought takes the middle values between the both foregoing thoughts by allowing the social insurance and strictly forbidding the commercial insurance[18].
This though supported by Muhammad Shafi’, Jurisconsult, Dar al-‘Ulum (Islamic Institution) Karachi , Pakistan
a. The amount paid towards insurance policy be invested, on the principle of mudharabah instead of pre-determined interest, profit be distributed as is generally done by commercial concerns.
b. In order to run the insurance business on cooperative lines, the policy-holders be bound, with their consent, to contribute a considerable portion of their profits towards a reserve fund in the form of a waqf (endowment), which will be utilized to provide for those who are victims of accidents.
c. The original amount of premiums together with profit is given to each insured which will be considered as his property while the reserve fund will remain a tabarru’. The insured will be entitled to be benefited by the tabarru’ in case of accidents.
d. There should be no forfeiture of the installments that are paid in case further installments are not paid[19].
The writer sees this third thought is wiser, in which the insurance has huge benefits and been needed by modern people in guaranteeing their risks. Islam with its universal characteristic never leaves any useful problem because of the contained forbidden elements but tries to adopt it and eliminates all the forbidden elements by modifying concept, form, nature, goal and its mechanism fund management. Then, it will come into being the newly modified concept of insurance with the basis of Islamic teachings.
[1]Literally ijtihad means striving or the exercise of effort to extract the rules of law from its sources. As a term of jurisprudence it means the application by a lawyer (faqih) of all his faculties to the consideration of the authorities of the law (that is, the Qur'an, the Traditions and the ijma') with a view to finding out what in all probability is the law (that is, in a matter which is not covered by the express words of such texts and has not been determined by ijma' or consensus). See Dr. Muhammad Muslehuddin, op. cit.., p. 92.
[2]Dr. Mohammad Muslehuddin, op. cit., p. 151.
[7]Prof. Drs. H. Masjfuk Zuhdi, Masail Fiqhiyyah, (Jakarta: PT. Toko Gunung Agung, 1996), ninth edition, p. 134.
[8]A commutative contract on the basis of “do ut des”, see Hans Wehr, op. cit., p. 657.
[9]Prof. Drs. H. Masjfuk Zuhdi, op. cit., p. 135.
[10]Abdul Hamid Hakim, Mabadiul-Awwaliyyah, (Jakarta
[11]Al-Jathiyah: 13. See for translation in Abdullah Yusuf Ali, op. cit., p. 615.
[12]Al-A’raf: 32. See for translation in ibid, p. 185.
[13]Azman Ismail, Insurance and Sharia, an article published in 19th issue of Nida'ul Islam Magazine, Juli-August 1997 (www.islam.org.au).
[14]Dr. Husain Hamid Hisan, Asuransi dalam Hukum Islam; Tinjauan atas Riba, Maisir dan Gharor, translated by Aisyul Muzakky Ishak (Jakarta: CV Firdaus, 1996), p. 83.
[15]Dr. Mohammad Muslehuddin, op. cit., p. 152.
[16]An-Nisa’: 29. See for translation in Abdullah Yusuf Ali, op. cit., p. 106.
[17]Dr. Mohammad Muslehuddin, op. cit., p 160, see also Prof. Drs. H. Masjfuk Zuhdi, op. cit.., p. 135.
[18]Azman Ismail, Takaful: A Practical Alternative, an article published in 23rd issue of Nida'ul Islam Magazine, April-May 1998 (www.islam.org.au).
[19]Dr. Mohammad Muslehuddin, op. cit., p. 160 – 161.