After a careful analysis of the subject of insurance, in the light of Shariah injunctions, it can be said that the insurance contract does not resemble any kind of Islamic contract besides the mutual onerous contracts and codes of sales. Therefore, the insurance contract has to meet the common criteria of these contracts in order to be considered as valid.
Some of the Islamic scholars state (regarding new, unprecedented contracts) that in the absence of any clear sign about such contracts being null and void, they should be considered permissible. There is a comprehensive discussion amongst Islamic scholars about which factors should be present in a legal Islamic contract and which factors should be absent.
There is consensus amongst the scholars regarding the four factors that should not be present in a contract to make it valid, i.e. Riba, gharar, qimar and jahaala. I have discussed these factors in detail in my previous posts. It is on the grounds of these factors that a majority of the Islamic scholars have aptly declared the commercial insurance as an anti-Shariah act.
The objective of Shariah regarding monetary transactions is quite clear cut. The important conditions which are required for a contract to be considered as valid include a balance between the two contracting parties and exclusion of uncertainties which can result in illicit profit made by any one party. These conditions laid down by the Shariah are meant to ensure that there is complete justice in the business dealings.
Since the insurance contracts tend to benefit only one party, they therefore, lack justice and have been excluded from Islam.
Keep Me In Your Prayers.