Insurance in the light of Islam An Intro-1

Assalam oalaikum,

“See, O Humans!!
The birds are flying high in the skies,
Just see what they do
Neither do they hoard their food
Nor do they starving die.
Has anyone ever seen
Birds dying of hunger?
It’s humans who hoard
And humans who die of hunger
(Sufi Saint Bulleh Shah)

The underlying idea of this verse is that birds do not hoard and neither do they plan ahead. They are carefree and they soar high in the blue sky. Their welfare lies in the hands of their Creator, Allah (swt) who takes care of their needs.

We know well Allah (swt) has honored us with the position of Ashraf-ul-Maqhluqat or the best amongst His Creations. Worshipping Allah (swt) and placing trust in Him is integral Imaan. Tawakkul is a cardinal tenet of Islam which has been defined in different ways:

Entrusting all the matter to the Master and relying on His Trusteeship
Severance by the servant of all hopes and expectations from the creatures (and attaching them to [Allah (swt)]

So tawakkul implies relying on Allah (swt) alone.

Allah (swt) has 99 beautiful names such as The Protector, The Sustainer, The Just, The Maintainer etc. So when Allah (swt) owns everything that is there on earth and in heaven and is All-Merciful, so the need does not arise for human beings to worry needlessly. (cont)

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Insurance in the light of Islam An Intro- 2

Assalam oalaikum,

Hazrat Umar (ra) said, ‘I heard Allah’s Apostle (saw) say that ‘if you were to rely on Allah as He is to be relied on, He would provide for you as He provides for the birds. They go out in the morning hungry and return in the evening full. (at-Tirmidhi)

We should realize that everything that happens in our life is not in our control. Tawakkul helps us to place all our matters in the Hands of Allah (swt) and accept His Decree.

The word insurance means a promise of compensation for certain potential losses in the future in lieu of periodic payments. Belief or trust in this kind of compensation is the outcome of a very narrow-minded, worldly and materialistic outlook. If we look at the larger picture it is Allah (swt) who is the best Compensator. So it is our duty to trust Him alone.

Allah (swt) says in the Holy Quran: “Whoever is stricken with poverty and turns to people for help, his needs will never be fulfilled, but whoever is stricken with poverty and turns to Allah (swt) for help, Allah (swt) will send him provisions sooner or later’. (Narrated by At-Tirmidhi-2326)

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RIBA OR INTEREST-1

Assalam oalaikum,

The schemes of insurance violate the Islamic Shari’ah in more than one way. So it would be a sin to get carried away by the alluring claims made by the insurance companies and to indulge in something which has been prohibited in the Quran and ahadith.

Let us first begin with the first point of contradiction, i.e. Riba. Islam strictly forbids all the transactions which are based on Riba.

Riba is an Arabic word that means addition or increment. Riba is a significant term in Islamic fiqh. It refers to an unjustified addition in borrowing or lending money and which is paid in cash or kind above the loan amount as a condition levied by the lender or voluntarily by the borrower. This kind of Riba is known as Riba-al-duyun or debt usury in Fiqh.

There exists an aspect of Riba in the insurance policies because the insured person is bound to receive much more money than what he /she had paid. Besides this, an element of Riba is found in the insurance funds which are invested in bonds, stocks etc.

There are numerous Quranic verses as well as ahadith which have forbidden Riba. Hence, it is the duty of each Muslim not to fall into a trap laid by the insurance companies which are merely business ventures with a profit motive.

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RIBA OR INTEREST-2

Assalam oalaikum,

In my earlier post I have discussed about the factor of Riba which makes the concept of insurance anti-Islamic. Here are some of the Quranic verses which strongly condemn Riba/ usury/interest:

O you who have believed! Fear Allah and give up what remains (due to you) of interest, if you should be of believers. And if you do not, then be informed of a war against you from Allah and His Messenger. And if you repent, you may have your principal. (Thus) you do no wrong, now are you wronged. (TMQ- 2:278 & 2:279)

O you who believe! Do not consume usury, doubled and multiplied, but fear Allah that you may be successful. (TMQ- 3:331)

Those who consume interest cannot stand (on the Day of Resurrection) except as one stands that who is being beaten by satan into insanity. That is because the say, ‘Trade is just like interest’. But Allah has allowed trade and forbidden interest. So whoever has received an admonition from Allah and desists may have what is past and his affairs may rest with Allah. But whoever returns to (dealing in interest or usury) those are the companions of the Fire. They will abide eternally therein. (TMQ- 2:275)

It is the duty of every Muslim to steer clear of Riba and all the activities, such as insurance, which are closely associated with Riba.
Though there are several sections within the Islamic community who approve of insurance but the point to remember here is that future lies in the hands of our Benefactor-Allah (swt) and not in the hands of some commercial, insurance company. Moreover, whatever the policy holders get above the amount (paid by him through Premiums), does not belong to him/her. So he or /she does not have any right over it.

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RIBA OR INTEREST- 3

Assalam oalaikum,

In this post I shall mention some ahadith which also condemn Riba/usury. They are as follows:
Narrated Abu Huraira that Prophet Mohammad (saw) said, ‘Avoid the seven great destructive sins’. The people asked, ‘O Allah’s Apostle, what are they? Prophet Mohammad (saw) replied:
To join others in worship along with Allah,
To practice sorcery,
To kill the life which Allah has forbidden except for a just cause, (according to the Islamic law),
To eat up Riba/usury,
To eat up an orphan’s wealth,
To give back to the enemy and fleeing from the battle field at the time of war
Accusing chaste women
(Sahih Bukhari- vol: 4, book: 5124, hadith#28.)


Malik related to me that Zayd Ibn Asalm said, ‘Usury in the Jahilliya was that a man gave a loan to a man for a set term. When the term was due, he would ask, ‘Will you pay for me or increase it? If the man paid then he would take it. If the man did not pay then the money-lender would increase him in his debt and lengthen the term for him’.
(Malik’s Muwatta-Book # 31, number 31.38.84)

So the best future planning is to invest in our Aakhrah and abstain from getting enticed by the temporary, unjustified gains of this world.

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RIBA OR INTEREST- 4

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Some people try to ignore the Riba factor associated with insurance. They believe that the existing insurance system, despite the Riba element, is justified on the grounds of Azzaroorat Taba’al Khatoorat (requirements at the time of calamity), Dafa al-Harj (wiping out the peril), Rafa zarar (combating the loss) and Tahaffuze-jaan-o Maal.  Besides these excuses they believe that insurance is legitimate in Islam because the lives and property of Muslims are constantly at risk in places where they are a minority community.

However, this is quite a narrow outlook of some people who do not hesitate to adopt anti-Islamic practices which are prevalent in the society. If Islam does not permit Riba at any cost it means that Riba is harmful for the society by and large. Islam does not propagate narrow and fragmented viewpoints. Instead Islam takes into consideration the welfare of the entire society and mankind. This is the reason why zakat/charity is one of the pillars of Islam. Zakat plays an important role in equitable distribution of wealth in the society and it ensures that the poor and needy are able to make two ends meet. Islam encourages virtues of universal brotherhood rather than filling one’s own coffers.
Riba on the other hand encourages selfishness and it degrades a person’s moral and spiritual nature. It hampers a person’s participation in the society. Riba also destroys the social solidarity and the desire to lend a helping hand to other fellow-beings.

Hence, instead of trying to control things which are in the Hands of Allah (swt), such as our future, we should have Tawakkul in Him and leave all our worries behind.

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GHARAR OR UNCERTAINTY

Assalam oalaikum,

The second point of objection which makes insurance unfeasible for Muslims is uncertainty.

If we scrutinize the subject of insurance we find that there exist speculative uncertainties and pure uncertainties. The speculative uncertainties are those which have a possibility of a monetary profit or monetary loss. On the other hand pure uncertainties are those which entail loss only.

The Arabic term gharar can be described as hazard, risk or uncertainty. As a rule Islam prohibits transactions in which the conditions of sale are not known or are not certain. Only those transactions are permitted in Islam in which both the parties involved have surety and complete information about the terms of exchange. Islamic scholars have also described the term gharar as fraud. 

According to the Hanafi jurist Al-Sarakhsi gharar is a bargain in which the result is hidden.

The Holy Quran has strictly prohibited the transactions in which either of the parties may suffer a loss or injustice. The Islamic scholars have framed the basic principles regarding the rights and obligations of those who participate in financial markets after throughly analysing the related Quranic verses and ahadith. Besides, forbidding gharar and Al-Qimar (gambling) Islam has also prohibited Al-Maysir i.e. unearned income from games of chance. It would not be wrong to say that insurance is akin to gambling and the unearned income received by the policy holder’s family after his early death is akin to Al Qimar.    

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AL-QIMAR OR GAMBLING-1

Assalam oalaikum,

Besides Riba and Gharar there is another major argument against insurance, i.e. Al-Qimar or gambling.
Those who favor insurance will definitely go to any length to prove that there is no resemblance between insurance and gambling. This is because such people irrationally believe in the idea of insurance due to their own irrational fears which get the better of them.

However, Quran and ahadith have categorically forbidden all the economic transactions that entail Riba, Gharar and Al-Qimar (gambling) and Al-Maysir (unearned income), wagering, taking on responsibility that is not permitted by the Shariah, unknown quantity etc. Islam does not allow monetary transactions which are unproductive and which provide undue advantage to one party at the cost of another.

Living in non-Islamic countries is not an excuse to feel that one is driven by the need of accepting and seeking the concept of insurance. A Muslim has to follow the Shariah injunctions irrespective of the country where he resides.  (contd)

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AL-QIMAR OR GAMBLING-2

Assalam oalaikum,

If we carefully analyze the concept of insurance we find similarities between gambling and insurance, such as:

Life insurance seems to be like a slot machine in which the policy holder has to plug in money umpteen times but the machine pays back just one.
Insurance schemes like pure endowment and term insurance closely resemble gambling because the policy holder will gain profit only if some specific incident happens, such as his death in case of term insurance and his continuing to live in case of pure endowment.
In case of life insurance the insured person dishes out some money every month till he is alive. When the insured person dies his heirs will get a huge amount. The insurance company’s loss is the insured man’s gain and vice-versa. If the insured person lives for long he will end up paying more than he gets from the insurance company. Such an insurance game does not contribute anything to the society, as such. Money is just transferred between the company and the policy holders who enter this monetary transaction voluntarily knowing well in advance that one of them will win and the other will lose. So this makes the game of insurance no better than gambling at a casino.

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AL-QIMAR OR GAMBLING- 3

Assalam oalaikum,


We have so far discussed about the factor of gambling that is present in insurance, which makes it anti-Islamic. Here let us see what Allah (saw) has decreed in the Holy Quran:
‘They ask you about wine and gambling. Say, ‘in them is great sin and (yet some) benefit for the people. But their sin is greater than their benefit. And they ask you about what they should spend. Say, ‘The excess (beyond needs). Thus, Allah makes clear to you the verses (of revelation) that you may give thought.  (TMQ: 2-219)

In the above mentioned verse, Allah (swt) has instructed us to refrain from acquiring monetary gains effortlessly from (any type of) gambling. The disadvantages of gambling outweigh its advantages as it degrades the moral character of human beings.

After the revelation of the Quranic verse 2-219 some people readily gave up these vices whereas some continued to indulge in wine-drinking and gambling.
However, the verses 5:90-91 ultimately declared wine-drinking and gambling as illicit.

‘O you who believe! Intoxicants and gambling and stones and divine arrows are only an infamy of Satan’s handiwork. Leave them aside in order that you may succeed. (TMQ: 5-90)

With the revelation of the Quranic verse 5:90 gambling was outlawed along with wine-drinking as both these vices have many similar properties.
Since insurance also has some features similar to gambling therefore the followers of Islam should consider insurance to be forbidden as well.

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IS A CLEAR CUT RULING ON INSURANCE POSSIBLE- 1?

Assalam oalaikum,

Since insurance is a relatively modern concept we find that there is no direct mention about it in the Quran or the ahadtih. This fact has made it the subject of Ijtihaad or juristic reasoning. The Islamic scholars have established the basic principles about the norms of participation in the financial markets, after conducting painstaking and thorough inspection of the relevant verses from the Holy Quran and the ahadith. There are different opinions regarding this issue as everybody is entitled to form their own opinion. Different Islamic scholars have interpreted and judged the concept of insurance according to their own understanding of this issue. Naturally, difference of opinion is bound to rise. However, if there is lack of mutual consent over this issue this does not mean that the issue has reached a deadlock situation and that a clear cut ruling cannot be established on the matter (in the light of Quran and ahadith).
The main challenge before the Fiqhi (Islamic jurisdiction) scrutiny of insurance is to perceive and expose the actual nature of insurance and the insurance contracts and then present their findings before the Muslim masses so that the latter reject insurance.
(contd)

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IS A CLEAR CUT RULING ON INSURANCE POSSIBLE -2?

Assalam oalaikum,

The point which lacks clarity and which has hindered a clear ruling on the issue of insurance is the nature of insurance and insurance contract. If there was not a difference of opinion amongst the Islamic scholars regarding the nature of insurance contracts then a lot of confusion could have been avoided.
The rules and regulations of about 30 kinds of contracts such as rent, partnership, endowment, guarantee, loans etc are mentioned in the Book of Fiqh. These contracts can be further divided into many other types of contracts. The most significant contract is that of al-bai (sale). The rules of various other contracts are judged in the light of al-bai.
It is very important to identify the category under which the insurance contract comes because different types of contracts have different set of rulings for them in Islami fiqh.
Three different opinions may rise regarding this issue of insurance. The nature of insurance contract can be construed as the following:
A contract of charity
A modern transaction which is subject to its own set of rules and regulation.
A basic sale transaction wherein a commodity is exchanges for another.

In the following posts we shall analyze the nature of insurance contracts in detail.

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IS A CLEAR CUT RULING ON INSURANCE POSSIBLE -3?

Assalam oalaikum,

Here we shall discuss about the first point, i.e. insurance being similar to charity. Many Islamic scholars, who are in favor of insurance, claim that insurance is a blend of a charitable and a business type of contract. Some people are convinced with this description related to the nature of insurance but it should be realized that a contract does not become charitable simply because it may benefit both the parties. If this were the case then even the banks which offer interest would have been considered to be legitimate in Islam.
The insurance companies also do not involve any kind of support or assistance. The insurance companies never pay the insured person a single dollar without receiving payment (premiums) and a signed contract from them first. This is why the Board of Leading Scholars of Saudi Arabia has declared that ‘Insurance is a jointly onerous contract in which both the parties get something in return of what they have given. Thus, the characteristics of being a charitable contract are cancelled out in the insurance contract’. Blanchard has aptly remarked in his classic work on insurance that, ‘The insurer is not operating a charitable operation’.
Far from being charitable, the insurance companies are a part of
the commercial industry whose only aim is to earn profits. They try to exploit the weaknesses and insecurities of people, especially those who have a weak Imaan.

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IS A CLEAR CUT RULING ON INSURANCE POSSIBLE -4?

Assalam oalaikum,

I have discussed in my previous post that the viewpoint that insurance is akin some form of charity holds no weight. Those who hold his view are having illusions and they live in a fool’s paradise. The commercial insurance agencies use advertising as a tool to promote their agenda. They try to brainwash their target audience into believing that it is only through insurance that they can get peace of mind. Consequently, their gullible clients end up paying a much bigger amount through premiums than the expected amount of loss they may suffer to get peace of mind. On the other hand the so-called ‘charity-cum-insurance’ companies make huge profits by extracting enough money through premiums by which they can easily pay the expected claims on their company and also make profit. The tall claims made by some people that the insurance policies can make one’s future secure and reduce risks are nothing but hogwash because the insurance policies are risky themselves.
In his thesis on insurance Thunayaan had interviewed many Western authorities and he found that none of them agreed to the view that the concept of insurance has an element of charity to it.
According to Al-Dhareer, the people who deal with the insurance companies find that they are exploitive by nature and they operate with a profit-motive by taking advantage of the fears and insecurities of people.

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IS A CLEAR CUT RULING ON INSURANCE POSSIBLE -5?

Assalam oalaikum,

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.

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