(*Note : Extremely long post*)
In modern business, one of the ways to reduce the risk of loss due to misfortunes is through insurance. The concept of insurance where resources are pooled to help the needy does not contradict Shariah.
The concept is in line with the principles of compensation and shared responsibilities among the community. It is not a new concept, in fact it had been practised by the Muhajrin of Mecca and the Ansar of Medina following the hijra of the Prophet over 1400 years ago. It is generally accepted by Muslim Jurists that the operation of conventional insurance does not conform to the rules and requirements of Shariah.
Conventional insurance involves the elements of uncertainity (Al-gharar) in the contract of insurance, gambling (Al-maisir) as the consequences of the presence of uncertainty and interest (Al-riba) in the investment activities of the conventional insurance companies which contravene the rules of Shariah. Takaful is an alternative form of cover which a Muslim can avail himself against the risk of loss due to misfortunes.
It is a Muslim’s belief that any misfortune that befalls him, that results in the loss of life or belongings, is by the will of the Almighty Allah. At the same time, we are also taught to take positive steps to avoid or reduce the possibility of these misfortunes as indicated by the hadith:
“The Prophet (s.a.w.) told a Bedouin who left his camel untied to the will of Allah: Tie your camel first, then put your trust in Allah”
(Narrated by at-Tirmizi and Ibn Majah)
Nowadays, insurance is seen as a means of action undertaken to reduce the risk of loss due to misfortunes. An alternative form of cover a Muslim can avail himself against the consequences of catastrophe and disaster is by participating in Takaful schemes. It is a scheme based on solidarity, shared responsibility and brotherhood among members. Participants of this scheme all agree to mutually help each other by contributing financially on the basis of tabarru' (donation).
Insurance as a concept does not contradict the practices and requirements of Syari'ah. In essence, insurance is synonymous to a system of mutual help. It is the pooling of resources to help the needy, a scheme which is similar to the principles of compensation and shared responsibility among the community, as practised between the Muhajirin of Mecca and the Ansar of Medina following the hijra of the Prophet over 1400 years ago.
However, Muslim Jurists are of the opinion that the operation of the conventional insurance, in its presence form, does not conform to the rules and requirements of Syari'ah as it embodies the following three elements:
(i) Gharar
The unknown or uncertain factors in operation of a contract in life insurance contracts.
(ii) Maisir
Gambling arises as the consequence of the presence of Gharar, particularly in the case of life insurance.
(iii) Riba
Interest and other related practices that do not conform to the Syari'ah in the investment activities.
Birth of Takaful in Malaysia
The foundation for the development of Takaful or Islamic insurance was set by the wish of Muslim to realign more to Islamic practices in the economic activities coupled with the strong support from the Government for Islamic financial services. In the same manner as conventional banking requires the services of insurance, Islamic banking also needs the services of insurance. It is befitting that the insurance services for Islamic banking must be based on a system acceptable to Islam.
Takaful Concept
In Malaysia, the provision of insurance cover as a form of business in conformity with Syari'ah is based on the following Islamic principles:
(i) Al-Takaful
The pact among a group of people called participants, reciprocally guaranteeing each other against loss or damage that may befall any one of them.
(ii) Al-Mudharabah
The commercial profit sharing contract between the provider(s) of funds (participants) for a business venture and the entrepreneur who actually conducts the business.
(iii) Tabarru'
The agreement by a participant to relinquish as tabarru’ (donation), a certain proportion of the Takaful contribution that he agrees or undertakes to pay, thus, enabling him to fulfil his obligation of mutual help and joint guarantee should any of his fellow participants suffer a defined loss.
Thus, the operation of Takaful may be envisaged as a profit sharing business venture between Takaful operator and the individual members of a group of participants who wish to reciprocally guarantee each other against certain loss or damage endured by any one of them. The operation of Takaful is confined within the Tijari (commercial) sector or popularly known as the private sector.
The traditional aspects of the commercial activity of Takaful must be subject to Islamic contractual laws to ensure its compliance with Syari'ah. Within this fundamental framework contract of tijari, Takaful is therefore based on the Islamic principle of Al-Mudharabah.
The tabarru' concept is incorporated in Takaful contract to eliminate the uncertainty element. A participant shall agree to relinquish as tabarru', certain proportion of his Takaful contributions that he agrees or undertakes to pay. Consequently, enables him to fulfil his obligation of mutual help and joint guarantee should any of his fellow participants suffer a defined loss. The sharing of profit or surplus that may emerge from the operations of takaful, is made only after the obligation of the assisting the fellow participants is fulfilled. It is imperative for a Takaful operator to maintain adequate assets of the defined funds under its care whilst simultaneously striving prudently to ensure the funds are sufficiently protected against undue over-exposure.
I was automatically enrolled for life insurance with my company. I would like to know if I must cancel the life insurance policy or not. Can you please explain if it is haram or halal and why?
Life insurance is a new contract not known in the history of Fiqh. Muslim scholars have different opinions regarding this kind of insurance.
Responding to the question, Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert, states the following:
In the circles of contemporary Shari'ah scholars, there are three opinions about life insurance. They all recognize that it is a new contract not known in the history of Fiqh. A minority consider it haram and with all kinds of argument against it including Riba, gambling, gharar and speculation on the will of Allah. This view does not carry much weight.
The second view is that it contains gharar because no one knows whether the liability of the insurer (the company) will ever materialize nor when it will, if ever. This is a serious gharar that leads to a major defect in the contract. It is therefore forbidden.
The third opinion is presented by the late Sheikh Mustafa al Zarka.
He argued that the gharar in the contract is remedied by the fact that it is a contract based on overwhelming statistical knowledge and the application of the theory of probability. With this in mind, there is no gharar on the part of the insurer and the contract is permissible with two conditions: that it contains no Riba clause and that its subject (insured thing) be legitimate. These two conditions rule out regular fixed return life insurance because the value of the policy is the outcome of investment premiums at a compounded rate of interest, (while variable - return life is permissible if the funds are invested in the Shari'ah approved stocks or mutual funds).
They also rule out insuring a prohibited activity such as casinos.The advocators of the second opinion argue that the gharar problem applies only in exchange contracts. If the contract is modified and restructure on the basis of cooperation or mutuality, where there will be an association of the insured instead of a profit motivated insurer company, the gharar is then tolerated.
This is so because the relation between the association and its members become based on contribution or tabarru' rather than exchange and a tabarru' can accommodate certain conditions ( i.e., that the association compensate in case a hazardous event happens). On the basis of this all the "Islamic insurance companies" were established.In this regards, al-Zarka adds, that if a mutual or cooperative insurance exists he prefers it to profit motivated insurance out of his respect to the opinion of opponents.
There is an old argument (from the 1950s), even by those who oppose insurance, that whenever insurance is forced by law, one must do it and one is excused, from the Shari'ah point of view.
This include car insurance, social security, workman compensation, and employer's imposed insurance if it is not optional for the employee to this we add another element that if the insurance provided by the employer is paid completely from the employer, i.e., given as a fringe benefit without deducting any part of the premium from the pay checks, then it is a kind of grant from the employer and if a hazard happens the paid policy amount is halal because it is an outcome of the grant.
Now think for yourself: if your life insurance is only term life, you may apply the opinion of Sheikh al-Zarka, and if it is imposed by employer, you also have room to accommodate, and if it is a grant from employer it is also tolerated. Otherwise you need to see the specifics of the contract you have and determine, in the light of the above briefing, whether you keep or seek to withdraw from it.
Can we have car insurance for all the risks, or just the obligatory car insurance?
Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert, states the following: "Insurance service and contracts were invented and developed over the last four centuries in Europe, then extended to the Americas. They reached the Muslim World in the Nineteen century.
Obviously, they were not known at the time of revelation of the Shari'ah nor at the time of the great scholars who founded the known Fiqhi Schools. Over the last more than a hundred years, Muslim scholars considered insurance as a new service that accompanies new risks intrinsic to technological applications, and as a contract.
Thus, in addressing it, two points of view have been developed: one that studies insurance within the context of its environment, i.e., the presence of a large number of people exposed to similar risks that call for the application of the theory of probability and what is called the laws of large numbers; the other regards insurance as only a specific relationship between two parties regardless of its environment. The first trend was led by the late Sheikh Mustafa Al-Zarqa. He argued that, as a new service and contract, insurance companies gather together the risks of a large number of people and redistribute them in a manner that makes them bearable.
This is a form of lawful cooperation that is compatible with the general objectives of the Shari'ah and hence the theory of probability is taken into consideration, the insurance contract does not contain any unbearable amount of ambiguity or undue uncertainty.
According to this view all kinds of insurance contracts (cars, hazards, accidents, transportation, life, etc.) are all permissible provided two conditions are fulfilled:
1. The contract must not contain any Riba element.
2. The object of insurance must be permissible in the Shari'ah i.e., insuring a shipment of liquor is not permissible. It doesn't matter whether this cooperation is founded by a group of concerned persons in the form of cooperatives or by a venture person or a company that takes charge of offering the service of pooling together the risks of a large number of persons.
Consequently, car insurance is permissible for the obligatory liability as well as for the value of the car and the hazards to driver and passengers and every other insurance coverage related to cars and driving them.
According to the second view, any conventional insurance contract between two persons contains elements of Riba, ambiguity, and gharar. It entails Riba because you pay small premium and get back a large sum should a risk occur. It also involves gharar because you don't know whether you will get the large sum or not since you don't know whether a hazard will happen, and ambiguity because you don't know the exact amount you get (though you know the maximum only) nor when it is going to be given to you since you don't know when an accident will happen.
Would it be permissible to work for a commercial insurance company that makes most of its income through car insurance?
Responding to the question, Dr. Monzer Kahf, a prominent economist and counselor, states the following:
Insurance is not unanimously prohibited. There are many scholars who believe that if insurance is not interest-based, it is permissible provided that the subject of insurance is also permissible (for example, it is prohibited to insure a shipment of liquor).
I personally follow this latter opinion.
Why is conventional insurance not permissible in Islam?
Conventional insurance contains elements contradictory to Islamic Shari’ah.
Gharar – “Uncertainty”
The insurance contract contains uncertainty due to:
Uncertainty whether the payment will be accepted as promised
The amount to be paid is not known
The time it will occur is not known
Any form of contract which is lopsided in favour of one party at the expense and unjust loss to the other is classified as Gharar.
When a claim is not made the insurance company may acquire all the profits whilst the participant may not obtain any profit whatsoever.
The loss of premiums on cancellation of a life insurance policy by the policyholder, or the "double standard" condition of charging a customary short period in general insurance, whilst only a proportional refund is made if the insurance company terminates the cover is also considered as unjust.
Maisir – Gambling
The participant contributes a small amount of premium in hope to gain a large sum
The participant loses the money paid for the premium when the insured event does not occur
The company will be in deficit if claims are higher than contributions
When a life insurance policyholder dies after only paying part of the premium his dependants receive a certain some of money which the policyholder has not been informed of and has no knowledge as to how and from where it has been derived.
Riba - Interests
An element of interest exists in conventional life insurance products - as the insured, on his death, is entitled to get much more than he has paid
Insurance funds invested in financial instruments such as bonds and stocks contain and element of Riba
I feel obliged to say a few things about the insurance because of the recent references to it.
When the Muftis were asked for an opinion on any matter, they did not just tell the people that they should do this or that; or this is supposed to be this way or that way without explaining from the Quran the reasons for his answer. They would refer to the verses from the Quran. That was their source. They did not make up laws or come up with understandings out of nowhere.
We cannot loosely use what they had concluded and said during private conversations or even in Quranic studies without qualifying the time, place, context, reasons and references for such statements. We know that when they thought something was crucial for the community, they would give a Khutbah and have it recorded, or write articles in the newspapers or online newletters. Again, their opinion were based on the Quran. Some of the verses that they had based on their opinion about this subject are as follows :
[13:11] ... If GOD wills any hardship for any people, no force can stop it....
[39:38] ... If GOD willed any adversity for me, can they relieve such an adversity? And if He willed a blessing for me, can they prevent such a blessing?" Say, "GOD is sufficient for me." In Him the trusters shall trust.
[6:80] ... Nothing can happen to me, unless my Lord wills it...
[3:175] It is the devil's system to instill fear into his subjects. Do not fear them and fear Me instead, if you are believers.
There are also many other verses that give us the concept that only God can protect us; and if He wants to give us some trouble, no insurance can stop it. However, the messenger was also aware that no one submitter was the same. Trusting in God and coming to the conclusion that God controls everything and runs everything is a process and cannot be forced on people. It is a commandment that we shall trust in God. Yet how many of us truly live that statement every single moment of our lives. If we could, the test would be over or very easy.
That is why it is dangerous to make statements like "the messenger said this was Haram or prohibited" as a general statement. It does not serve any purpose. It makes the messenger seem as if he is making laws that were not in the Quran. Instead it would be better for us to quote the verses on which the messenger based his understanding or conclusion.
For those who want to go and listen to opinions from the Muslim organizations, or from religious scholars there is nothing wrong with doing so, as long as you study the information in the light of the Quran. If you are referring to those because you think the Quran lacks that information, you are doing it for the wrong reasons.
Plus you might be implying inadvertently the same thing that Mohammedans are implying that the Quran simply do not have all the information necessary for our salvation, and that we need additional sources besides the Quran.
We all know that they have always referred to the Quran for their views, based on the knowledge at their current stage of development. They have to correct some of the things they were advocating as they later gained a better understanding of the meaning of the verses in accordance with the will and mercy of God. If we can stick to what God left us with, the authorized translation of the Quran, and leave all the details to the growth of the individual submitters, we will avoid division and unnecessary arguments.
If you arrive at the same conclusion as the messenger in what you should do in matters that are outside the practices of religion, that is fine. But keep in mind that each of us come to Submission from different backgrounds. We all have different circumstances. We all learn at different paces and have different levels of understanding. Furthermore, none of us is perfect. In any case, do not force your opinion on others. Take the example from the messenger who gave us the freedom in such matters, as God instructs us in the Quran.
In conclusion, be judges of yourselves, not others. Let the people practice the religion of submission in total freedom, without fearing reprisal from the fellow submitters. Enjoin others to do the right things using the Quran, but never force your opinion down their throats. If we cannot tolerate the freedom of expression or the right to question and answer amicably, we will never be part of the mission that God sent His messenger of the Covenant for: To purify and unite all the existing religions - Submission to God alone.
I have experienced at least 6 different types of phobias.
Recently, I received a few emails of stories about small venomous spiders hiding under toilet seats in Singapore, Malaysia and even Thailand, which have caused the death of several women. Nowadays, I would make it a habit to always lift the toilet seats first before using them and check the toilets for spiders before using them. I hate it when I'm taking a shower and there's a naughty hairy spider looking down at me with its (juling) eyes wide open.
I have a fear of heights since I was a toddler and able to walk. Last time, when I have to cross an overhead bridge with my family, I would grip my mum's fingers so tightly that my mum would slap me. Nowadays, I have learned to overcome the fear of heights, after forcing myself to go para sailing, bungee jumping, roller coaster rides, walk on bridges and look down from tall buildings. I do sometimes feel lightheaded when I am going down steep staircases but I always tell myself to be brave and overcome it. 
Not only that, I fear injection shots, dentists and even enclosed space. I can't stand being in a crowded train, crowded elevators and even crowded shopping malls. I would be anxious and feel stressed up and sweat, even if its air-conditioned. Lock me up in small storeroom and I would end up having panic attacks and faint.
I have to been brave enough to overcome the fear of injections, dentists and heights so far.
