Islamic Insurance: A Modern Approach to Islamic Banking

By Aly Khorshid | Go to book overview

INTRODUCTION

What is it about insurance that is so divisive and emotive to modern Muslims? Is it not that Islam is a religion based on peaceful coexistence with fellow man, with the maintenance of stable and constructive societies? This second question is perhaps the most germane; the answer is yes, Islam is a society that cares for its most unfortunate members, the result of which is a community that can thrive, free from crime, bitterness and sorrow. And if this is the case, if communities and nations pull together to assist those most in need, there is a distribution of wealth and resources unrestricted by a nadir of charitability. The gains of the rich and comfortable, be they from skill or fortune, will help the poor with their losses, be they foolish or calamitous. Under a system such as this, why bother getting personal insurance?

There is another reason why insurance is frowned upon and outlawed in Islamic States and among Islamic communities: interpretation of many Quranic edicts brings the conclusion that insurance is not only unnecessary but highly unlawful Islamically. Chief among these are the outlawing of riba (usury) and gharar (risk). The lending of money at high rates of interest, or the payment of money for nothing are both linked with commercial insurance and contribute to its proscription. Riba is considered extremely anti-Islamic, and references to it pepper the Quran, each mention adding to its significance. Insurance is a risk. People in the West willingly pay money to insurance companies in order to buy peace of mind, with no guarantee of return. In one sense, never having to make a claim is a good thing as it suggests mishaps or tragedies have been avoided. In another, this means that the insurance company has literally been given the money, and the insured is out of pocket. Even the most generous no-claims bonus will not square this circle. To the Muslim, things that happen on earth are the will of God, and so to insure against them could be construed as questioning his actions.

Insurance is, however, something that the Muslim participates in five times a day; what is prayer if not a form of insurance premium in the hope of a divine dividend at the end of life? Faith itself is insurance, and the Quran states many examples of how worldly insurance is as sensible and as beneficial to community as is faith. This book methodically explores many of these

-xi-

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Islamic Insurance: A Modern Approach to Islamic Banking
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Tables ix
  • Introduction xi
  • Acknowledgements xiv
  • 1 - The Meaning of Insurance in Islam 1
  • 2 - Riba (Usury) and Gharar (Risk) 31
  • 3 - Pre-Modern and Modern Jurists' Standing on Insurance 44
  • 4 - The Development of Mutual Insurance in the West 97
  • 5 - The Development of Islamic Banking and Insurance in Malaysia 113
  • 6 - The Development of Islamic Banking and Insurance in Saudi Arabia 132
  • 7 - Basic Principles for an Insurance Scheme Acceptable to the Islamic Faith 155
  • 8 - Conclusions 166
  • Appendix 1 173
  • Appendix 2 180
  • Appendix 3 183
  • Appendix 4 206
  • Notes 208
  • Bibliography 216
  • Index 223
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