Islamic Insurance: A Modern Approach to Islamic Banking

By Aly Khorshid | Go to book overview

4

THE DEVELOPMENT OF MUTUAL INSURANCE IN THE WEST

Introduction

Insurance has a crucial role to play in social and economic development of Muslim countries, which is why it is necessary to study relevant insurance schemes that have been developed and practised with a history of success. The application of mutual insurance, the most successful form of insurance in the West and, as discussed in earlier chapters, acceptable to most Muslim scholars, is suitable to Muslim countries. This chapter outlines the mutual insurance structure and practice in several Western countries, each of which has a different structure, approach, and framework of legislation. From selected components of all the Western countries' insurance schemes compared in this chapter, we are able to construct an acceptable mutual form.

It is noted that all Muslim countries are also developing countries that suffer from an excessive growth of population relative to economic capacity and, as a result, national income dose not rise at rates commensurate with growth. Also, since capital formation is a very slow process, developing markets are usually small, being based on a relatively undiversified economy and lacking both financial and technical experience, particularly in mutual insurance activity.

As insurance expands with industrial and economic growth, the problem of insurance will differ from one country to another, according to each country's economic stage of development and political environment. It is known that establishing a mutual insurance market in developing countries often suffers from a lack of sufficient numbers of similar risks, and more time is required to develop the insurance market.


The organization of mutual insurance

The concept of mutual insurance can be traced back in history to the eighteenth century when shipowners' dissatisfaction with the terms available from the underwriters at Lloyd's led them to form mutual insurance associations to meet their needs at lower cost. 'Mutual' appears in the names of those associations, now known as 'protecting and indemnity clubs'. Since the start,

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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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