Islamic Insurance: A Modern Approach to Islamic Banking

By Aly Khorshid | Go to book overview

8

CONCLUSIONS

The conflict between Islam and today's financial institutions

Technological and sociological progress tend not to follow a linear path, a phenomenon repeated throughout history. Single developments can inspire, facilitate or allow multitudinous others and humanity generally benefits. We can use the Agricultural and Industrial Revolution as examples of practical, visible changes, and few would deny that we are experiencing similar phenomena today, those of information technology, finance and communications. Developments in computer technology, satellites, the Internet, and the immense speed of communication between nations means that the globe has effectively become one large country. Growing international trade has increased the need for forms of commercial insurance which are acceptable internationally.

Insurance is one of the cornerstones of competition. Covered risks are more likely to be taken, particularly in the fields of shipping and air travel, where random natural events can cause massive loss. Add to this the fact that most developed countries have compulsory employee insurance and we see a lack of insurance as a severe hindrance on international development and expansion. The principle of insurance and its permissibility in Islam has become a maze of contradictions, confusion and ambivalence, and a comprehensive, thorough understanding of the relevant Islamic principles and of the Shari'a is essential if this problem is to be resolved. After all, insurance protects people's livelihoods, communities and well-being - this does not sound much like a contradiction of Islam. The articulation of insurance to Muslims is not in antithesis with the principles of Islam. It is an axiom which endures for Muslims, with analogies in prayers and good deeds, associated with worldly life and categorized in the Quran and Sunna-these deeds can be considered the 'premium' Muslims pay for ensuring peace and salutation in both worldly life and in the hereafter.

We have two guiding principles: we have a pressing insurance, and we cannot contravene the Shari'a. There is no reason why the two requirements have to contradict one another. The forms of insurance developed in Islam have never been precisely regulated by Islamic law and, as already noted, were practised for purposes wider than financial gain. Legislative and contractual

-166-

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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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