The Difference Between Cooperative Insurance and Commercial Insurance

Question:
Honorable Shaykh, what is the difference between cooperative insurance and commercial insurance?

Answer:
In truth, there is no such thing as cooperative insurance. What is called cooperative insurance is actually a cooperative association, where the generous donate money to the needy. Whoever needs something requests it from this association. This is not insurance; calling it insurance is a mistake. It is called a charitable association. Insurance is what is customary internationally and among people: they gather and pay money, have employees, and have a company that develops it. Then, if someone is afflicted, the insurance company covers the fine for them from the people's money. He pays a small amount, and if he incurs a large fine reaching hundreds of thousands, the people participating in the insurance bear it. Thus, they consume the wealth of people through falsehood. He pays a little and consumes the wealth of others through falsehood. This is a gamble, and it involves interest (riba). Therefore, this is not permissible. Insurance is forbidden (haram). This cooperative thing is not called insurance; it is called a charitable association. There is no insurance, but I do not know where the name "cooperative insurance" came from, or whether it was called a cooperative association or a charitable association; that was the point.