Types of Insurance Permissible in Islamic Law
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Fatwa No. ( 18332 )
Q: What are the types of insurance permissible in Islamic law ? And does the following company’s work fall under insurance that is permissible in Islamic law? A company claims that it operates under the cooperative insurance approved by the Committee of Senior Scholars, which is as follows: The company provides all forms of insurance: marine insurance, insurance against theft, fire insurance, aviation insurance, engineering insurance, medical insurance, personal accident insurance, etc. The company requires the insured to pay an annual premium, estimated according to a certain percentage of the value of the insured items. The percentage varies, rising and falling, according to the level of risk or the likelihood of loss. At the end of each year, the company calculates the profits and then distributes a portion of them to the shareholders. The company also operates on an important principle in insurance, known as reinsurance, which means: the insurance company partners with other companies in its insurance contracts, in exchange for a portion of the premium given to the other companies. Consequently, these companies bear a portion of the losses. The contracts between the original company and the other companies are purely commercial insurance contracts. It is known that more than
85% of the company’s work is based on reinsurance, and without it, this company could not exist at all.
A: Commercial insurance in all its forms is forbidden; because it contains prohibitions, such as riba (usury or interest), gharar (excessive uncertainty in a contract), and consuming people’s wealth unjustly. It is not the cooperative insurance that the Committee of Senior Scholars has permitted; because in insurance, nothing returns to the participants, and the participant does not intend to invest what he pays, but rather intends to assist the needy and the distressed. As for commercial insurance: the participants intend to invest and for the returns and profits to come back to them from what the company obtains. Therefore, mixing this with that is deception of people to take their wealth, and lying to the scholars. It is obligatory to be aware of these false tricks.
Q: What are the types of insurance permissible in Islamic law ? And does the following company’s work fall under insurance that is permissible in Islamic law? A company claims that it operates under the cooperative insurance approved by the Committee of Senior Scholars, which is as follows: The company provides all forms of insurance: marine insurance, insurance against theft, fire insurance, aviation insurance, engineering insurance, medical insurance, personal accident insurance, etc. The company requires the insured to pay an annual premium, estimated according to a certain percentage of the value of the insured items. The percentage varies, rising and falling, according to the level of risk or the likelihood of loss. At the end of each year, the company calculates the profits and then distributes a portion of them to the shareholders. The company also operates on an important principle in insurance, known as reinsurance, which means: the insurance company partners with other companies in its insurance contracts, in exchange for a portion of the premium given to the other companies. Consequently, these companies bear a portion of the losses. The contracts between the original company and the other companies are purely commercial insurance contracts. It is known that more than
85% of the company’s work is based on reinsurance, and without it, this company could not exist at all.
A: Commercial insurance in all its forms is forbidden; because it contains prohibitions, such as riba (usury or interest), gharar (excessive uncertainty in a contract), and consuming people’s wealth unjustly. It is not the cooperative insurance that the Committee of Senior Scholars has permitted; because in insurance, nothing returns to the participants, and the participant does not intend to invest what he pays, but rather intends to assist the needy and the distressed. As for commercial insurance: the participants intend to invest and for the returns and profits to come back to them from what the company obtains. Therefore, mixing this with that is deception of people to take their wealth, and lying to the scholars. It is obligatory to be aware of these false tricks.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.