This is the first of a series of articles about Takaful in Islam.

The writer, brother Azman Ismail, is an expert in setting up Takaful companies in Malaysia and other countries. He is currently working as a consultant for the Malaysian Insurance Institute in Kuala Lumpur, Malaysia.

It is a Muslim’s belief that everything that happens in this world is by the will of Allah. Similarly any accident or misfortune that befall us, that results in the loss of life or belongings, is by the will of Allah (swt). If that is the case, some people might ask, why should there be Takaful? Should we then not leave it to Allah and accept whatever accident, misfortune or catastrophe that befall us?

Whilst it is true that we should accept whatever “misfortune” that befall us, we are also taught to avoid or reduce the possibility of these “misfortunes” by taking positive steps. One day the Prophet (s.a.w.) saw a bedouin leaving a camel and he asked the bedouin, “why don’t you tie down you camel?” The Bedouin answered, “I put my trust in Allah.” The Prophet said, “Tie your camel first, then put your trust in Allah.” What the Prophet (s.a.w.) has done here is teaching the bedouin to reduce the risk of losing his camel. Similarly in many actions of the Prophet (s.a.w.), we saw that he took steps to reduce risks although he could have done otherwise if he wanted to. For example, during the Hijrah, he went to hide in the cave first instead of going straight to Madinah. He commanded the companions to migrate to Madinah by batches instead of in one big group. Again this is to reduce risks. When he went to war, he put on his armour instead of wearing light clothes.

In this modern world, one of the ways that can be done to reduce the risk of loss due to accident or misfortune is through insurance. In fact it is almost impossible to live without being affected by insurance. The house that we buy or rent has got insurancecover. The car that we buy or rent has to have insurance. The bus that we board has insurance. Insurance is all around us whether we like it or not. However, what is the status of insurance in Islam?

Islamic Rule Concerning Insurance

Our scholars are not in agreement whether insurance is permissible (Halal) or prohibited (Haram). Since insurance as it is being practised now did not exist during the Prophet’s time, Ijtihad is used to determine whether it is permissible or otherwise. As the scholars are not in agreement as to whether insurance is permissible or prohibited, they are also not in agreement as to reasons for its prohibition.

The scholars who opined that insurance is permissible said that insurance is a modern contract and there is no injunction (Nass) regarding it. If there is no injunction, then it is allowed (Mubah). They based their argument on the established legal maxim that “the original legal position on any matter is permissibility until there is evidence prohibiting it.” This legal maxim is based on the Qur’an ofwhich some of the related verses are as follows:-

“We have subjugated to you all that is in the heavens and the earth” [45:13]

According to the scholars this implies that, in principle, we are permitted to use the resources of the universe. This implies that all acts that are necessary to facilitate this usage, including transactions, are permissible. To reinforce this, the Qur’an lays down the principle that Allah (swt) has clearly explained His prohibitions. Allah swt says in the Qur’an:

“He has explained to you that which is forbidden to you, unless you are compelled thereto” [6:19]

Furthermore, the universe is described as an adornment of Allah. This is stated in the Qur’an [7:32]:

“Who has forbidden the adornment of Allah which He has brought forth for His bondsmen, and the good things of His providing?”

Therefore, a mere presumption is not enough to declare something unlawful. Muslim scholars have held that any injunction that overrules this principle of permissibility must be decisive in meaning and transmission (Nasson qati’ul thubut wad-dalalah).

The scholars further claimed that insurance is a contract that brings Maslahah to the insured. Without insurance, for example, one’s next of kin will suffer a huge burden after his death. Also, the scholars said that custom (’uruf) establishes insurance to protect public and individual interests and custom is accepted as a source of Islamic law. According to them, the insurance contract is not a contract of exchange but falls under the concept of Tabarru’ and as assistance and guarantee by the insurer to the insured, compensation. In this respect the insurer’s position is that of a middleman that collects money from the insured and collectively arrange a form of assistance to them in facing collective losses. Other scholars claimed that the premium the insured pays to the insurer is a fee for looking after his (insured’s) property.

On the other hand, many scholars deemed insurance to be prohibited (Haram). They could not unanimously agree on the reasons for its prohibition. However, in 1972, the Malaysian National Fatwa Council decreed that “insurance”, especially life insurance, is a Fasid practice because it contains the elements of Gharar, Maisir and Riba, therefore, it is Haram.