Insurance is a sort of contract for mutual help in which
people pay a fixed amount in installments. The purpose is that if any of them is
inflicted with losses relating to their persons or their wealth they are
compensated from this pooled money in a prescribed manner. The money given is
never returned and all the people or institutes which provide this service are
granted this right by people who enter into this contract of mutual help with
them that in return for this service they can spend the accumulated money in
whatever way they want.
This is an extraordinary scheme which has been chalked out
to compensate losses and to help people in difficult circumstances. Its benefits
are now acknowledged everywhere. After the termination of the institutions of
tribes, fraternities and ‘āqilah, this is the best substitute for them which
contemporary economic systems have provided to this world. There seem to be no
objection against it; however, Islamic scholars generally regard it to be
prohibited. Following are the objections they have raised against Insurance:
1. The amounts which Insurance Companies pay to their
clients are generally more than the installments their clients have paid them;
this is interest and interest is forbidden in Islam. Moreover, Insurance
Companies further invest this money in interest-based schemes. Some part of the
interest earned by them is also used in paying off their clients who had bought
their insurance policies.
2. Insurance Policy holders repeatedly receive large sums
of money against death, accidents or losses. This is gambling which is
prohibited in the Islamic sharī‘ah.
3. The entity for which an Insurance Policy is bought does
not typically exist; the locus of the contract is also not ascertained and the
Policy holders do not even know the number of installments and the time till
which they will have to pay them. In the terminology of the jurists these are
called gharar (deception), jahālah (ignorance) and ghaban (embezzlement)
respectively in the presence of which no contract is allowable. The Prophet (sws)
has forbidden such deals.
A little deliberation will show that all these three
objections are baseless.
The first of these is not tenable because the installments
paid by an Insurance Policy holder are not loans. They are given by him for the
help and support of others on the condition that he too could be the recipient.
Thus they are never returned. If Insurance institutions invest them in
interest-bearing transactions, it is because they have been given the right by
the policy holders to use them. No responsibility of the nature of this use
rests on the Policy holders. If a person is to receive Insurance money for the
purpose he had bought an Insurance Policy, then as per the contract, he receives
it from the accumulated amount. This is the real nature of Insurance, and it
must be viewed on its basis.
The second of these objections is not tenable because
gambling is a game and a matter of purely chancing one’s luck. People who buy
Insurance Policies do so to become part of a system which caters for helping one
another in case of losses. The nature of the two is entirely different, and the
basis of religious directives is not marginal similarity between two things; it
is and should be based on the actual nature of the two.
The third of these objections is not tenable because the
directives of the Prophet (sws) related to gharar (deception), jahālah
(ignorance) and ghaban (embezzlement) are not of the nature of an absolute
prohibition: they are meant to resolve disputes and to close the door to ways
which may result in these evils in cases of financial transactions. Insurance,
however, is not a financial transaction. It is a scheme which relates to mutual
help. It is executed and managed by individuals and institutions who are given
the right to use the accumulated money in return for the service they provide.
It is not appropriate at all to judge it by ignoring the nature of this scheme.
(Translated from Maqāmāt by Shehzad