In the UK like other western countries insuring cars, houses and properties is compulsory by law. If any one does not insure for instance his vehicles they are not eligible to be on the road. On the other side Islamic systems for insurance are not available here. If I establish a commercial company for helping people in finding out a suitable insurance policy or work in such broker company is it allowed for me? It is noted that the company does not deal with life insurance which is not permitted.
In the name of Allah, the most Beneficent, the most Merciful.
Answer
The Islamic alternative for the conventional car insurance is called Takaful. It literally means ‘to join’ and according to the principles of Hanafi Fiqh it makes the guaranteed persons liability a joint persons liability of the guaranteed and guarantor at the time of demanding compensation. (Raddul Muhtar p.553 v.7)
The opinion expressed by the Fiqh Academy in Makkah Mukkaramah in 1398 A.H./1978 and the Fiqh Academy in Jeddah in ruling #9 in 1406 A.H./1985 was that a co-operative insurance is legally valid as a charitable contribution and co-operation contract. In this contract, each participant pays his contribution voluntarily to reduce the effects of loss. In summary, this form of social and co-operative insurance is permissible since they are based on charitable contributions. (Financial Transactions in Islamic Jurisprudence p.44 v.2)
With regards to your question it will be permissible for you to work as a broker or to set up a company with deals with halal and lawful insurances. The conventional car insurance in itself is unlawful but because of the law of the country and out of necessity, it becomes permissible to have. To work in the field of helping people in unlawful conventional car insurances will not be permissible. (Ahsanul Fatawa p.25 v.7)
This is because all types of insurances are impermissible for three reasons:
- Interest/ Usury
- There is an element of deception
- Qimar (gambling)
The reason for it being interest is that insurance is the sale of money for money of a greater or lesser amount with a delay in one of the payments. Insurance companies take money from individuals and promises to pay them more or less when an accident happens. This is riba, which is haram in Islam.
(Hujjatullahi Baaligah p.98 v.2)
In the Holy Quran Allah (SWA) has said:
“Allah has permitted transactions and has forbidden riba” (Surah Al Baqarah v.275)
The Prophet of Allah (Sallallahu Alahi Wasalam) has cursed the person who takes interest, who gives interest and who writes it and who witnesses it.”
(Mishkaatul-Masabeeh p.244 v.1)
“To take dirham of interest knowingly is worse than committing adultery 36 times.” (Mishkaatul-Masabeeh p.246 v.1)
Also in insurance policies there is an element of deception, which Islamicaly, is termed as garar.
- The amount to be paid is unknown
- The time it will occur is also unknown
The Prophet of Allah (Sallallahu Alahi Wasalam) has forbidden deception and uncertainty in transactions. (Sunan Tirmizi p.233 v.1)
All forms of insurances are based on uncertainty. The reason why you are being insured must have a possibility of happening or not happening. For example, when an accident happens and the extent of the damage caused.
Finally, the third reason for it being impermissible is because there is an element of qimar (chancing). Insurance policies require payment of money, thereafter if the following mishaps were to occur, a payment will be made. This is pure gambling, thus forbidden in Islam.
The definition of Gambling as stated in Raddul Muhtar;
“Gambling is a dealing in which there is a chance of gain and loss. (P577 V.9)
Only Allah Knows Best
Mohammed Tosir Miah
Darul Ifta Birmingham
