Conventional Insurance, Medical Aid, Hospital Plan and Takaaful

muftionline.co.za

Q:

  1. I purchased a business and wish to insure it. What is the Shar‘ee ruling regarding insuring one’s business? Similarly, explain the law of insuring one’s vehicle.
  2. Could you also explain to me what is the Shar’ee ruling regarding medical aid and hospital plan?
  3. Is Takaaful insurance permissible? I was informed that this is an Islamic insurance and is therefore permissible.

A:

  1. Insurance is haraam in Islam due to the elements of interest and gambling being found in it. One is uncertain as to whether one will be hijacked or meet in an accident, or whether one’s house or business will be burgled in the future or not. Hence, one does not know when he will receive the pay-out.

Any transaction wherein one pays for something which is suspended upon an uncertain event is in actual fact gambling. This is the definition of gambling according to all the Ulama. In the case of gambling, one spends a certain amount of money in the hope of gaining something which is uncertain. At times, one loses all his money and receives nothing, while at other times, he may receive more than the amount he had spent or less than the amount he had spent. Hence, it is clear that the element of gambling is found in an insurance policy.

Further, if one receives the insurance pay-out and one is paid more than the amount that one had paid to the insurance company in premiums, then in this case, the extra amount which one has received is riba (interest). Hence, taking out an insurance policy is impermissible in Shari’ah.

  1. There is no difference between the workings of a medical aid scheme, hospital plan and an insurance policy. The common factor in all three companies is that they do not provide any service to the client, but rather they settle the bills of the client when he is faced with a problem. In the event of an accident, the insurance company will settle the bills which may either be more than the invested amount or less. Similar is the case with regard to the medical aid schemes and hospital plans. When the patient falls ill, they settle the bills with the doctor or hospital. Hence, since the elements of qimaar (gambling) and interest are found in all (medical aid scheme, hospital plan, and the insurance policy), it is impermissible for one to involve himself in them.
  2. After studying Takaaful carefully, we have not found any difference between Takaaful and the conventional insurance systems that are in vogue.

We have prepared a detailed fatwa on Takaaful. You may refer to it http://muftionline.co.za/node/25528

And Allah Ta’ala knows best.

الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَٰلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّـهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَن جَاءَهُ مَوْعِظَةٌ مِّن رَّبِّهِ فَانتَهَىٰ فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّـهِ وَمَنْ عَادَ فَأُولَـٰئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ ﴿البقرة: ٢٧٥﴾

يَا أَيُّهَا الَّذِينَ آمَنُوا إِنَّمَا الْخَمْرُ وَالْمَيْسِرُ وَالْأَنصَابُ وَالْأَزْلَامُ رِجْسٌ مِّنْ عَمَلِ الشَّيْطَانِ فَاجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿المائدة: ٩٠﴾

عن جابر رضي الله عنه قال لعن رسول الله صلى الله عليه وسلم آكل الربا وموكله وكاتبه وشاهديه وقال هم سواء رواه مسلم ( مشكوٰة المصابيح ص244)

عن أبي هريرة عن رسول الله صلى الله عليه وسلم قال ليأتين على الناس زمان لا يبقى أحد إلا أكل الربا فإن لم يأكله أصابه من بخاره ويروى من غباره رواه أحمد وأبو داود والنسائي وابن ماجه ( مشكوٰة المصابيح ص245)

وعن عبد الله بن حنظلة غسيل الملائكة قال قال رسول الله صلى الله عليه وسلم درهم ربا يأكله الرجل وهو يعلم أشد من ستة وثلاثين زنية رواه أحمد والدراقطني وروى البيهقي في شعب الإيمان عن ابن عباس وزاد وقال من نبت لحمه من السحت فالنار أولى به ( مشكوٰة المصابيح ص245)

( إن شرط لمال ) في المسابقة ( من جانب واحد وحرم لو شرط ) فيها ( من الجانبين ) لأنه يصير قمارا

قال الشامي : قوله ( ومفاده لزومه بالعقد ) انظر ما صورته وقد يقال معنى قوله لعدم العقد أي لعدم إمكانه على أن جواز الجعل فيما ذكر استحسان قال الزيلعي والقياس أن لا يجوز لما فيه من تعليق التمليك على الخطر ولهذا لا يجوز فيما عدا الأربعة كالبغل وإن كان الجعل مشروطا من أحد الجانبين اه فتأمل وبالجملة فيحتاج في المسألة إلى نقل صريح لأن ما ذكره محتمل ورأيت في المجتبى ما نصه وفي بعض النسخ فإن سبقه حل المال وإن أبى يجبر عليه اه أقول لكن هذا مخالف لما في المشاهير كالزيلعي و الذخيرة و الخلاصة و التاترخانية وغيرها من أنه لا يصير مستحقا كما مر فتدبر قوله ( من الجانبين ) بأن يقول إن سبق فرسك فلك علي كذل وإن سبق فرسي فلي عليك كذا زيلعي وكذا إن قال إن سبق إبلك أو سهمك إلخ تاترخانية قوله ( لأنه يصير قمارا ) لأن القمار من القمر الذي يزداد تارة وينقص أخرى وسمي القمار قمارا لأن كل واحد من المقامرين ممن يجوز أن يذهب ماله إلى صاحبه ويجوز أن يستفيد مال صاحبه وهو حرام بالنص ولا كذلك إذا شرط من جانب واحد لأن الزيادة والنقصان لا تمكن فيهما بل في أحدهما تمكن الزيادة وفي الآخر الانتقاص فقط فلا تكون مقامرة لأنها مفاعلة منه (رد المحتار 6/ 402)

Answered by:

Mufti Ebrahim Salejee (Isipingo Beach)

THE HARAAM SHENANIGANS OF THE SCHOLARS FOR DOLLARS

How Sharia-compliant is Islamic banking?
BBC News
By John Foster Former editor, Islamic Business & Finance magazine

The Islamic finance industry has often battled with the question: How Islamic is Islamic banking?
The question’s pertinence was raised in March last year, when Sheikh Muhammad Taqi Usmani, of the Accounting and Auditing Organization for Islamic Finance Institutions (AAOIFI), a Bahrain-based regulatory institution that sets standards for the global industry, said that 85% of Sukuk, or Islamic bonds, were un-Islamic. Usmani is the granddaddy of modern-day Islamic finance, so having him make this statement is synonymous with Adam Smith saying that free-markets are inefficient. Because Sukuk underpin the modern-day Islamic financial system, one of its pre-eminent proponents arguing that the epicentre of the system was flawed sent shockwaves through the industry. It also gave ammunition to the many critics who see Islamic finance as an industry more driven by cultural identity than practical problem solving: as a hodgepodge of incoherent, incomplete, impractical and irrelevant ideas.
Recognisable products
The products that modern-day Islamic bankers have created are very similar to conventional products. So similar, in fact, that to an outside observer they could be considered the same. Islamic banks now offer Islamic mortgages, Islamic car loans, Islamic credit cards, Islamic time deposit and guaranteed return accounts, Islamic insurance and some even offer Islamic managed and hedge funds. This point is conceded by Samir Alamad, Sharia, or Islamic law, compliance and product development manager of the Islamic Bank of Britain.
“The industry does not want to alienate its products,” he says. “They have to be recognisable, produce the same outcome as conventional products, but remain within the guidelines of Sharia.”
No interest
The core of Islamic economics is a prohibition on interest. This immediately creates a problem for Islamic banks, as conventional banks charge borrowers an interest rate through which they can reward their depositors and make some profit for being the broker. With interest ruled out it is harder to make money. The modern Islamic banker has found a way around this prohibition, however. As in many Islamic products, the bank enters a partnership with its depositors and invests his money in a Sharia compliant business. The profit from this investment is then shared between the depositor and the bank after a set time.
In many cases this “profit rate” is competitive with the conventional banking system’s interest rate for savers….To the casual observer, a spade is a spade.
Whether the product is dressed up in Arabic terminology, such as Mudarabah, or Ijarah, if it looks and feels like a mortgage, it is a mortgage and to say anything else is semantics. However, this new generation of Islamic bankers had cut their teeth in the City and Wall Street, and were used to creating sophisticated financial products. They often bumped heads with the Sharia scholars who authorised their products as Sharia compliant. However, these bankers had a way of dealing with this, as one investment banker based in Dubai, working for a major Western financial organisation explains: “We create the same type of products that we do for the conventional markets. We then phone up a Sharia scholar for a Fatwa [seal of approval, confirming the product is Shari’ah compliant]. “If he doesn’t give it to us, we phone up another scholar, offer him a sum of money for his services and ask him for a Fatwa. We do this until we get Sharia compliance. Then we are free to distribute the product as Islamic.”
No consensus Fatwa Shopping
This “Fatwa shopping”, which was carried out by some institutions, brings us back to the Sharia scholars. Even these scholars do not agree all the time, which means that in some cases a product is deemed Sharia compliant in one market and not in another. This is especially the case with Malaysian products, which are often deemed not Sharia complaint in the more austere Gulf. “Often no rulings exist for modern day problems, such as use of narcotics,” Alamad explains. “In Islam intoxication by wine is forbidden, but at the time of the Prophet Mohammed there was no crack cocaine.” Modern scholars had to interpret the rules on intoxication, and the consensus was that crack should also be forbidden to Muslims, as it is a dangerous intoxicant. “This is how we make rulings, whether in finance or societal,” Alamad says. “The consensus rules, which usually will become mandatory for all Muslims to follow, but there are some opinions and sometimes scholars are not in the consensus.” Banking is banking This makes it more important to be in the consensus, and so getting a favourable ruling from a leading Sharia scholar is important for a product manager. That is why the top scholars can earn so much money – often six-figure sums for each ruling. The most creative scholars are the ones in the most demand, says Tarek El Diwany, analyst at London-based Islamic financial consultancy Zest Advisory.
“To date, most Islamic financiers have been looking at examples of financing in Islamic history and figuring out how to apply them to today’s financial products.” But banking is banking. It is the taking of a deposit and then using it to finance a purchase or business. The lender pays the depositor compensation for the opportunity cost of his money, and the person borrowing the money “rents” it off the bank. The same symbiotic relationship occurs whether it is conventional banking, ethical banking, Islamic banking or Presbyterian banking.