Original Question: Some people say that there are elements of uncertainty (gharar) and gambling (maysir) in conventional insurance. Is it true?
In conventional insurance, the underlying contract (‘aqad) reflects a “buy and sell” contract, whereby the insured (policy owner) pays a certain amount of premium to the insurer (insurance company).
In exchange, the insured expects to be covered by the insurer in the event of a loss such as a personal injury due to a road accident.There are uncertainties in the sense of whether the event of loss might or might not happen. From the Shariah perspective, the commercial consideration in exchange must be clearly defined, specified and agreed upon.If something happens (uncertain), the insured is entitled to a certain amount of money/benefits.
If nothing happens (which is also uncertain), the insurer, on the other hand, will “win” by reaping more benefits.This is also related to the element of gambling (maysir) in which a wager in the form of premium payment is paid, and either one party will suffer loss (zero-sum game), as opposed to a takaful arrangement whereby the situation is a “win-win situation”.Takaful participants agree to contribute (based on tabarru’) and pool a certain amount of money to the tabarru’ fund.
In the spirit of mutual assistance, the money from the tabarru’ fund will help any takaful participants when needed.The takaful companies are merely the operator and the donation fund manager. They don’t own the money contributed by the policy owner, i.e. the money is still owned by the policy owners.
The takaful operator only charges fees for the service rendered to monitor and do the surveillance to the premium owned by the policy owners. In this way, no commercial transaction happens that triggers the issue of riba, gharar or gambling-maysir.
It is noteworthy to note that apart from gambling (maysir) and uncertainty (gharar) which are mentioned in the question, there are other prohibited elements associated with conventional insurance, such as usury (riba).For example, some insurance companies invest part of the premium paid by the insured in bond investments and/or business activities involved in usury (riba).
