Is Insurance Haram?

[Reader Questions]

Aslamalaykum

Muslim scholars say that Insurance is haram in the Shariah. They say it is both gambling and riba which is prohibited in Islam. What are your views br. Joseph?

[Joseph Islam]

Salamun Alaikum,

In my humble view, gambling, Riba and insurance are very distinct matters and at their crux have totally different intentions. For example, someone who insures their car does not do so with the intention that the car will be involved in an accident before the end of the specified date of the contract. One insures the car with the intention to cover an 'accidental loss' if it should occur. Both the 'insurer' and the 'insured' would not want the accidental loss to ever materialise.

In the case of gambling, one party would wager a bet with the intention that a situation materialises. Therefore, in the example cited above, if one were to bet with the intention that an accident occurs so that a windfall can be accrued, that would be gambling. As I trust that you will appreciate, these are totally different matters with inherently different intentions.

Riba is the excess charged by the lender on the amount lent (the capital amount). This is totally distinct from both gambling and insurance which is not fundamentally based on lending. [1]

There is no prohibition in the Quran against insurance per se, which is acquired with the intention to indemnify against a possible loss. In some countries of which Muslims are citizens under the law of the land, certain indemnities are mandatory. It is a Muslim's responsibility to fulfil obligations (5:1) if they do not conflict with the Quran's directives.  It is also within the Quranic guidance to take sensible precautions in one's affairs (4:102).

Of course, there will always be certain companies who provide insurances that as a business have more ethical practices than others when it comes to matters such as dealing with Riba etc. This of course, needs to be appreciated. However, charging Riba would be an unethical practice from an Islamic perspective but the answerability would primarily remain with the one that charges it and arguably would not shift to the one who provides interest and has no other viable alternative [1]. Furthermore, this would not render insurance per se, haram (forbidden).

I hope that helps, God willing.
Joseph.


RELATED ARTICLE

[1] RIBA
http://quransmessage.com/articles/riba%20FM3.htm