Classic insurance and Islamic takaful

Modern insurance (pooling risk against premium) raises three fiqh questions: gharar (the claim is uncertain), riba (funds invested at interest) and the level of compensation (paying more than the premium for a loss not suffered). The classical bases and the contemporary institutional verdicts meet on one point: mutual solidarity is the way, profit-driven insurance is the problem.

The basic verdict and its nuances

• The classical base: help against loss has a prophetic precedent in the aqila, the solidarity pact by which a tribe or alliance collectively paid blood money: a pre-Islamic practice confirmed and organized by the Prophet (peace and blessings of Allah be upon him); compensation there arises from solidarity, never from profit on uncertainty.
• The academic verdict: the International Islamic Fiqh Academy (OIC), resolution No. 9 (9/2) on insurance and reinsurance (2nd session, Jeddah, December 1985), judged that the fixed-premium commercial insurance contract contains major elements of gharar that invalidate the contract; the same resolution calls on Muslim countries to establish cooperative insurance institutions.
• The designated alternative: the same resolution 9 (9/2) retains cooperative insurance founded on gift and mutual help (tabarru') as the compliant form; reinsurance is valid only on this same model.
• Compulsory insurance (car in France, health in several countries): a legal obligation to respect, the constraint of the law being admitted under the classical rule of iqrar al-hakim (the ruler's order); the Muslim insures at the required minimum.
• Savings life insurance: the most problematic (guaranteed capital + gains = a disguised interest loan); provident alternatives (savings, family mutual aid) are recommended.

Takaful: compliant mutuality

The believer is to the believer like a building, one part supporting the other.Muslim 2585 Allah is at the help of the servant as long as the servant is at the help of his brother.Muslim 2699

• The mechanism: participants pay donations (tabarru') into a common fund; claims are paid from the fund; the operator manages for a fee, the surplus being invested compliantly or returned to the participants: mutuality replaces profit insurance, as in resolution 9 (9/2) of the Academy (OIC).
• Governance: AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) devoted its Governance Standard No. 3 "Takaful (Islamic Insurance)" to it: Shari'a committee, segregation of the participants' fund from the operator's capital, compliant investments.
• The distribution: the surplus goes back to the participants or to charity, not to the shareholder as a price of risk.

Practical cases

• When no takaful exists: the legal obligation is respected; optional insurance is limited to the necessary; wisdom lies in precautionary savings and trust in Allah with tying the legs (camel hadith, at-Tirmidhi 2517).
• Compensation received: lawful as compensation for a real loss; any surplus without loss is treated according to the contract and prudence.

Practical note

Order of priority for the Muslim: takaful when accessible, otherwise the compulsory minimum, personal savings as first insurer, and family solidarity (the original insurance of the texts, the direct heir of the aqila).