Today the concept of Islamic
insurance and conventional insurance mixed in different parts of insurance firms
and conventional insurance making windows of Islamic insurance services. Infect
the Islamic insurance (Takaful) is based on mutuality; hence the risk is not
transferred but shared by the participants who form a common pool. The company
acts only as the manager of the pool. The element of ‘uncertainty’ i.e. ‘gharra’
is brought down to acceptable levels under Shariah by making contributions as
‘Conditional Donations’ for a good cause i.e. to mitigate the loss suffered by
any one of the participants. The participants pays the contribution in the
spirit of purity and brotherhood; hence it obviates the element of ‘maisir’
while at the same time without losing the benefit of Takaful in the same way as
conventional insurance and funds are only invested in onto-interest bearing,
i.e. riba-free instruments.
On the other hand the conventional insurance is about the Risk Transfer
mechanism whereby risk is transferred from the policy holder to the insurance
company in consideration of ‘insurance premium’ paid by the insured. The
conventional insurance contains the uncertainty i.e. “gharrar” which is
forbidden in Islam. There is an uncertainty as to when any loss would occur and
how much compensation would be payable. Conventional insurance also contain the
gambling “maisir” in that the insured pays an amount in the expectation of gain,
if the insured loses the amount paid as premium, if the loss does occur, the
insurer loses a far larger amount than collected as premium and the insured
gains by the same. Funds are mostly invested in fixed interest bearing
instruments like bonds, TFCs, securities, etc. hence these contains the element
of “riba” which is forbidden in Islam.
Islamic insurance is offering the Takaful which contain the family and life
aspects and also all other aspects which also perform by the conventional
insurance firms also, but the Takaful free from the riba, gharrar, and misair
and in conventional insurance the interest and commission is the main hedge for
gains.
Today, if we look at the both insurance firms then we can examine that most of
the people have the trend toward the conventional insurance, its reason is that
the Islamic insurance came into existence later the conventional insurance and
also people is not fully aware about the Islamic insurance, and the Islamic
insurance start in 20th century in India and enlightened by Muslims like Sir
Syed Ahmed Khan, Sir Agha Khan and AllamaIqbal have regarded insurance as
beneficial to the society.
I think the Islamic insurance firms will lose their worth because most of the
conventional firms offering the Islamic insurance in their windows, this trend
can lead the Islamic insurance firms decline.