Islamic insurance 2014 topic 2

التكافل اإلسالمىIslamic Insurance

(Takaful)

Dr. Kamaru Salam YusofLecturer, FBMS, Unissa

Negara Brunei Darussalam

TOPIC 2INSURANCE; CONCEPT, HISTORY & HUKM

Faculty of Business & Management Sciences, UNISSA, Brunei Darussalam

History of insurance (1)• The first methods of transferring or

distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively.

• Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing.

• The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.


History of insurance (2)

• Achaemenian monarchs were the first to insure their people and made it official by registering the insuring process in governmental notary offices.

• The insurance tradition was performed each year in Nowruz; the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. Then the assessment was registered in special offices.


History of insurance (3)• The ancient Athenian "maritime loan"

advanced money for voyages with repayment being cancelled if the ship was lost.

• The Greeks and Romans introduced the origins of health and life insurance c. 600 BCE when they created guilds called "benevolent societies" which cared for the families of deceased members, as well as paying funeral expenses of members.

• Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.


History of insurance (4)• in 12th Century, after the establishment of

Seljuk state in Anatolia, Seljuk Sultan Ghiyas ad-Din Kaykhusraw I, introduced a form of state insurance which reimbursing the traders for their loss from the state treasury, if they would be robbed within the Seljuk territory.

• Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates.

• The first known insurance contract dates from Genoa in 1347, and in the next century maritime insurance developed widely and premiums were intuitively varied with risks.

• The first printed book on insurance was the legal treatise On Insurance and Merchants' Bets by Pedro de Santarém (Santerna), written in 1488 and published in 1552.


History of insurance: post-Renaissance (5)

• Insurance became far more sophisticated and specialized varieties developed.

• The will of Robert Hayman, written in 1628, refers to two policies he has taken out with a wealthy Londoner: one of life insurance and one of marine insurance.[In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures.

• Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.


History of insurance: post-Renaissance (6)

• Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.

• In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance.This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance.

• The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina in 1732, but it provided only fire insurance.

THE CONCEPT OF INSURANCE

WHY INSURANCE IS HARAM?


Elements in insurance

1.riba2.Gharar3.maysir


Riba - definition

• Literally: addition, increase, to grow to rise.• Technically: the premium that must be paid by

the borrower to the lender along with the principal amount as a condition for the loan or for an extension in its maturity


Prohibition of riba

4 stages of prohibiton1. Comparing between zakat & riba (30:39)2. Riba practiced by jew & its zulm (4:160-161)3. Prohibition of multiplied riba (3:130)4. Total prohibition of riba (2:275-281)


Comparing between zakat & riba (30:39)

ف�ي ب�و� �ل�ي�ر ب!ا ر� �م�ن �آت�ي�ت�م ا و�م�ن�د� ع� ب�و �ي�ر ال� ف� الن0اس� و�ال� �م

أ�ك�اة4 ز� �م�ن �آت�ي�ت�م ا و�م� الل0ه�

أ�ول�ئ�ك� ف� الل0ه� ه� �و�ج ت�ر�يد�ون�ون� ) ع�ف� �ال�م�ض (39ه�م�


Riba practiced by jew & its zulm (4:160-161)

ن�ا �م ر0 ح� اد�وا ه� ال0ذ�ين� م�ن� ب�ظ�ل�م4 ف� �م ل�ه� �ل0ت أ�ح� ط�يLب�ات4 �م ع�ل�ي�ه�

ا ك�ث�ير! الل0ه� ب�يل� س� �ع�ن �دLه�م ب�ص� و�وا( 160) ن�ه� �د و�ق� ب�ا Lالر ذ�ه�م� �أ�خ و�

الن0اس� و�ال� �مأ� �م �ك�ل�ه� أ و� ع�ن�ه�

ر�ين� ل�ل�ك�اف� أ�ع�ت�د�ن�ا و� ب�ال�ب�اط�ل�ا ) �ل�يم! أ ع�ذ�اب!ا �م ن�ه� (161م�


Prohibition of multiplied riba (3:130)

ال� ن�وا آم� ال0ذ�ين� ا �يWه� أ ي�اا ع�اف! �أ�ض ب�ا Lالر ت�أ�ك�ل�وا

الل0ه� وا ات0ق� و� ة! اع�ف� م�ض�ون� ) ل�ح� �ت�ف �(130ل�ع�ل0ك�م


Total prohibition of riba (2:275-281)

وم�ون� ي�ق� ال� ب�ا Lالر ي�أ�ك�ل�ون� ال0ذ�ين�ب0ط�ه� ي�ت�خ� ال0ذ�ي وم� ي�ق� ا ك�م� إ�ال0ذ�ل�ك� Lم�س�ال م�ن� ي�ط�ان� الش0

ث�ل� م� ال�ب�ي�ع� ا �ن0م� إ ال�وا ق� �م �ن0ه� ب�أم� ر0 و�ح� ال�ب�ي�ع� الل0ه� ل0 أ�ح� و� ب�ا Lالر �ن م� eع�ظ�ة�و م� اء�ه� ج� �م�ن ف� ب�ا Lالر

ل�ف� س� م�ا ل�ه� ف� ان�ت�ه�ى ف� بLه� ر�ع�اد� �و�م�ن الل0ه� �ل�ى إ ه� ر� �م

أ� و�ا يه� ف� �ه�م الن0ار� اب� ح� �ص

أ� أ�ول�ئ�ك� ف�ال�د�ون� ) (275خ�


General types of riba

1. Al-Duyun - increases arising from debts (loans)1. Riba Qardh : the increase (interest) on the principal

sum of the loan is agreed upon at the point of contract. 2. Riba Jahilliyah or Riba Nasiah: the increase levied on

the borrower for late repayment or failure to repay the loan

2. Al-buyu’ – commercial transaction1. Riba Buyu' or Riba Al Fadl : excess which is taken in

exchange of specific homogenous commodities and encountered in their hand-to-hand purchase & sale.


Comodities of ribawi

1. Gold 2. Silver 3. Dates 4. Wheat 5. Salt 6. Barley


Text of the hadith

والفضة ” بالذهب، الذهببالتمر، والتمر بالفضة،

والشعير بالبر، والبروالملح بالملح“بالشعير،


Another hadith

هذه اختلفت إذاكيف فبيعوا األصناف

بيد يدا! كان إذا شئتم،(transl. pg 24)


Riba in insurance

2 situation1. amount received by insured– greater than instalment• fadl• nasi'ah

2. company's profit accumulated tru riba– fix income– interest based transac

Gharar


gharar

Definition• Literally : deceit, fraud, uncertainty, danger,

peril, delusion, or hazard that might lead to destruction or loss

• Technically : purposive cheating as well as ignorance of the object of seller & undeliverability


Condition for subject matter

• Must be certain.• Specific identification of the subject matter

and its attributes.• Certainty of existence and deliverability of

subject matter.• Subject matter good & price


hukm

• unanimous jurist – haram• dalil - hadith Abu Hurayrah

الله رضي هريرة أبي عنالله صلى النبي أن عنه

( : نهى وسلم آله وعلى عليه AD( الغرر بيع عن


Type of gharar

1.fahish – substancial/excessive/major prohibited

2.yasir – trivial/minor/tolerable tolerated – not affect


Gharar in Quran

ت�أ�ك�ل�وا ال� ن�وا آم� ال0ذ�ين� ا �يWه� أ ي�اإ�ال0 ب�ال�ب�اط�ل� �ب�ي�ن�ك�م �ال�ك�م و� �م

أ�اض4 ت�ر� �ع�ن ة! ار� ت�ج� ت�ك�ون� �أ�ن �ك�م س� �ن�ف� أ ت�ل�وا �ت�ق و�ال� �ن�ك�م م�ا يم! ح� ر� �ب�ك�م ك�ان� الل0ه� إ�ن0

(29)


Gharar: in what ‘aqd?

• Gharar effect on aqd mu’wadhah (changed contracts- bilateral) & not on aqd tabarru’ (donation or charity contracts - unilateral)

Mu’wadhahTabarru’


Gharar in insurance

life & general• Subject matter – policy & premium.• subject matter not uncertain until event– pay more get nothing– pay less get more

• shariah - must know all particulars relating at time of contract. Policyholder not informed amount of compensation

Maysir


maysir

• Definition–Any activities which involve betting,

whereby the winner will take the entire bet and the loser will lose his bet.

• Zero sum game eg: game of chance.• Link to presence of gharar.


maysir

dalil• dalil 5:90

ر� �م ال�خ� ا �ن0م� إ ن�وا آم� ال0ذ�ين� ا �يWه� أ ي�ام� ال� ��ز �و�األ اب� �ن�ص� �و�األ ر� ي�س� ال�م� و�

ي�ط�ان� الش0 ع�م�ل� �م�ن eس�ر�جون� ) ل�ح� �ت�ف �ل�ع�ل0ك�م ت�ن�ب�وه� �اج (90ف�


Maysir in insurance

• insurer make payment- policyholder purchasing the policy with the hope of getting more in term of compensation if any of the perils were to occur - betting premiuns• not make - get nothing

Wallahu ‘a’lam

Economy & Finance

Islamic insurance 2014 topic 2