4(f) Co-operative Insurance

There is a feeling that insurance is un-Islamic, because it is said that it is nothing but gambling or speculation. But there is a fundamental difference between gambling and insurance. While gambling promotes dissension and hatred and tends to deter those who indulge in it from remembrance of Allah, insurance is based on co-operation and the insured individual is enabled through mutual action to obviate poverty for himself and his dependents. There is nothing in Islam which prevents anyone from making provision for his dependents. In fact, through insurance, the society as a whole gets benefits out of accumulation of capital reserves.
The difference between modern insurance industry and Islamic insurance industry lies not only in its form but also in the nature of its handling the business. The present-day trend toward formation of cartel like associations of entrepreneurs in the field of insurance is the negation of Islamic values of life. We know that the modern insurance industry invest their funds in interest-bearing undertakings. But the Islamic
insurance companies will provide capital loans instead either directly on the basis of Mudarabah or in participation with Islamic banks and other specialised credit institutions.
Under Islamic scheme contributors to the insurance fund are donors, and their contributions are donations, with the aim being to share out the losses that befall on any of the contributors among them all. The compensation given is relevant to the loss incurred and not a fixed sum which is agreed between the insurer and the insured at the time when the contract is made.
Insurance schemes made by the government are also permissible since they are a kind of fulfilling the state’s duty to look after its citizens and alleviate the hardships that they encounter.
It is interesting to note that Islamic co-operative insurance has already been put into practice by the Faisal Islamic Bank of Sudan and Dar Al-Maal Al-Islami. Their initialsuccess are indeed encouraging and provides a scope for further expansion.