03-21-2004, 12:30 AM
<BLOCKQUOTE id=quote><font size=1 face="Verdana, Tahoma, Arial" id=quote>quote<hr height=1 noshade id=quote> Apocalypse First of all Mr.DT i addressed FTG in my reply (who incidently happens to be my friend since last seven years), even if you think that I addressed you then wont you like to anwer my query about halal&haram in acturial sciences. hoping for a much relevant reply. <hr height=1 noshade id=quote></BLOCKQUOTE id=quote></font id=quote><font face="Verdana, Tahoma, Arial" size=2 id=quote>
mmm, can I poke my nose (once and for the last time) in the little discussion that was going on here??
The scholars have disagreements over the legitimacy of (Life/General)Insurance in Shariyaa i-e whether its Halal or Haram?
I'll try to explain only the General Insurance here (which is my future area of speciality), I've little idea about how Life Insurance works.
Main points of different scholars who consider Insurance as HARAM
1)Insurance involves Gambling(Jua). If a loss occurs during the policy period, the insurer will pay you the benefit and you win!. If a loss doesn't occur you lose premium's money!
2)Insurance is something against the will of GOD. You receive financial help from insurer if you incurr a loss (insured event).
3)There is an element of high risk involved i-e you either win or
lose (see above example)
4)Insurance involves Interest(Sood), most insurance companies invest the policyholder's premium in schemes with fixed Interest arrangements.
Scholars who thought that Insurance(itself) isn't HARAM, Infact its the "Interest(Sood)" that makes it haram, have the following answers to above reasons, respectively
1)Insurance differs from Gambling. In gambling you put Rs5/- and makes it into Rs500,000 (or even Rs5,000,000) i-e there is NO benfit limit in Gambling. As a Gambler, you can make more and more money as long as you are winning. In insurance, you don't get UNLIMITED benefits e.g
An Automobile insurance company insures your new car whose value is Rs 2,20,000. You use it for 2 years, after that you experience a severe loss resulting in total damage. Your insurance Company will see the cost of new car (2,20,000) decrease it by the Depreciation amount for 2 years (lets say 20,000) and will make you the payment of no greater than 2,00,000 i-e you won't be RICH due to the occurrence of an insured event(the accident) due to insurance. But you'll be protected from total ruin because of the existance of insurance. This is the "FUNDAMENTAL PRINCIPLE OF INDEMNITY" underlying most of the General Insurance policies.
Insurance is a "protection" that will save you from a great financial loss or Total ruin in case of an insured event but won't make you wealthy. So, there is a difference b/w Gambling and Insurance.
2)God has given men the wisdom to make decisions to protect himself from the possible calamities. You put roof on home to give yourself shelter against the rain (you don't keep standing in rain). Pehlay apna Janvar rassi sey baandho, phir Allah pey Tawakkal karo.
3)There is an element of risk involved (smaller or greater) in all the businesses we do in a daily life. There appears to be NO business with not even a slightest element of risk. Insurance is a business in which the policyholder buys a product(although intagible) named as "a peace of mind" i-e If I experience a loss, me or my family won't get ruined because of Insurance protection. In reply, the Insurance Company promises to compensate me for the losses I incurrer but won't make me wealthy b/c of an Insurance policy.
4)Sood is Haram and any Muslim can't deny this. Insurance in its present form is not appropriate because of the involvemnt of Interest in it, But it CAN BE tailored to be in line with Islamic Principles. In many Middle East & Western Countires Islamic Insurance (named as "TAKKAFUL")is being provided by many Muslim FIA's (Fellow of IoA, U.K). For Islamic insurance, the insurance companies will have to invest the premiums collected from policyholders in interest-free businesses and will have to pay for benefits from the income they earn on those interest-free businesses.
However, even with TAKKAFUL, the problem arises when it comes to "Reinsurance" of Islamic Insurance. There aren't many financially strong "RE-TAKKAFUL" companies to provide Reinsurance to Takkaful companies. In the end even the TAKKAFUL companies have to end-up being "reinsuring" their risks with the foreign reinsurers and the Scholars have allowed it in-evitably, until there are strong enough
Re-Takkaful companies, so there will be no need to get involved with Foreign Reinsurer.
Unfortunately in Pakistan, we don't have enough Actuarial involvement
in designing Islamic Life Insurance products until now. However, I do know atleast one FSA (Mr.Abdul Rahim Abdul Wahab in Sydat Hyder Morshed Associates) who has started working in Islamic Insurance.
In a nut-shell, many Scholars think that Insurance (itself) isn't Haram, but the presence of Sood (in its current form) makes it Haram. If Insurance can be tailored to eliminate the presence of Interest(Sood), it could be in line with Islamic Principles.
So question appears, who is going to modify Insurance structure to make it into purely Islamic shape??
The answer is Muslim Actuaries. Actuaries are experts in Insurance matters and right now, there isn't any formal Muslim Actuarial track to get Actuarial students educated in Islamic insurance. In the end one has to qualify via the foreign Actuarial route and he/she can then work for promoting Islamic insurance. Otherwise we'll always have to rely on Interest-based insurance to get financial protection.
I'm neither a Scholar nor a qualified Actuarial Consultant (still
an Actuarial Student). But my personal view is more in line with the second-mentioned scholars. My plan is to get as much work-experience abroad as I can (no matter if any or all of the experience is gained by working in non-Islamic insurance industry) and then to come back here in Pakistan to utilize my experience in promoting Islamic Insurance. I consider it as a service to both my religion as well as to my career as an Actuary )
As a last note, A qualified FSA/FIA/FCAS/FFA need NOT to work ONLY in Insurance. There are 5 speciality tracks on SoA side and "Individual Life Insurance" is one of them. You can always choose NOT to work in "Life Insurance" and still being a successful "Pension" or "Health" Actuary etc e.g Akhtar & Hassan consultants work primarily in "Pensions", they don't work in Life Insurance at all.
Hope this ugly & lengthy explanation helps,
-Ali
mmm, can I poke my nose (once and for the last time) in the little discussion that was going on here??
The scholars have disagreements over the legitimacy of (Life/General)Insurance in Shariyaa i-e whether its Halal or Haram?
I'll try to explain only the General Insurance here (which is my future area of speciality), I've little idea about how Life Insurance works.
Main points of different scholars who consider Insurance as HARAM
1)Insurance involves Gambling(Jua). If a loss occurs during the policy period, the insurer will pay you the benefit and you win!. If a loss doesn't occur you lose premium's money!
2)Insurance is something against the will of GOD. You receive financial help from insurer if you incurr a loss (insured event).
3)There is an element of high risk involved i-e you either win or
lose (see above example)
4)Insurance involves Interest(Sood), most insurance companies invest the policyholder's premium in schemes with fixed Interest arrangements.
Scholars who thought that Insurance(itself) isn't HARAM, Infact its the "Interest(Sood)" that makes it haram, have the following answers to above reasons, respectively
1)Insurance differs from Gambling. In gambling you put Rs5/- and makes it into Rs500,000 (or even Rs5,000,000) i-e there is NO benfit limit in Gambling. As a Gambler, you can make more and more money as long as you are winning. In insurance, you don't get UNLIMITED benefits e.g
An Automobile insurance company insures your new car whose value is Rs 2,20,000. You use it for 2 years, after that you experience a severe loss resulting in total damage. Your insurance Company will see the cost of new car (2,20,000) decrease it by the Depreciation amount for 2 years (lets say 20,000) and will make you the payment of no greater than 2,00,000 i-e you won't be RICH due to the occurrence of an insured event(the accident) due to insurance. But you'll be protected from total ruin because of the existance of insurance. This is the "FUNDAMENTAL PRINCIPLE OF INDEMNITY" underlying most of the General Insurance policies.
Insurance is a "protection" that will save you from a great financial loss or Total ruin in case of an insured event but won't make you wealthy. So, there is a difference b/w Gambling and Insurance.
2)God has given men the wisdom to make decisions to protect himself from the possible calamities. You put roof on home to give yourself shelter against the rain (you don't keep standing in rain). Pehlay apna Janvar rassi sey baandho, phir Allah pey Tawakkal karo.
3)There is an element of risk involved (smaller or greater) in all the businesses we do in a daily life. There appears to be NO business with not even a slightest element of risk. Insurance is a business in which the policyholder buys a product(although intagible) named as "a peace of mind" i-e If I experience a loss, me or my family won't get ruined because of Insurance protection. In reply, the Insurance Company promises to compensate me for the losses I incurrer but won't make me wealthy b/c of an Insurance policy.
4)Sood is Haram and any Muslim can't deny this. Insurance in its present form is not appropriate because of the involvemnt of Interest in it, But it CAN BE tailored to be in line with Islamic Principles. In many Middle East & Western Countires Islamic Insurance (named as "TAKKAFUL")is being provided by many Muslim FIA's (Fellow of IoA, U.K). For Islamic insurance, the insurance companies will have to invest the premiums collected from policyholders in interest-free businesses and will have to pay for benefits from the income they earn on those interest-free businesses.
However, even with TAKKAFUL, the problem arises when it comes to "Reinsurance" of Islamic Insurance. There aren't many financially strong "RE-TAKKAFUL" companies to provide Reinsurance to Takkaful companies. In the end even the TAKKAFUL companies have to end-up being "reinsuring" their risks with the foreign reinsurers and the Scholars have allowed it in-evitably, until there are strong enough
Re-Takkaful companies, so there will be no need to get involved with Foreign Reinsurer.
Unfortunately in Pakistan, we don't have enough Actuarial involvement
in designing Islamic Life Insurance products until now. However, I do know atleast one FSA (Mr.Abdul Rahim Abdul Wahab in Sydat Hyder Morshed Associates) who has started working in Islamic Insurance.
In a nut-shell, many Scholars think that Insurance (itself) isn't Haram, but the presence of Sood (in its current form) makes it Haram. If Insurance can be tailored to eliminate the presence of Interest(Sood), it could be in line with Islamic Principles.
So question appears, who is going to modify Insurance structure to make it into purely Islamic shape??
The answer is Muslim Actuaries. Actuaries are experts in Insurance matters and right now, there isn't any formal Muslim Actuarial track to get Actuarial students educated in Islamic insurance. In the end one has to qualify via the foreign Actuarial route and he/she can then work for promoting Islamic insurance. Otherwise we'll always have to rely on Interest-based insurance to get financial protection.
I'm neither a Scholar nor a qualified Actuarial Consultant (still
an Actuarial Student). But my personal view is more in line with the second-mentioned scholars. My plan is to get as much work-experience abroad as I can (no matter if any or all of the experience is gained by working in non-Islamic insurance industry) and then to come back here in Pakistan to utilize my experience in promoting Islamic Insurance. I consider it as a service to both my religion as well as to my career as an Actuary )
As a last note, A qualified FSA/FIA/FCAS/FFA need NOT to work ONLY in Insurance. There are 5 speciality tracks on SoA side and "Individual Life Insurance" is one of them. You can always choose NOT to work in "Life Insurance" and still being a successful "Pension" or "Health" Actuary etc e.g Akhtar & Hassan consultants work primarily in "Pensions", they don't work in Life Insurance at all.
Hope this ugly & lengthy explanation helps,
-Ali
