Shariah Principles and Analysis

What is Takaful insurance?

Takaful insurance is an Islamic term for pooling of resources to guarantee its contributors against defined risk. Takaful insurance seeks to set premiums that do not exploit its participants and ensure that the business model is established in an equilibrium and ethical manner. It ensures that all aspects of its activity are conducted in a Halal manner and according to Islamic tenets. Most importantly Takaful insurance seeks to eliminate elements of usury (Ribah), uncertainty (Gharrar) and gambling (Maysir) which are prohibited in the Islamic economic system.

How is it different to conventional insurance?

It has to be accepted that there are a number of good equitable principles inherent in conventional insurance. The overwhelming factor in Takaful insurance is that it enhances the spirit of cooperation between the participants, whereas the key driving factor in conventional insurance is the attainment of profit.

You, the Takaful, participant will build greater affinity with other participants whereas in regular insurance there is no doctrinal aspiration for collective responsibility. The Takaful fund operator will see itself as a service, where as the conventional operator will see itself as a pure business.

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What is the Takaful fund?

The Takaful fund is the sum of monies collected and deposited solely emanating from Iman Insurance Services customers. This fund will be identifiable separately from any other fund that may be held. This Takaful Fund will be operated and invested exclusively on Islamic Shariah principles and will be supervised by a Shariah Supervisory Board.

The sources of Shariah law

Islamic insurance as the name implies, is insurance that is "Islamic" i.e. it conforms to Islamic law (Shariah). Insurance that conforms to Shariah must necessarily follow the sources of Shariah. The four fundamental sources of Shariah are the Quran, Sunnah (traditions of the Prophet Muhammad), Ijma (consensus) and Qiyas (analogy) respectively. In other words, for there to be established a valid principle or practice of Islam one must look to the Quran first for the solution. If there exists a rule, then it is taken. If not, one then searches the Sunnah. Both the Quran and the Sunnah are divinely inspired. If no ruling is found in the Quran or the Sunnah, the Ijma of the Imam Mujtahids (those who were renown for their Ijtihad i.e. the Sahaba (companions of the Holy Prophet Muhammad peace be upon him ); their companions (Tabaeen) and those companions that followed them (Taba Tabaeen) is referred to. If there is no practice or comment by any one of them, then one can rely on Ijtihad (independent judgement of the renown Scholars of Islam) to deliberate based on Qiyas (individual reasoning based on analogy). However, it should be noted that Qiyas must meet the following conditions:

  1. It must be relied upon only in the absence of the primary sources of Shariah;
  2. It must not contravene the spirit of Shariah; and,
  3. The course of reasoning should not detract the Ummah from the global practices of Shariah, but should be in tune with the same.

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Assuring Shariah Compliance

All transactions within the insurance policy must conform to the Islamic principles of Shariah. These principles have been accommodated in the establishment of the Takaful policy. The insurance policy offered to you carries with it the following elements to ensure Shariah compliance:

  1. Endorsement and support for the idea of Islamic Takaful insurance by hundreds of Muslim scholars;
  2. Shariah Supervisory Board consisting of some of the leading scholars and jurists;
  3. Members of the Islamic Financial Service Authority;
  4. Shariah compliant contract between the Wakeel and the Fund operator
  5. Shariah compliant audit transparency
  6. Shariah compliant and ethical investments
  7. Fatwa supporting the Halal Takaful insurance by some of the leading scholars worldwide.

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